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| Photo Credit: AP. |
SILVER SPRING, Md. (AP) — The parent company of social media platform Snapchat said Wednesday that it is letting go of 20% of its staff as it reorganizes and tries to reduce costs in the face of declining ad sales.
In a letter
to staff posted on Snap Inc.’s website, CEO Evan Spiegel said sales were not
keeping up with earlier projections.
“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,”
Spiegel wrote.
Spiegel said
Snap was restructuring its business to focus on community growth, revenue
growth and augmented reality. Anything that doesn’t contribute to those three
areas “will be discontinued or receive substantially reduced investment,”
Spiegel said.
Last fall,
Snap said its ad sales were being hurt by a privacy crackdown that rolled out
on Apple’s iPhones, which raised investor fears about the app’s potential for
growth. Most social media platforms rely heavily on advertising revenue, one
reason that Facebook has been an outspoken critic of Apple’s recent changes to
privacy controls.
Since Snap
posted its first-ever profitable quarter in the last quarter of 2021, there has
been little good news from the company.
On May 24,
Snap shares lost nearly half their value, falling 43% after the company said in
an SEC filing that the “macroeconomic environment has deteriorated further and
faster than anticipated” and that it would not meet its own sales and profit
targets in the period. Shares tumbled another 39% on July 22, a day after Snap
posted quarterly results that fell short of projections.
Snap’s staff
has grown to more than 5,600 employees in recent years and the company said
even after laying off more than 1,000 people, its staff will be larger than it
was a year ago.
Snapchat is
a video messaging platform best known for a feature that automatically deletes
messages after they’ve been viewed by recipients. It now offers other forms of
video content as well.
Like most
other social media companies, Snap boomed during the pandemic when workers and
students spent longer hours online at home. Snap shares peaked in late
September of 2021 at more than $83 per share.
Snap shares
gained about 10% on Wednesday, to $11 per share, after the layoffs were
reported.
Snap said it
was halting investment in Snap Originals, Minis, Games, Pixy, and other
segments. It also said it is “winding down” the standalone apps Zenly and
Voisey.
Santa
Monica, California-based Snapchat also announced the promotion of Jerry Hunter
to chief operating officer effective immediately, as well as other regional
leadership changes.