UNITED STATES: Due to a drop in advertising, social media giant Snapchat has announced it will let go of 1300 employees or 20% of its global workforce.
The company said its most recent quarterly revenue growth of 8% was “well below” expectations and that the cuts were part of a worst-case scenario plan because it expected the weak advertising market to continue to affect it in the coming year.
Snapchat CEO wants to avoid ongoing losses
Evan Spiegel, the CEO of Snap and husband of Australian model Miranda Kerr, told staff that the company had anticipated a ten-fold increase in revenue and a doubling of its social media following, but that neither had happened.
He sent an email to the staff explaining the situation, saying, “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.”
Laid off employees in the U.S. will receive four months of compensation replacement, plus financial assistance to enroll in COBRA, Snap says.
Spiegel disclosed that the company would wind down its social mapping app Zenly and stop investing in projects like its augmented reality glasses, mobile games, mini-apps, and its drone camera, Pixy.
Its Originals division, which had produced content from renowned creators like Bunim/Murray and stars like Megan Thee Stallion and Anthony Joshua, was also on the chopping block.
A different option was the 2020 purchase of the UK startup Voisey, which provided instrumentals that you could mix with your voice to create quick music tracks and videos.
Spiegel expressed his regret over the layoffs but said they were necessary to “ensure the long-term success” of the company. “The extent of the cuts would vary for each team,” he said.
“Overall, the size of our team will remain larger than it was at this time last year.”
He added that “the friendship and camaraderie” at the company “make these changes particularly painful”.
Since the start of the year, Snap’s stock price has lost nearly 80% of its value, and the company had warned that cost-cutting measures would be necessary following a profit warning in May.
North America accounts for more than two-thirds of its revenue, but the company claimed that supply chain disruptions, a labour shortage, and high inflation were hurting advertisers.
Similar to other tech firms, Snap ramped up hiring during the pandemic, growing its workforce from about 3427 full-time employees in March 2020 to 6446 in the most recent quarter, a 38% increase from the same period in 2019.
Although it has more daily users than Twitter (347 million), Snapchat has only ever made a profit once since going public on the US stock exchange in 2017.
Tech firms are laying off employees
In response to the economic downturn, a number of Australian tech companies have also reduced staff this year.
One of them involved Linktree, an Australian social media startup recently valued at $1.78 billion and laid off 17% of its employees worldwide, as it disclosed this month.
After that, disability startups emerged. Despite raising $40 million in funding at the end of last year, Hireup laid off 10% of its staff in August.
In the meantime, one out of every five employees at the Brisbane-based cryptocurrency company Swyftx were let go.
Immutable, a $3.5 billion-valued cryptocurrency platform, came under fire earlier this month for firing 17% of its gaming division employees while continuing to “hire aggressively” in the wake of raising $280 million in funding in March.