Snapchat lays off 20% of staff, 1300 jobs lost amid low revenue growth
The social media company warned the lay offs were necessary across the globe to prevent “ongoing significant losses” and will shutter a number of divisions.
Social media giant Snapchat has revealed it is sacking 1300 staff – which amounts to 20 per cent of its workforce globally – as its hit by an advertising downturn.
Its latest quarterly revenue growth of 8 per cent was “well below” expectations and the company’s cuts were part of a worst-case scenario plan where it would continue to be impacted next year by the weak advertising market, it said.
Just like Facebook, which has also laid off staff, the company known as Snap has been particularly hard hit by Apple’s crackdown on ad tracking across apps.
Snap CEO Evan Spiegel, who is married to Australian model Miranda Kerr, told staff that it had assumed revenue would grow by ten times and it would also double the size of its social media community, but this had not occurred.
“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,” he wrote in an email 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.”
‘Reduce the risk’
The US-based company will shed 20 per cent of its 6400 employees, but Snapchat declined to reveal how many from its Australian operations would be impacted by the cuts when contacted by news.com.au.
Mr Spiegel revealed the company would stop investment in areas such as its augmented reality glasses, mobile games, mini apps and its drone camera, Pixy, and would wind down its social mapping app Zenly.
Also on the chopping block was it Originals division, which has produced content from top producers like Keeping Up With The Kardashians creator Bunim/Murray and stars such as Megan Thee Stallion and Anthony Joshua.
Another cut was the UK start-up Voisey, which it acquired in 2020, that featured instrumentals that you overlay with your own voice to create short music tracks and videos.
Mr Spiegel said the scale of cuts in each team would vary and he was “deeply sorry” the lay offs were necessary to “ensure the long term success” of the business.
“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 re-accelerate our revenue growth,” he said.
“Overall, the size of our team will remain larger than it was at this time last year.”
He added “the friendship and camaraderie” at the company “make these changes particularly painful”.
Hired aggressively
Snap’s stock price has lost nearly 80 per cent of its value since the beginning of this year and the company had flagged cost cutting measures would be necessary after a profit warning in May.
More than two-thirds of its revenue comes from North America but the company said advertisers were being hit by supply chain disruptions, labour shortages and high inflation.
Like other tech companies, Snap hired aggressively during the pandemic taking its staff of around 3427 full-time employees in March 2020 up to 6446 in the last quarter, a 38 per cent increase from the same time last year.
Snapchat has 347 million daily users worldwide, which is more than Twitter, but it has only turned a profit once since it floated on the US stock exchange in 2017.
Changes at the company
The company said moving forward it would focus on improving sales and the number of Snapchat users.
Meanwhile its senior vice-president of engineering, Jerry Hunter, was promoted to a new role of chief operating office to improve co-ordination between the engineering, ad sales and product teams.
The 8 per cent growth revealed by Mr Spiegel would be a huge hit to the company’s prior fortunes after it recorded triple-digit growth rates in previous quarters.
Tech companies slashing staff
A number of Australian tech companies have also slashed staff this year amid the economic downturn.
One included another Australian social media start-up called Linktree that was recently valued at $1.78 billion sacked 17 per cent of staff from its global operations, it revealed this month.
Then there was disability start-up Hireup sacked 10 per cent of its workforce in August, despite raising $40 million in funding late last year.
Meanwhile a Brisbane-based cryptocurrency company Swyftx sacked one in five of its workforce with one employee learning she had lost her job while on honeymoon in Hawaii.
Another crypto platform Immutable, which was valued at $3.5 billion faced a fierce backlash earlier this month after sacking 17 per cent of its staff from its gaming division, while continuing to “hire aggressively” after raising $280 million in funding in March.
Then there was Australian healthcare start-up Eucalyptus that provides treatments for obesity, acne and erectile dysfunction, which fired up to 20 per cent of staff after an investment firm pulled its funding at the last minute.
It also included buy now, pay later providers Brighte and BizPay, alongside a start-up focused on the solar sector called 5B Solar, which boasts backing from former prime minister Malcolm Turnbull, which let go of 25 per cent of staff.
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