Reeling from an advertising slowdown and a grim economic environment, Snapchat parent Snap Inc. is laying off about 1,600 workers, or about 20% of its workforce.
The dramatic cuts follow a series of grim financial reports, which sent the company’s shares plunging in recent months. Snap stock shot up almost 9% on heavy trading volume to close the day at $10.88, but even with that strong one-day gain it has still plummeted 77% since the start of the year.
Among the business areas the company plans be pull back from amid the cutbacks is self-funded original content. Snap will instead turn its focus to content from partners and creators. It will also shift its “minis” and games efforts into what it called “maintenance mode,” representing a “substantially reduced investment.” It is also ditching a flying drone camera, Pixy, and trimming other hardware investments, as well as winding down stand-alone apps Zenly and Voisey.
The company estimates a $500 million reduction in its annualized cash cost structure as a result of the cuts. In a memo to employees, CEO Evan Spiegel said the company’s current-quarter revenue growth of 8% compared with the same period in 2021 is “well below what we were expecting earlier this year.”
In a separate statement, Spiegel said the company is “restructuring our business to increase focus on our three strategic priorities: community growth, revenue growth, and augmented reality.” He added, “Changes of this magnitude are always difficult, and we are focused on supporting our departing team members through this transition. We are deeply grateful for their many contributions to Snap.”
Along with the advertising slowdown and sagging economy, Snap also blamed changes by major tech gatekeepers, which “have upended a decade of advertising industry standards.” It didn’t call out Apple, but the company’s blocking of certain ad-tracking features due to privacy concerns has stymied Snap, Facebook, Twitter and others in recent quarters.
Snap is promoting Jerry Hunter to Chief Operating Officer Spiegel and will realign its regional operational leadership and create a new president role in the Americas, EMEA and the Asia-Pacific region. Those three regional presidents will provide “in-market leadership, lead cross-functional efforts across our business, oversee local operational needs, and lead our go-to-market strategy,” Spiegel wrote in the memo.
Ronan Harris, VP and managing director of UK & Ireland at Google, is joining Snap as president, EMEA, beginning in October, reporting to Hunter. Snap is looking to fill the other two regional president positions. On Tuesday, senior Snap execs Jeremi Gorman and Peter Naylor jumped to Netflix to lead the streaming service’s push into advertising.
Snap had one of Wall Street’s biggest IPOs in 2017, raising $3.4 billion and reversing years of significant losses, but as a public company it has taken investors on a bumpy ride. In 2018, after a number of high-level executive departures a widely panned update of the Snapchat app and stumbles with its Android version, Snap stock plunged below $5 and speculation grew about the company’s viability as a stand-alone entity. But Spiegel then piloted a comeback and the company rode a wave of digital advertising spending, a trend helped by Covid, to hit new heights by 2021. Like many other digital purveyors of ad-backed products, though, Snap hit the rocks in 2022 as the economic picture worsened and upstart rival TikTok continued to surge in popularity.
Spiegel said he will review the restructuring and provide other updates on Thursday in a meeting with employees.
"original" - Google News
August 31, 2022 at 08:41PM
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Snap Cuts 20% Of Workforce, Discontinues Self-Funded Original Content; Stock Revives - Deadline
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