Snap, the maker of short-lived messaging app Snapchat, is laying off 20% of its employees, discontinuing at least six products and appointing its first chief executive in seven years, the financially-troubled social media company said on Wednesday.
The cuts are expected to affect nearly 1,300 of Snap’s 6,400 employees, the company said. Snap closes its division that produced exclusive short shows with celebrities and other influencers, as well as its social mapping app, Zenly; his music creation app, Voisey; and hardware, including its drone camera, Pixy.
At the same time, Snap announced that it was appointing Jerry Hunter, senior vice president of engineering, as chief operating officer. Mr Hunter will become No. 2 to Evan Spiegel, who is one of Snap’s founders and chief executive. The CEO position had been vacant since 2015.
In an email to employees on Wednesday, Mr. Spiegel blamed difficult macroeconomic conditions for forcing his hand.
“As we continue our work to re-accelerate revenue growth, we must ensure Snap’s long-term success in any environment,” he wrote. He added, “I am deeply sorry that these changes are necessary to ensure the long-term success of our business.”
Snap’s layoffs were reported earlier by tech news site The Verge.
Snap, which is popular with teens and young adults and has more than 347 million active users worldwide, has struggled for months. Apple’s privacy changes have affected its advertising business, and rising inflation and economic uncertainty have made advertisers nervous.
Last month, Snap announced its slowest quarterly growth rate since its IPO in 2017 and said it would “significantly reduce” its hiring pace. It also declined to predict its financial performance for the current quarter due to “uncertainties in the operating environment”. Snap’s stock price has fallen nearly 80% since the start of the year.
Many social media companies are grappling with the prospect of a recession. Meta, the parent company of Facebook and Instagram, and Twitter have also slowed hiring in recent months. But Snap, like Twitter, is particularly vulnerable to economic shocks because it’s a small social media company and relies heavily on a primary means of making money.
“When the economy starts to slow down, advertising budgets get tighter,” said Brent Thill, equity analyst at Jefferies. “Advertisers tend to go to the proven platforms, like Google or Amazon, where the wallets are.”
Some Snap executives are gone. Its chief commercial officer, Jeremi Gorman, and its vice president of sales for the Americas, Peter Naylor, recently left for Netflix. Their releases were reported earlier by The Verge.
Mr Spiegel said the extent of the layoffs “would vary from team to team”. He said the scale of the cuts would also “significantly reduce the risk of having to start over”. The company said it expected to save $500 million from the restructuring.
The projects and products that Snap is ending were rolled out so the company could better compete with rivals and attract creators to the platform. Apps like Zenly and Voisey, which operate independently of Snapchat, have been positioned against Instagram and TikTok.
In his email, Spiegel said Snap would focus more on three areas: community growth, revenue growth and augmented reality. He said the company would continue to invest in those priorities.
Spiegel also said Snap’s revenue in the current quarter was up 8% from a year ago, which was “well below” what the company expected earlier this year. but was an improvement over the “roughly flat” revenue growth at the start of the year. quarter last month.
Snap and other social media companies also continue to face intense scrutiny from lawmakers and regulators for exposing young users to potentially harmful content, which some say can worsen unrest. diet and mental illness. Snapchat rolled out its first parental controls this month.