Social media giant Snapchat is reportedly planning to layoff 20% of its workforce. The planned cuts come after the company reported a less-than-expected earnings report , which sent its stock falling.
The social media site will start the Snapchat layoffs from August 31, said people familiar with the matter. The job cuts will start with the team working on Minis, which works on building third-party apps and games.
Snapchat Layoffs
Zenly, the social-media mapping app, bought by Snap in 2017 will also be severely impacted by the Snapchat layoffs. The company’s stock had plummeted by over 80% in value this year. In the Q2 investor letter in July, Snap mentioned the reason for not providing guidance for its current quarter, stating, “forward-looking visibility remains incredibly challenging.” Since going public in 2017, Snap has only been profitable in one quarter.
The company’s disappointing results were echoed in the results of other social media giants, as weak digital advertising growth hit profit forecasts. Both Facebook and Pinterest missed their estimates for the second quarter. Social media companies blamed a weak economy for cuts in online advertising, as most companies tried to reel in costs while inflation hit a four-decade high.
Other than inflation, social media companies have also blamed changes made by Apple’s iOS for making it difficult to track users. The privacy-focused updates make it difficult for firms to track user activity, which is required to deploy personalized ads.
Tech companies have been responsible for a majority of the job cuts this year. Most hired aggressively during the pandemic but when recession fears and grim forecasts threaten to overwhelm growth, they decided to trim the workforce in an attempt to keep business profitable. Big tech companies like Apple, Google, Microsoft, and Meta have either deployed hiring freezes or slowed hiring for the remained of the year. They have cited uncertain market conditions and a record-high inflation as factors that have given them pause, as they attempt to keep businesses functional during times of instability. Most tech companies have warned stakeholders of tough times ahead.
In April, Snap had announced that it is developing a Pixy flying camera drone. In August, the company revealed that it had scrapped the camera plans.
A Snap Forecast
Although the social media company has not made any official comment about the Snap layoffs, CEO Evan Spiegel had hinted at the glum outlook in its Q2 results. “While the continued growth of our community increases the long-term opportunity for our business, our financial results for Q2 do not reflect our ambition,” said Spiegel. “We are evolving our business and strategy to reaccelerate revenue growth, including innovating on our products, investing heavily in our direct response advertising business, and cultivating new sources of revenue to help diversify our topline growth.”
Snap nearly doubled its workforce during the pandemic. Last year, in May, it also acquired WaveOptics, an AR display supplier for over $500 million.
As rumors about Snapchat layoffs gathered steam in the last week, the site’s Chief Business Officer, Jeremi Gorman, and Peter Naylor, Vice President of the Americas, decided to jump ship to join Netflix Inc. to help lead its global advertising business, starting in September. Gorman will be president of worldwide advertising for Netflix, while Naylor will serve as the VP of ad sales. The two Snap executives are popular for their astute tech and entertainment knowledge. Last month, Netflix announced that it will be partnering with Microsoft to roll out its advertising technology.
Snapchat currently employs around 4,600 people and if the jobs cuts are initiated approximately 1,200 people will lose their jobs. The company has faced increased competition from rivals like TikTok and Instagram in the last year.
