Snap to cut 20% of its workforce as digital advertising plunges – The Irish Times

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Snap will lay off a fifth of its 6,500 employees and cut investment in its augmented reality glasses, among other things, in a big shake-up as the social media group battles a drop in advertising.

The Los Angeles-based company officially announced the restructuring on Wednesday, adding that revenue growth in the current quarter had so far slowed to 8% year-over-year from 13% in the second quarter.

Snap shares jumped 13% in early trading on Wednesday following the news at $11.32 (€11.25).

The cuts and gloomy outlook mark a striking about-face for Snap, which saw meteoric growth in the first two years of the coronavirus pandemic and increased headcount as users spent more time and money online. during closings.

However, boom times for social media groups have turned into a massive stock selloff this year amid high inflation and a general economic slowdown, forcing the biggest tech groups such as Meta and Google to freeze shares. hiring and implement other cost reduction measures. .

Snap said it expects to generate savings of $500 million a year from the restructuring, compared to its second-quarter costs. He added that he expected to spend between $110 million and $175 million to implement the restructuring, which would be mostly initiated in the current quarter.

“Today, we are restructuring our business to focus more on our three strategic priorities: community growth, revenue growth and augmented reality,” said chief executive Evan Spiegel. “Changes of this magnitude are always difficult, and we are focused on supporting our departing team members through this transition.”

Investment scope

Among the most significant changes, Snap said in an investor slideshow that it was “reducing its investment scope” in its much-vaunted Spectacles augmented reality glasses to “focus on research and development efforts.” long-term highly differentiated”.

It also said it was cutting investment in Snap Originals, the short-form video content it produces in-house, and drastically reducing investment in games and Snap Minis, through which developers can create simplified versions of their apps. in the main Snapchat app.

It will reduce its global workforce by 20%, which stood at 6,446 at the end of June.

Jeremi Gorman, chief commercial officer, and Peter Naylor, vice president of advertising sales for the Americas, are leaving the company as part of the shakeup, according to a report from The Verge, which was confirmed by Snap. Ms Gorman said in a social media post that she and Mr Naylor would go to Netflix, where she would serve as the streaming site’s global advertising president.

The company’s shares have lost more than 75% of their value since the start of the year, after issuing a profit warning in May and posting dismal second-quarter results in July.

In both cases, Snap said difficult macroeconomic conditions caused advertisers to cut budgets. He also blamed increased competition in the industry and privacy changes by Apple that made it harder for apps to target advertising and measure the success of campaigns.

In its earnings statements in July, Snap said it was “not happy” with its earnings “regardless of the current headwinds.”

Mr. Spiegel said the company plans to focus on product innovation, revenue diversification and investments in its direct-response advertising business to weather the downturn. – Copyright The Financial Times Limited 2022

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