Snap to lay off one in five employees as losses mount
Original shows, games, the company's other apps, and more also being axed
Snap CEO Evan Spiegel has confirmed layoffs at the struggling social media biz, telling employees in a letter that 20 percent of them will lose their jobs, mostly from teams working on one of the variety of projects it also plans to ax.
The letter, leaked to The Verge not long after it was sent to staff this morning, reveals that Snap has limited visibility into its potential forward-looking revenue, Spiegel said, and that its year-over-year growth of 8 percent was far below expectations set earlier in 2022.
As a result of that slower growth, Spiegel said Snap was restructuring with a focus on what he called the company's three strategic priorities of growing its community, growing revenue, and augmented reality. "Projects that don't directly contribute to these areas will be discontinued or receive substantially reduced investment," Spiegel said.
Additionally, the CEO said the company would discontinue its Snap Originals shows, HTML5 Snap Minis, Snap Games, social mapping app Zenly, and TikTok-esque music sharing app Voisey. Spiegel also mentioned the end of Snap's Pixy drone, which Snap had already discontinued earlier in August after less than four months of availability.
Snap also announced that it was promoting SVP of Engineering Jerry Hunter to Chief Operating Officer effective immediately. Hunter, who has been with Snap since 2016, will lead the company's monetization efforts in the Americas, EMEA, and APAC regions. As part of the restructuring, Snap will also be adding a new regional president role for each of the three aforementioned markets.
"We must ensure Snap's long-term success in any environment... and we have built our 2023 plan to generate free cash flow even in a low-growth scenario," Spiegel said. According to the CEO, the company's headcount would remain larger than it was at the same time last year.
With a total staff of just under 6,500, the layoffs are likely to affect some 1,300 people globally, and could save the biz as much as $500 million annually.
Snap's losses keep piling up
It hasn't been a great year for Snap. Despite reporting an 18 percent increase in daily active users in both Q1 and Q2, and double-digit revenue growth (compared to the same periods last year), the company has hemorrhaged cash.
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According to Snap's Q1 2022 earnings statement, the company lost $360 million between January and March, while it lost $287 million in Q1 2021. In the second quarter the problem was similar, but larger: Snap lost some $422 million, while in Q2 2021 it lost $152 million.
Those numbers were likely the reason behind Spiegel's less-than-enthusiastic statement in the profit and loss accounts, which he opened by saying: "While the continued growth of our community increases the long-term opportunity for our business, our financial results for Q2 do not reflect our ambition."
As to the layoffs of Snap's rank and file, Spiegel said in his letter that US-based employees would receive four months of compensation, while overseas employees would receive similar help based on local regulations. Spiegel said Snap would also help "minimize disruption" to the immigration status of employees on work authorization visas.
In other Snap news, it emerged yesterday that two high-ranking executives have left the business for pastures new, with Snap Chief Business Officer Jeremi Gorman and VP of ad sales for Americas Peter Naylor both leaving to join Netflix, which is in the process of rolling out an ad-based subscription tier. ®