Snap set to fire a fifth of its workforce amid tough market conditions

Layoffs to address widening losses will begin at the social media company this week

The Snap logo as it appeared on the floor of the New York Stock Exchange. The company's shares have slumped 79 per cent this year and it is making job cuts to address losses. Reuters
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Snap, the owner of social media platform Snapchat, is planning to fire about 20 per cent of its nearly 6,500 employees as it battles tightening market conditions, according to technology news website The Verge.

The layoffs, which were planned for weeks, will start on Wednesday and will primarily affect the team running Minis, small third-party applications that run on the platform, and the social mapping company Zenly, which Snap acquired in 2017, the report said, citing sources.

Snap has made no official announcement on the matter. A representative for the company declined to comment to The Verge.

Snap has faced a very challenging 2022, mainly because of a slowdown in advertiser spending on its platform that has dragged its stock price down almost 80 per cent this year.

It is also trying to contend with bigger and more well-funded social media companies, including Meta Platforms' Facebook, WhatsApp and Instagram, Google's YouTube and China-grown apps led by TikTok.

Snapchat, with about 557 million users, is the 12th-biggest social media platform — and that is counting even mainland China-focused apps, according to data from Statista.

Snap posted its first quarterly net profit in the fourth quarter of 2021, swinging to a $22.5 million gain from a $113m loss from a year earlier, as the company exceeded analysts’ expectations on earnings and user growth.

Revenue rose 42 per cent on an annual basis to about $1.3 billion in the three months ended December.

However, the company immediately returned to the red. It has reported about $782m in losses so far in 2022 — $422m in the second quarter and $360m in the first quarter, according to its earnings reports.

Revenue, however, remained positive, rising 13 per cent to $1.1bn and 38 per cent to $1.06bn, annually, in the second and first quarters of the year, respectively.

“While the continued growth of our community increases the long-term opportunity for our business, our financial results for the second quarter do not reflect our ambition,” chief executive Evan Spiegel said in the second-quarter earnings report.

He said that to evolve the company's strategy to “reaccelerate revenue growth”, Snap would focus on key priorities — product innovation, heavy investments in its direct response advertising business and finding new sources of revenue to help diversify its top-line growth.

Snap continues to roll out new features in an effort to appeal to its users amid its fiscal troubles.

In July, the company announced a desktop version of Snapchat, which will allow users to access the platform beyond their mobile devices on personal computers and laptops. This is also a boon for iPad users, since there is currently no version of the app for Apple's tablet, much like WhatsApp.

On Tuesday, Snap unveiled a dual-camera feature that allows users to use a smartphone's front and rear cameras simultaneously. It will be initially be available on Apple's iOS, with Google's Android to follow soon.

There have been, however, no concrete plans announced on how to address the issues on advertising and creating revenue streams. Also, given the uncertainty, Snap told investors in its second-quarter earnings report that it would not offer any guidance for the current quarter.

Snap's shares fell 2.5 per cent to $10.01 at the close of trading in New York on Tuesday.

Updated: August 31, 2022, 8:55 AM
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