Snapchat’s parent company confirmed on Wednesday that it is cutting 20 percent of staff in a bid to dig itself out competition and revenue woes, as well as recent quarterly losses.
A hit with young smartphone users in its early days, Snapchat has remained a small player in the social networking space, as competition from other apps such as TikTok has grown more intense.
“We must now face the consequences of our lower revenue growth and adapt to the market environment,” Snap CEO Evan Spiegel said in a note to employees on Wednesday announcing the decision “to reduce the size of our team by approximately 20 percent.”
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The company in July reported that quarterly losses nearly tripled to US$422 million amid conditions that were “more challenging” than expected.
Restructuring would focus on “three strategic priorities: community growth, revenue growth and augmented reality,” while unrelated projects would “be discontinued or receive substantially reduced investment,” Spiegel said.
Snap said that it would discontinue its Snap Originals show programming, third-party app integration known as Minis, its games, and a lightweight drone offering called Pixy.
The company also said that it is “winding down” its standalone geolocation app Zenly and music creation app Voisey, which it acquired through takeovers.
As with other social networks, Snap has taken a hit since advertisers tightened their belts, and since new privacy changes by Apple Inc that have bitten into firms’ sales of costly but highly-targeted advertisements.
“The company is facing layoffs as it works to restructure its ad business and cut costs,” said Insider Intelligence principal analyst Jasmine Enberg said. “Even so, I wouldn’t count Evan Spiegel out.”
Snap has a growing and loyal user base, and is well-positioned to capitalize on advertising and commerce in its augmented reality offerings over the long-term, the analyst said.
Enberg expected Snapchat to end this year with nearly US$5 billion in net ad revenue worldwide in a 43 percent increase from last year. Insider Intelligence projected that ranks of Snapchat users would be up more than 10 percent to 493.7 million by the end of this year.
“We are encouraged by stabilizing user trends, as well as the large shopping and e-commerce advertising opportunity, healthy margins, and perspective and experience from recent upgrades to the management team,” Baird analysts said of Snap in a note to investors.
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