Snapchat’s parent company confirmed Wednesday it is cutting 20 per cent of staff, as the troubled messaging app attempts to dig itself out amid competition and revenue woes, as well as recent quarterly losses.
A hit with young internet users in its early days, Snapchat has remained a small player in the social networking space as competition from other apps, such as TikTok, has grown ever more intense.
“We must now face the consequences of our lower revenue growth and adapt to the market environment,” Snap CEO Evan Spiegel said in a note to employees Wednesday announcing the decision “to reduce the size of our team by approximately 20 per cent.”
In July, the company reported that quarterly losses nearly tripled to $422 million amid conditions “more challenging” than expected.
Tech news website The Verge first reported the southern California-based company would be making steep cuts to its approximately 6,400 staff.
Restructuring, Spiegel said, would focus on “three strategic priorities: community growth, revenue growth and augmented reality” with unrelated projects to “be discontinued or receive substantially reduced investment.”
Snap said it would discontinue its Snap Originals show programming, third-party app integration known as Minis, its games, and its lightweight drone offering called Pixy.
It also said it was “winding down” its standalone geolocation app Zenly and music creation app Voisey, which it acquired through takeovers.
Like other social networks, Snap has taken a hit as advertisers have tightened their belts, as well as from new privacy changes by Apple that have bitten into firms’ sales of costly but highly-targeted ads.
“The company is facing layoffs as it works to restructure its ad business and cut costs,” said Insider Intelligence principal analyst Jasmine Enberg.
“Even so, I wouldn’t count Evan Spiegel out.”
Snap has a growing and loyal user base, and is well-positioned to capitalize on advertising and commerce in its augmented reality offerings over the long-term, the analyst reasoned.
Enberg expected Snapchat to end this year with nearly $5 billion in net ad revenue worldwide in a 43 per cent increase from 2021. Insider Intelligence projected that ranks of Snapchat users would be up more than 10 per cent to 493.7 million by the end of this year.
“We are encouraged by stabilizing user trends, as well as the large shopping and e-commerce advertising opportunity, healthy margins, and perspective and experience from recent upgrades to the management team,” Baird analysts said of Snap in a note to investors.
Snap announced a new chief operating officer, Jerry Hunter, who is being promoted from senior vice president of engineering. Google executive Ronan Harris will become president of the company’s Europe, Middle East and Africa division in October.
Meanwhile, Snap’s chief business officer Jeremi Gorman and Peter Naylor, the vice president of ad sales for the Americas, will be going to work for streaming television titan Netflix in September, according to the companies.
Snap shares were up more than 10 per cent in mid-day trading on the New York Stock Exchange.