Snap confirms it's laying off around 1,300 employees
The company has canceled most original Snapchat shows and shut down some other projects.
Snap has confirmed reports that it will lay off around 20 percent of its employees — approximately 1,300 people — to reduce costs. The company has also canceled most original Snapchat shows (save for the long-running politics and news series Good Luck America) and shelved other projects. For one thing, Snap said it's putting games and mini-apps into maintenance mode. It will also sunset the standalone Zenly and Voisey apps to focus on Snapchat's Snap Map and Sounds features.
On the hardware front, Snap is "narrowing our investment scope in Spectacles to focus on highly differentiated long-term research and development efforts." In addition, the company has halted further development of its Pixy selfie drone only a few months after it started selling the device.
Snap said in a note to investors that the layoffs, project cancellations and other restructuring will save the company approximately $500 million in the annualized cash cost structure relative to the April-June quarter (for which Snap posted lackluster earnings results). The figure includes a $50 million reduction in content costs. The restructuring costs will be around $110 million to $175 million. Approximately $95 million to $135 million of that will likely be incurred in adjusted operating expenses, mostly in the current quarter.
"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," Snap CEO Evan Spiegel wrote in a letter to staff. "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."
Speigel noted that the company is restructuring around three pillars: community growth, revenue growth and augmented reality. "Projects that don’t directly contribute to these areas will be discontinued or receive substantially reduced investment," he added.
Snap has been feeling the brunt of a broader economic slow down. Its share price has slumped by 80 percent this year (though it rebounded slightly following news of the layoffs and restructuring). So far in 2022, the company's year-over-year revenue growth is eight percent, which Speigel said is "well below what we were expecting earlier this year." However, the Snapchat+ subscription service is off to a positive start, with more than a million users signing up within the first month or so.
Meanwhile, company's leadership team has a fresh look. This week, its two top advertising executives departed for Netflix, which will soon start offering an ad-supported tier. Snap has promoted its former senior vice president of engineering Jerry Hunter to the position of chief operating officer. It will also bring in Ronan Harris, Google's UK and Ireland vice president and managing director, as president of its Europe, Middle East and Africa division.