Snap to cut 20% of employees in digital advertising decline

Snap will lay off a fifth of its 6,500-strong workforce and cut investment in its augmented reality glasses, among other areas, in a major change as the social media group battles a decline in advertising.

The Los Angeles-based company formally announced the restructuring on Wednesday, adding that revenue growth in the current quarter so far has slowed to 8 percent year over year, compared to 13 percent in the second quarter.

Cuts and bleak expectations are a striking face Explode, Explodewhich recorded explosive growth in the first two years of the coronavirus pandemic and expanded headcount as users spent more time and money online during lockdowns.

However, the boom times for social media groups this year have turned into a deep and broad sell-off of stocks amid rising inflation and a broader economic slowdown, forcing the biggest tech groups like Meta and Google to do so. Hiring Freeze and implement other cost-cutting measures.

Snap said it expects to achieve savings of $500 million annually from the restructuring, compared to second-quarter costs. It added that it expects to spend between $110 and $175 million on implementing the restructuring, which will mostly be incurred in the current quarter.

“Today we are restructuring our business to focus more on our three strategic priorities: community growth, revenue growth and augmented reality,” said CEO Evan Spiegel. “Changes of this magnitude are always challenging, and we are focused on supporting our departing team members during this transition.”

Among the biggest changes, Snap said in a slide group to investors that it is “narrowing down its investment scope” in its long-touted augmented reality glasses, Spectacles, in order to “focus on long-term, highly differentiated research and development efforts.”

It also said it is killing investment in Snap Originals, the short video content it produces in-house, and significantly reducing investment in games and Snap Minis, with which developers can create simplified versions of their apps within the main Snapchat app.

It will cut 20 percent of its global headcount, which stood at 6,446 at the end of June.

Jeremy Gorman, chief business officer, and Peter Naylor, vice president of advertising sales in the Americas, will leave the company as part of the changeover, according to a report from The Verge, which Snap confirmed. Gorman said in a social media post that she and Naylor will be going to Netflix, where she will serve as head of global advertising for the streaming site.

Shares in Snap fell more than 6 percent in after-hours trading on Tuesday after the Verge and Financial Times first reported the layoffs. The company’s shares have lost nearly 80 percent of their year-to-date value, after an earnings warning was issued in May and published. bleak results for the second quarter in July.

Either way, Snape said tough macroeconomic conditions caused it Advertisers to cut their budgets. He also blamed increased competition in the sector and Apple’s privacy changes that made it difficult for apps to target ads and measure the success of campaigns.

In its July results statements, Snap said it was “not satisfied” with its earnings “regardless of the current headwinds.”

Spiegel said the company plans to focus on product innovation, revenue diversification and investment in its direct response advertising business in order to address the slowdown.