Nothing is going well at Snap Group
The problems are piling up within the Snap group, and the CEO of Snap, the parent company of the Snapchat application, announced on Wednesday, 31 August, a restructuring of the group, leading to the elimination of about 20% of the workforce, or more than 1,200 employees.
“We are restructuring our company to increase our focus on three strategic priorities: growing our community, growing our revenue, and augmented reality,” Evan Spiegel wrote in a note sent to employees.
“Projects that do not directly contribute to these areas will be discontinued or receive significantly less investment,” the Snap co-founding boss added.
The redundancies were announced on Tuesday 30 August by the specialist site The Verge. At the end of June, Snap, which is based in California, had just over 6,400 employees worldwide. Projects such as Snap Originals (exclusive series), Minis (integration of third-party applications), Games (mobile games) and Pixy (miniature drone) will be discontinued as part of the group’s reorganization, Spiegel said.
It is likely that the geolocation app Zenly and the music creation app Voisey, which were acquired through buyouts, will be phased out. When it published its quarterly results at the end of July, the group had already warned that its turnover growth was slowing down and that it would therefore have to reduce its expenses. The stock had then collapsed by almost 40% on the New York Stock Exchange.
Like other social networks, Snap is suffering from a general reduction in advertising spending by advertisers, its bread and butter, as well as a regulatory change by Apple requiring users to give their consent before being tracked for advertising purposes.
Snap also faces rivals with a younger audience, including the short video sharing platform TikTok. Spiegel said the 8% quarterly revenue growth figure over 2021 is “well below what we expected earlier in the year”. “Still, I wouldn’t underestimate Evan Spiegel,” commented Jasmine Enberg of Insider Intelligence in a note.
“Snap continues to have a loyal and growing user base and is well positioned to benefit in the long term from its augmented reality offering for advertising and commerce,” the analyst added.
Snap Group also announced on Wednesday the promotion of Chief Operating Officer Jerry Hunter to Chief Operating Officer. Ronan Harris, a Google executive, has been hired as president of the Europe, Middle East and Africa region and will start in October. The restructuring was welcomed on Wall Street, where Snap’s stock rose nearly 8 percent after giving up about 4 percent at the close Tuesday, Aug. 30.