Snap to Cut 20% of Staff, Cancel Projects

Snap announced today that it will lay off 20 percent of all staff and shut down projects, including mobile games and novelties like a flying drone camera, as high inflation and a deteriorating economy ravage the advertising industry.

Snap said that these cuts will help the company save an estimated $500 million in annual costs. Shares of the social media app rose 15 percent in morning trading today, which reverberated across the social platform sector. 

Meta Platform shares, the parent company for Facebook and Interest, went up 5 percent. Pinterest also rose 6 percent. 

Snap said that it will be focusing on improving sales and the number of Snapchat users. The “clear and defining action” to refocus its business has reassured investors, analysts and experts have said. 

Analysts and investors have viewed Snap as an early indicator of trends affecting other social media platforms, as Snap is usually the first to report quarterly earnings or provide business updates.

In May, Snap warned that it would miss its revenue targets because of worsening economic conditions, and it sparked a sell-off of social media stocks. 

Shares in Santa Monica, California-based Snap closed down 2.5 percent at $10 on news first broke of Snap’s plans for layoffs, as well as news breaking that Snap would see the departure of two top advertising executives.

Two of Snap’s top ad sales executives – Chief Business Officer Jeremi Gorman and Vice President of ad sales Peter Naylor – are leaving to join Netflix Inc and build the streaming service’s ad business. 

Revenue growth so far in the third quarter is up 8 percent from the previous year, which is “well below what we were expecting”, Snap Chief Executive Evan Spiegel wrote in a memo to employees that were also released publicly on Wednesday.

If the growth rates hold, it will mark the slowest revenue growth Snap has had since it became a public company in 2017. It is a far cry from the triple-digit growth rates it has recorded previously. 

Despite reducing spending in some areas, Snap must now “face the consequences of our lower revenue growth and adapt to the market environment”, CEO Spiegel wrote in the memo.

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