Snapchat, the popular social media app known for its disappearing messages and filters, has reportedly laid off around 20% of its employees in recent weeks. This equates to more than 1,200 jobs cut across divisions like hardware, advertising, and partnerships.
The layoffs at Snapchat signify the company’s attempts to restructure and cut costs in order to endure the current economic downturn. Many tech firms have enacted hiring freezes or layoffs in 2022 amid concerns over a potential recession.
Background on Snapchat
Snapchat first launched in 2011 as a mobile app that allowed users to send photo and video messages that disappeared after being viewed. The ephemeral nature of Snapchat helped differentiate it from other social platforms like Facebook. Snapchat pioneered features like Stories and Filters that have since become ubiquitous across social media.
Snapchat is a public company trading on the New York Stock Exchange under the ticker SNAP. It had its IPO in 2017. Snapchat’s founders are Evan Spiegel, who serves as CEO, and Bobby Murphy, the CTO.
Some key facts and statistics about Snapchat:
- Daily active users: 347 million (as of Q2 2022)
- Revenue in 2021: $4.12 billion, up 64% YoY
- Headquarters: Santa Monica, California
- Valuation at IPO: $33 billion
Snapchat achieved meteoric growth in its early years but has faced slower user and revenue growth recently as it contends with rivals like TikTok. The company has aimed to expand its app into being a full “social camera” platform.
Details on Snapchat’s Layoffs
In August and September 2022, Snap conducted multiple rounds of layoffs impacting over 20% of positions across the company.
Here are key details on Snapchat’s job cuts:
- The layoffs eliminated around 1,280 jobs, equivalent to over 20% of the company’s over 6,400 employees.
- CEO Evan Spiegel announced the first round of layoffs in a memo to staff on August 31, 2022, confirming a 20% reduction.
- Further layoffs continued throughout September.
- The layoffs spanned geographies and departments, including advertising sales, software engineers, hardware staff, and partnerships teams.
- Some key divisions like Zenly, Snap’s social mapping app, were particularly hard hit.
- Spiegel cited the need to restructure and cut costs to endure the weakening economy.
The broad layoffs indicate Snap is looking to protect profitability and its core app features by slimming down peripheral divisions. However, the cuts also risk slowing innovation.
Snapchat’s Stock Price and Financial Position
Snapchat’s parent company Snap Inc. has seen its stock price plummet in 2022 amid its slowing growth and the broader tech downturn.
Here is a look at how Snapchat’s finances and stock performance have trended:
- Snap’s share price has declined nearly 80% year-to-date in 2022.
- The stock trades around $10 currently, down from a high of $50 in February 2022.
- Q2 2022 revenue grew 13% YoY to $1.11 billion, the slowest growth rate since going public.
- Q2 daily active users were 347 million, up 18% YoY, but flat sequentially for the first time.
- Snap has $4.9 billion in cash reserves as of June 2022.
- The company posted a $422 million net loss in Q2 2022 and has yet to reach sustained profitability.
Snap’s faltering user growth and ongoing losses have made investors sceptical. But the company still has substantial cash to endure the downturn.
Broader Layoffs at Tech Companies
Snapchat’s layoffs come amid a wave of job cuts across the technology sector in 2022. Other major tech companies enacting hiring freezes or layoffs include:
| Company | # Laid Off | % of Staff |
|---|---|---|
| Meta | 11,000 | 13% |
| ~3,700 | 50% | |
| Lyft | 700 | 13% |
| Shopify | 1,000+ | 10% |
This wave of layoffs in the tech sector reflects dampening demand, recession fears, and companies looking to cut costs and streamline. Snapchat’s layoffs put it on par with the percentage cuts at Meta and Lyft.
Reasons for Snapchat’s Layoffs
Snapchat appears to have enacted broad layoffs for the following key reasons:
- Slowing revenue growth – Snapchat’s revenue grew just 13% YoY in Q2 2022, a massive slowdown versus 116% growth in 2021.
- Declining stock price – Snap’s share price has plunged nearly 80% in 2022, reducing its valuation.
- Investor pressures – Investors have urged Snapchat to focus on profitability in the challenging environment.
- Weakening ad market – Advertising is Snapchat’s main revenue source, and ad spending is being cut.
- High costs – Snapchat has consistently spent heavily on research, payroll, and other operating costs.
- Economic downturn – Recession risks are leading companies like Snapchat to cut costs.
With these pressures mounting, Snapchat moved to lay off around 20% of staff to preserve capital and aim for profitability. The cuts span peripheral divisions to protect Snapchat’s core features.
Impact on Snapchat’s Business
The large-scale layoffs will have both positive and negative consequences for Snapchat’s business going forward:
Potential Positive Impacts
- Lower costs and reduced cash burn
- Moves company closer to profitability
- Allows increased focus on the core Snapchat app
- Boosts efficiency by cutting peripheral projects
- Shows investors Snap is serious about cost cuts
Potential Negative Impacts
- Could slow innovation and product development
- Loss of talented employees and institutional knowledge
- Damage to company culture and morale
- Reduced workforce for scaling ads and content
- Ceding ground to competitors like TikTok
Overall, the layoffs appear strategically targeted at slowing Snapchat’s cost growth and boosting profitability. But the cuts also risk hampering Snap’s capacity to innovate, grow, and compete.
Conclusion
Snapchat’s decision to lay off around 20% of staff – over 1,200 employees – reflects the company’s aim to cut costs in the face of a weakening economy, slowing revenue growth, and a plunging stock price. The broad layoffs span peripheral divisions outside of Snapchat’s core messaging app.
While the layoffs could help Snapchat move towards profitability, they also risk slowing innovation and ceding ground to rivals. It remains to be seen how the job cuts will impact Snapchat’s user growth, revenue, product roadmap, and culture over the longer-term.
But the layoffs make clear that Snapchat, like much of the tech sector, is battening down the hatches to endure challenging economic conditions in 2022 and 2023. The company is betting that losing some talent will be outweighed by the benefits of lower costs and a renewed focus on efficiency.