Snap restructures into 'start-up squads' as growth stalls
What's the story
Snap, the parent company of Snapchat, is undergoing a major internal restructuring. CEO Evan Spiegel announced in his annual company letter that the firm will be reorganized into small "start-up squads" of 10-15 people each. The move is aimed at helping Snap compete against larger rivals more effectively. The decision comes amid mounting pressure on the company, with advertising revenue growth stagnating at 4% in Q2 and a 2% decline in North American daily active users to 98 million.
Revenue growth
Snapchat+ subscriptions surpass $700 million in annual recurring revenue
Despite the challenges, Spiegel highlighted a major positive in his letter. He revealed that Snapchat+ subscriptions now bring in over $700 million in annual recurring revenue from more than 15 million paying subscribers. This makes direct revenue one of Snap's fastest-growing opportunities. The revelation comes as the company continues to grapple with its advertising business and user growth.
Tech innovation
Specs AR glasses development gains momentum
Along with the restructuring, Snap is also focusing on Specs, its own augmented reality (AR) glasses. Spiegel envisions these devices as a potential replacement for smartphones. He describes the development as "a once-in-a-generation transformation toward human-centered computing." Other tech giants like Meta and Google are also looking at similar futures with their partnerships with Ray-Ban and Warby Parker, respectively.
Market outlook
Snap's market cap has dropped nearly 90% since September 2021
Spiegel acknowledged that Snap's current stock price "reflects doubt" but insisted there's "start-up style return potential" at the company's roughly $12 billion valuation. This figure is a far cry from September 2021, when Snap's market cap peaked at over $116 billion amid social media hype. The drastic drop of nearly 90% in its current valuation highlights the challenges the company has faced in recent years.