Dive Brief:
- Snap CEO Evan Spiegel outlined a restructuring plan that includes laying off 20% of employees in a note to staff published on the company’s blog. The Verge earlier reported on the layoffs.
- Moving forward, Snap’s strategic priorities will be community growth, revenue growth and augmented reality (AR). It is discontinuing investments in original shows, mini-games and apps and its selfie drone Pixy, along with nixing standalone apps Zenly and Voisey.
- The Snapchat owner is also streamlining its organization by promoting senior vice president of engineering Jerry Hunter to chief operating officer, a newly created role overseeing monetization efforts and other initiatives. The overhaul comes amid struggles with revenue growth and an uncertain macroeconomic environment.
Dive Insight:
Snap affirmed earlier reports that it is making significant reductions to its headcount while giving color on the areas it views as important to a turnaround. The challenge is balancing more pared-back, focused investments with continued innovation in a highly competitive social media category that includes ByteDance’s TikTok and Meta Platforms’ Instagram. Snapchat is chasing TikTok’s emergent short-form video dominance through a Spotlight feature that has gained traction with users but is still early days in terms of monetization.
A tighter internal structure centered around the new chief operating officer appointment could help Snap correct course. On top of spearheading monetization efforts, engineering vet Hunter is leading teams related to growth, partnerships and content, AR enterprise and small- and medium-sized businesses, effective immediately.
However, Snap at the same time is about to lose key executives with deep connections to advertisers. Chief Business Officer Jeremi Gorman and vice president of Americas Peter Naylor are leaving the platform for Netflix in September, where they will help the streamer get its own advertising initiative off the ground. Gorman joined Snap in 2018 and Naylor in 2020.
In terms of what remains a priority, Snap is continuing to support the development of AR, a longstanding product strength and frequently deployed tool among advertisers seeking to blend digital and physical experiences. But original content, gaming and hardware are receiving a heavy blow. Social mapping service Zenly and music-creation platform Voisey, standalone apps Snap acquired in 2017 and 2020, respectively, are also getting axed.
Snap’s decision to discontinue mini-games follows reports that TikTok is experimenting more in that space amid an explosion of mobile gaming use. The Wall Street Journal earlier in August reported Snap’s decision to kill off its Pixy drone unit.
Steep layoffs and project cancellations mark a comedown from earlier in the pandemic, when digital ad dollars flowed freely and Snap went on a hiring spree. Spiegel’s comments help put in perspective how fast the company expanded over the COVID-19 reopening period.
“The extent of this reduction should substantially reduce the risk of ever having to do this again, while balancing our desire to invest in our long term future and reaccelerate our revenue growth,” the executive wrote in the note. “Overall, the size of our team will remain larger than it was at this time last year.”
Spiegel said that Snap’s quarter-to-date revenue growth is up 8% over the year-ago period, well below what the company expected earlier in 2022.
Like other social platforms, Snap has been pummelled by falling advertiser demand brought on by a cooling economy and global events like the war in Ukraine. It is also contending with privacy changes introduced by Apple last year that make targeting and measuring mobile campaigns more challenging and fiercer competition as brands get choosier with their ad spending.
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