Snap is canceling several projects and laying off 20 percent of employees
Snap is laying off around 20 percent of its more than 6,400 employees and canceling its original shows, in-app games, and several other projects as part of a corporate restructuring.
In a company memo on Wednesday that you can read in full below, CEO Evan Spiegel wrote that Snap is “restructuring our business to increase focus on our three strategic priorities: community growth, revenue growth, and augmented reality.”
Spiegel said the company’s revenue growth had reaccelerated to 8 percent from being flat in late July, suggesting its ads business is starting to rebound. Still, that is a far cry from the more than 40 percent revenue growth Snap was seeing before Russia invaded Ukraine, which it blamed for a slowdown in marketing spend, and the digital ads market started to contract earlier this year. In a filing with the SEC, Snap said it expects the layoffs, which were first reported by The Verge on Tuesday, to save it $500 million in costs annually.
“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,” Spiegel wrote in the memo. “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 said that Snap would end its original shows that appear in the Discover section of Snapchat, along with its in-app games and HTML miniature applications built by outside developers. The company’s self-flying camera drone, Pixy, is being canned after debuting in only April. Spiegel said the company is also “winding down” Zenly, a separate app for seeing where your friends are on a map that was acquired in 2017, and Voisey, a TikTok-like music app that Snap bought in 2020.
Since at least 2017, Snap has invested in original, vertically shot shows for its Discover section. Just earlier this year, the company announced a slate of new shows featuring celebrities like Olympic gymnast Simone Biles and the social media star Charli D’Amelio. In its last earnings report, Snap bragged that 10 million Snapchat users had watched The Fight Inside, a new Snap show featuring the professional boxer Ryan Garcia.
The company’s platform for mini apps and games from outsider developers first debuted in 2020 as a way for users to do things like book concert tickets with friends without leaving Snapchat. But the platform has remained relatively buried inside Snapchat and hasn’t contributed meaningfully to Snap’s ads business.
Snap’s leadership team is also being shaken up this week: Spiegel announced that Jerry Hunter, the company’s engineering chief, will become chief operating officer overseeing all monetization, growth, partnerships, and engineering. Snap’s chief business officer and top ads exec, Jeremi Gorman, announced Tuesday that she was leaving to run Netflix’s forthcoming ad-supported tier.
You can read Spiegel’s full memo to Snap employees below:
Thank you for your patience as we have worked through our 2023 financial planning and reprioritization process. Our forward-looking revenue visibility remains limited, and our current year-over-year QTD revenue growth of 8% is well below what we were expecting earlier this year. While we will continue our work to reaccelerate revenue growth, we must ensure Snap’s long term success in any environment. For planning purposes we have modeled a range of outcomes, some of which assume that low revenue growth continues into next year, and we have built our 2023 plan to generate free cash flow even in a low growth scenario.
The investments we have made in our business to-date assumed a higher rate of revenue growth based on our vast opportunity and our proven history of execution, including 2x growth in the size of the Snapchat community and 10x growth in trailing twelve month revenue since our IPO in 2017. 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.
We are restructuring our business to increase focus on our three strategic priorities: community growth, revenue growth, and augmented reality. Projects that don’t directly contribute to these areas will be discontinued or receive substantially reduced investment. We have worked thoughtfully and deliberately to find the right balance between focusing our investments while continuing to innovate, and we have made the decision to discontinue our investments in Snap Originals, Minis, Games, and Pixy, among other areas. We have also started the process of winding down the standalone applications Zenly and Voisey.
As a result, we have made the difficult decision to reduce the size of our team by approximately 20%. The scale of these changes vary from team to team, depending upon the level of prioritization and investment needed to execute against our strategic priorities. 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.
We will miss the many kind, smart, and creative team members who have contributed to Snap’s growth and I am deeply sorry that these changes are necessary to ensure the long term success of our business. The friendship and camaraderie we all share as a team make these changes particularly painful, and we will make every effort to treat our departing team members with the respect and gratitude that they deserve.
Team leaders will notify their impacted team members as soon as possible and provide them with detailed guidance. In the United States, we will provide at least four months of compensation replacement, as well as financial assistance to enroll in COBRA, so that team members will have until the end of the year to find new opportunities while still receiving compensation and health benefits from Snap. Outside the United States, we will follow local processes required in each country and tailor compensation and benefits to reflect local norms with the intent to provide similar levels of support regardless of geography. We will also provide outplacement service support and launch an opt-in talent directory to help departing team members connect with new opportunities.
We acknowledge that these changes may have a particularly serious impact on team members relying on work authorizations to live outside their home country, and we will provide these impacted team members additional support and flexibility to minimize disruption to their immigration status.
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. In an effort to realize this opportunity, we are promoting Jerry Hunter to Chief Operating Officer, effective today. Jerry will lead our monetization efforts across our three operating regions (EMEA, APAC, and Americas), as well as our Growth, Partnerships & Content, AR Enterprise, and SMB teams. He will also continue to lead the Engineering teams that currently report to him.
Jerry has repeatedly demonstrated operational rigor at scale, leading our business through several challenging transitions including the build out of our advertising platform, the rebuild of our Android product, our infrastructure optimizations, and most recently, significant investments in our Platform Integrity team. I believe Jerry’s promotion will result in both better short term execution as well as a higher velocity of long term innovation.
We are also realigning our regional operational leadership by creating a new President role in each of the Americas, EMEA and APAC regions. Our three regional Presidents will provide in-market leadership, lead cross-functional efforts across our business, oversee local operational needs, and lead our go-to-market strategy. Ronan Harris, Vice President and Managing Director of UK & Ireland at Google, is joining Snap as President, EMEA, beginning in October. Ronan will join our executive team and report to Jerry. We are currently searching for Presidents for our APAC and Americas regions.
I will give a presentation detailing these changes to our entire team tomorrow morning, and will plan on following up with “Ask Evan” shortly thereafter. My annual letter to the team will be distributed on Tuesday of next week and our Strategic Planning Process for 2023 will follow.
Changes of this magnitude are never easy, and we must act decisively to meet this moment as a team. I am proud of the strength and resilience of our team as we have navigated the myriad challenges of growing our business in a highly competitive industry during uncertain and unprecedented times. Thank you for your dedication, hard work, and commitment to our community.
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