Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
The Snap employee layoff plan is seen by the company as crucial to remaining competitive in a weakening market.
Snap Inc (NYSE: SNAP) has kicked its austerity measures into high gear as it plans a 20% staff layoff that will affect 1,300 employees. The Snapchat parent also intimated that it would be scrapping several projects. These include its Pixy photo-oriented drone and the Snap Originals premium show.
Following the announcement of these developments on Tuesday, Snap’s shares surged 15% on Wednesday. However, the American camera and social media company’s shares remain down over 70% year-to-date.
Insight into Snap Employee Layoff Agenda
Snap CEO Evan Spiegel announced the company’s layoff agenda following its recent underwhelming Q2 earnings report. According to Spiegel, the company is taking these cost-cutting measures to properly weather its financial challenges. In his own words, “We must reduce our cost structure to avoid incurring significant ongoing losses”. Spiegel also stated:
“While we have built substantial capital reserves, and have made extensive efforts to avoid reductions in the size of our team by reducing spend in other areas, we must now face the consequences of our lower revenue growth and adapt to the market environment.”
The Snap CEO also explained that the company’s latest year-over-year quarterly revenue growth rate of 8% is way below expectation. Finally, he revealed that the social media-focused company now looks to focus on its three strategic priorities. These include community growth, revenue growth, and augmented reality.
As part of its restructuring plans, Snap promoted Jerry Hunter from senior vice president of engineering to chief operating officer. However, Spiegel says that Hunter will continue leading Snap’s engineering unit despite the change in job title. Commenting on the broader restructuring process undertaken by Snap, the company’s chief executive stated:
“Changes of this magnitude are never easy, and we must act decisively to meet this moment as a team. I am proud of the strength and resilience of our team as we have navigated the myriad challenges of growing our business in a highly competitive industry during uncertain and unprecedented times.”
Challenging Times for NASDAQ-listed Stocks
Snap’s stringent operational measures indicate a recent broader trend across several social media and tech-oriented companies. Several of these companies are doing away with projects they no longer deem critical to their bottom line. For instance, amid a deteriorating macroeconomic environment, Facebook parent Meta Platforms (NASDAQ: META) previously stated that it would cut some teams. Furthermore, software power player Microsoft (NASDAQ: MSFT) also revealed intentions to reduce its workforce at its Modern Life Experiences group. In addition, the company wants to plunge business expenses by restricting spending on travel and company gatherings.
Still on austerity measures undertaken by various tech players, ride-hailing giant Lyft (NASDAQ: LYFT) has shuttered its rider car-rental scheme. In addition, the San Francisco, California-based platform also laid off around 60 employees.
Competition is also playing a big factor in waning sales for players in the tech space. Everyone from Amazon (NASDAQ: AMZN) to relative newcomers TikTok is battling for market share in a saturated market.