Home genetics company 23andMe is facing its toughest year yet as it embarks on a major restructuring in a bid to stay afloat amid a turbulent 2024.
With the tech sector experiencing widespread economic pressure, many companies are taking similar cost-cutting measures as they navigate persistent economic uncertainty and the rapidly evolving AI industry.
23andMe’s plan includes laying off 200 employees—almost 40% of its workforce—in an effort to cut expenses by over $35 million annually, though it will cost the company $12 million in severance and related transition expenses. Anne Wojcicki, 23andMe’s CEO, said that the layoffs were a “difficult but necessary” move to secure the company’s “long-term success” and ensure the viability of its core consumer genetics business.
The layoffs at 23andMe primarily target departments slated for discontinuation.
This year alone, major firms like Meta, Google, and Amazon have implemented layoffs, following a challenging economic downturn that has impacted demand and intensified the need for operational efficiency. Companies in the genetics and healthcare tech sectors have felt the blow especially hard, as market interest in at-home genetic testing, once seen as a consumer tech frontier, has dwindled, and revenue models tied to a single-use product have proven difficult to sustain.
Adding to 23andMe’s troubles, the company suffered a data breach this year that exposed 14,000 user accounts, a misstep worsened when it attributed the breach to user error, citing “recycled credentials” rather than accepting corporate responsibility. The company further tarnished its reputation by revealing that data was siphoned for five months before being detected, and its relationship with consumers was shaken further after customers reported issues with its subscription model, specifically with unauthorized auto-renewals.
At least 133 customers filed complaints with the Federal Trade Commission (FTC), alleging that 23andMe charged them for renewals they hadn’t authorized and refused refunds, even when customers tried to cancel their subscriptions in advance.
The restructuring will also involve shuttering 23andMe’s therapeutics division, which previously engaged in cancer research and monoclonal antibody development. Though this move downsizes its research ambitions, 23andMe remains focused on partnering with other entities to pursue advancements in these areas, rather than managing them in-house.
Yet, some industry analysts view this as a signal that the company is retreating from a potential growth area at a critical time.
Notably, as companies like 23andMe grapple with financial challenges, the rise of artificial intelligence is prompting additional industry-wide shifts. While AI brings transformative potential, its implementation often replaces jobs once held by human workers, amplifying layoffs as companies streamline processes. Experts anticipate that continued economic stagnation, combined with increasing AI integration, will lead to additional workforce reductions across various sectors in the coming months, affecting workers even in traditionally stable fields like healthcare and tech.
Ultimately, 23andMe’s focus remains on its core consumer DNA-testing business, even as market interest wanes and the inherent one-time-use nature of the service limits potential repeat business. With competitors diversifying to offset similar revenue challenges, 23andMe’s commitment to staying within the consumer sector could prove risky, given shifting consumer interest and the rapid evolution of the AI-driven tech economy.
As the company works to stabilize, analysts have pointed out that it must also work to restore trust among its consumer base, a challenge made greater by recent controversies, layoffs, and questions surrounding its long-term viability.
