Snap cut 20% of its workers to save money

The parent company of the social media platform Snapchat is cutting off 20% of its workforce in an effort to decrease expenses in response to dwindling sales, the business announced on Wednesday.

In a statement to colleagues posted on Snap’s website, CEO Evan Spiegel stated that sales were not meeting estimates.

“Unfortunately, given our current slower rate of revenue growth, it has become abundantly evident that we must cut our cost structure in order to prevent incurring substantial ongoing losses,” he said.

Spiegel stated that Snap is reorganizing its business to prioritize community expansion, revenue expansion, and augmented reality. Everything that does not contribute to these areas “either be eliminated or have its funding severely reduced,” he warned.

Last October, Snap said that a privacy crackdown on Apple’s iPhones was hurting its ad revenues, raising investor concerns about the app’s growth potential. The majority of social media networks rely primarily on ad revenue.

Since the final three months of 2021, when Snap posted its first-ever profitable quarter, there has been little good news from the firm.

The company stated in an SEC filing that the “macroeconomic environment has worsened farther and faster than anticipated” and that it would not fulfill its own sales and profit goals for the time. In late July, following the release of quarterly results that fell short of expectations, Snap’s stock price declined by an additional 39%.

In recent years, Snap has added more than 5,600 employees. Even after firing off more than 1,000 employees, the business’s headcount will be larger than it was a year ago, according to the corporation.

Snap’s move Wednesday adds to the flood of layoffs in the IT sector that has swept the country this year. The Seattle Times claimed that Microsoft lay off fewer than 1% of its large employees in July. In June, Coinbase lay off 18%, or over 1,100 employees, while mortgage provider Better.com laid off 900 employees in March.

This year, Apple, Twitter, Peloton, iRobot, Oracle, Shopify, and Robinhood have all decreased their workforces. According to Layoffs, the tech industry has lost about 75,000 employment so far this year. FYI, which measures industry-wide employment losses

TechWatch: Tech firms increase layoffs 03:38

Snapchat, which earlier this month launched a new feature that lets parents to see who their children are chatting with, is a video messaging network that deletes messages once recipients have viewed them.

Snap, like the majority of other social media companies, flourished during the pandemic, when employees and students spent more time online and less time connecting in person. In late September of 2021, Snap shares peaked at almost $83 per share.

Following the announcement of layoffs on Wednesday, Snap’s share price increased by roughly 10% to $11 per share.