Snap to Lay Off One in Five Employees Globally, Shelve Multiple Projects
Snap expects to save $500 million, a bulk of which will come from the reduction in operating expenses.
Snapchat’s parent company, Snap Inc., plans to fire 20% of its workforce, almost 1,300 employees. According to the company’s Form 8-K filing with the Securities and Exchange Commission, the layoffs are a part of its “2023 financial planning and reprioritization process,” which kicked off earlier this year as ominous signs of a slowdown in growth materialized.
Snap is also pulling back on investments in Snap Originals, Minis, Games, Pixy, and standalone applications Zenly and Voisey. The company didn’t mention any changes to developing its AR-based glasses, Spectacles. Snap expects to save $500 million, a bulk of which will come from the reduction in operating expenses.
“We are restructuring our business to increase focus on our three strategic priorities: community growth, revenue growth, and augmented reality,” Snap CEO Evan Spiegel wrote in an internal memo made public through the filing. “Projects that don’t directly contribute to these areas will be discontinued or receive substantially reduced investment.”
U.S-based employees of Snap that will be shown the door can expect at least four months of compensation in addition to financial assistance to enroll in COBRA. Snap employees outside the U.S. will be entitled to tailored compensation and benefits per local norms.
“We are also reorganizing our team to better meet the challenges of the current macroeconomic environment and to make as much progress as possible, as quickly as possible, in the areas of our business that we are able to control. In particular, there remains significant opportunity to improve coordination and prioritization across our engineering, sales, and product teams,” Spiegel wrote in the filing.
These efforts include promoting VP of engineering Jerry Hunter to COO, who will oversee monetization across EMEA, APAC, and Americas). Hunter will also lead growth, partnerships &cContent, AR enterprise, and SMB teams besides engineering.
Like multiple companies in the tech domain that rely on advertising, Snap also witnessed a slump in 2022 driven partly by the introduction of App Tracking Transparency in Apple’s iOS. Snapchat, Facebook, Twitter, and YouTube cumulatively lost $10 billion in revenue due to ATT just in H2 2021.
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The tech sector sailed through the uncertainties of the COVID-19 pandemic and immediately bounced back. However, the pandemic’s domino effect on the hardware and other supply chain disruptions, and inflationary forces driven by the Ukraine-Russia conflict, has contributed to an unpropitious macroeconomic scenario. In May 2022, Spiegel predicted that Snap would miss its YoY Q2 and H1 revenue goals, which it did.
“Unfortunately, given our current lower rate of revenue growth, it has become clear that we must reduce our cost structure to avoid incurring significant ongoing losses. While we have built substantial capital reserves, and have made extensive efforts to avoid reductions in the size of our team by reducing spend in other areas, we must now face the consequences of our lower revenue growth and adapt to the market environment,” Spiegel added.
Year-to-date, Snap’s stock price has plummeted by over 76% taking its market capitalization from more than $75 billion on January 1, 2022, to nearly $18 billion as of today.
According to Crunchbase, more than U.S-based 39,000 employees in the tech domain have been laid off in 2022. Earlier in August, online brokerage Robinhood parted ways with 23% of its staff, and so did Twitter, with 30% of its talent acquisition team in July. Netflix fired 300 employees in June 2022.
Big Tech giants Apple and Google have also slowed down hiring since Q2 2022, while Meta has instituted a hiring freeze.
Spiegel added that this should be a one-off event. “The extent of this reduction should substantially reduce the risk of ever having to do this again, while balancing our desire to invest in our long-term future and reaccelerate our revenue growth. Overall, the size of our team will remain larger than it was at this time last year,” he said.
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