Snap confirmed report that it will fire about 20% of its employees – about 1,300 people – to reduce costs. The company also canceled most of its original Snapchat shows (save for the Castle politics and news series Good luck America) and other projects are folded. First, Snap says it’s putting games and small apps into maintenance mode. It will also stop offering standalone Zenly and Voisey apps to focus on Snapchat’s Maps and Audio features.
On the hardware side, Snap is “downsizing our investment in Spectacles to focus on highly differentiated long-term research and development efforts.” In addition, the company has Pause further development of the Pixy selfie drone just a few months after it start selling equipment.
Snap said in a note to investors that layoffs, project cancellations, and other restructuring activities would save the company about $500 million in its annual cash expense structure compared with the April-June quarter (when Snap announced it). lackluster earnings results). This figure includes a $50 million reduction in content costs. The restructuring cost will be around $110 million to $175 million. About $95 million to $135 million of that will likely incur adjusted operating expenses, mostly in the current quarter.
“Unfortunately, with our current lower revenue growth rate, it is clear that we must reduce our cost structure to avoid incurring significant ongoing losses,” said CEO. Snap Evan Spiegel wrote in a letter to employees. “While we have built up a substantial capital stock and have made extensive efforts to avoid downsizing our team by reducing spending in other areas, we now face the consequences. of lower revenue growth and adapting to the market environment.”
Speigel notes that the company is restructuring around three pillars: community growth, revenue growth, and augmented reality. He added: “Projects that do not contribute directly to these areas will either be shut down or receive significantly reduced levels of investment.
Snap has felt the brunt of a widespread economic slowdown. Its share price is down 80% this year (though it bounced back slightly on the news of layoffs and restructuring). So far in 2022, the company’s annual revenue growth is 8%, which Speigel says is “much lower than what we expected earlier this year.” However, Snapchat subscription service + got off to a positive start, with over a million users sign up within the first month or so.
Meanwhile, the company’s leadership team has a fresh look. This week, its two top advertising executives departure for Netflix, will start offering it soon one level of ad support. Snap has promoted former senior vice president of engineering Jerry Hunter to chief operating officer position. It will also bring in Ronan Harris, vice president and chief executive officer of Google UK and Ireland, as president of the Europe, Middle East and Africa division.
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