Crisis-hit Snap plans to axe over 1,000 employees
What's the story
Things are not going well at the Snap Inc. headquarters in Santa Monica, California. The company is planning to lay off approximately 20% of its employees, people close to the matter told The Verge. The parent of Snapchat currently employs over 6,400 people. This means that over 1,000 employees will get the axe. Snap has declined to comment on the report.
Context
Why does this story matter?
Snap, one of the biggest social media companies in the world, has managed to make a profit only once since it went public. Surprising, isn't it? The company is yet to find an optimal way to turn its growing user base into revenue This lack of revenue generation has begun to take a toll on Snap. The mass layoff is an indication of that.
Lay off
Snap Minis team and Zenly will be severely impacted
The layoffs in Snap will affect some departments more than others. Among them, the team working on Snap Minis will be severely hit. Zenly, the social mapping app Snap bought in 2017, will also feel the brunt of layoffs. Snap's hardware team working on Spectacles smart glasses will see some cuts as well. The company also has plans to restructure its ad sales organization.
Falling valuation
Snap lost approximately 80% of its value in 2022
The layoffs in Snap, despite the magnitude, do not come as a surprise to many. The post-pandemic economy hasn't been kind to the social media giant. Since the beginning of the year, the company has lost nearly 80% of its value. Its dismal second-quarter results only added fuel to the fire. About the upcoming quarter, it said that it wouldn't forecast the results.
Poor decisions
Snap's recent investments have not been successful
Snap's challenges were magnified by some poor decisions. Like its peers, the company hired in bulk during the pandemic. The number of full-time employees increased from 3,427 in March 2020 to 6,446 in the last quarter. Its decision to acquire WaveOptics for over $500 million last year hasn't panned out well. Earlier this month, the company scrapped the development of its Pixy selfie drone.
Ad revenue
The decline in ad revenue severely affected Snap
Snap isn't the only social media company to have reported poor results in the last quarter. Others like Meta and Pinterest also underperformed. The companies blame a downfall in digital ad revenue for this. Due to recession fears, businesses have cut back on digital ads. The 2021 iOS privacy update, which made it hard for companies to track users, has also affected ad revenue.