Snap to cut 20% of staff in digital advertising downturn

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Snap will lay off a fifth of its 6,500-strong workforce and cut investment in its augmented reality glasses, among others, in a major uproar as the social media group battles a slump in advertising.

The Los Angeles-based company formally announced the restructuring on Wednesday, adding that revenue growth in the current quarter had so far slowed to 8 percent year-on-year, compared to 13 percent in the second quarter.

The budget cuts and bleak outlook mark a striking hit for Snap, which posted blockbuster growth in the first two years of the coronavirus pandemic and expanded its workforce as users spent more time and money online during lockdowns.

However, the boom for social media groups this year has turned into a deep and broad sell-off of stocks amid high inflation and a broader economic slowdown, forcing the biggest tech groups like Meta and Google to hire staff and implement other cost-cutting measures. to feed .

Snap said it expected to generate $500 million in annual savings from the restructuring, compared to costs in the second quarter. It added that it expected to spend between $110 million and $175 million implementing the restructuring, much of which would take place in the current quarter.

“Today we are restructuring our business to increase focus on our three strategic priorities: community growth, revenue growth and augmented reality,” said CEO Evan Spiegel. “Changes of this magnitude are always difficult and we are focused on supporting our departing team members during this transition.”

One of the biggest changes is that in a slide deck for investors, Snap said it was “shrinking its investment scope” in its long-touted augmented reality goggle, Spectacles, to “focus on highly differentiated long-term research and development efforts.”

It also said it was halting investment in Snap Originals, short video content it produces in-house, and significantly reducing investment in games and Snap Minis, allowing developers to build simplified versions of their apps within the main Snapchat app.

It will cut 20 percent of its global workforce, which stood at 6,446 at the end of June.

Jeremi Gorman, chief business officer, and Peter Naylor, vice president of ad sales for America, are leaving the company as part of the shakeup, according to a report from The Verge, which was confirmed by Snap. Gorman said in a social media post that she and Naylor will be heading to Netflix, where she will serve as the streaming site’s president of global advertising.

Shares in Snap fell more than 6 percent in after-hours trading on Tuesday after the Verge and Financial Times first reported the layoffs. The company’s shares have lost nearly 80 percent of their value since the start of the year after issuing a profit warning in May and announcing dismal second-quarter results in July.

In both cases, Snap said the difficult macroeconomic environment has caused advertisers to cut their budgets. It also blamed increased industry competition and privacy changes by Apple that have made it harder for apps to target ads and measure campaign success.

In its results statements in July, Snap said it was “not satisfied” with its earnings “regardless of the current headwinds”.

Spiegel said the company planned to focus on product innovation, diversify revenue and invest in its direct response advertising business to address the slowdown.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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