Snap cuts personnel as it restructures its Ad Business
In a significant restructuring, Snap (NYSE:SNAP) has announced it will eliminate over 1,200 jobs, or 20% of its workforce, and will also be abandoning a number of projects.
CEO Evan Spiegel stated in an internal memo that revenues for the current quarter are tracking at an 8% year-over-year increase, considerably below forecasts. The company will focus even more on three strategic areas, he continues, “augmented reality, revenue development, and community growth. Cuts can be made in other places.”
Although we have taken significant efforts to prevent lowering the size of our team by reducing spending in other areas, Spiegel wrote in the memo that “we must now confront the implications of our reduced revenue growth and adapt to the market climate.” As of 10:12 a.m. on Tuesday, Snap stock had increased 13.4% premarket.
Spiegel informed staff in a memo that Snap had developed a 2023 strategy to create free cash flow even in a low-growth scenario. Those sectors that will be cut: “We have determined to stop funding Snap Originals, Minis, Games, and Pixy, among other ventures. Additionally, we have begun the process of shutting down the stand-alone programs Zenly and Voisey.”
After news broke on Monday that the company will drastically reduce its employees, Netflix reacted by recruiting Snap’s chief business officer Jeremi Gorman and senior advertising executive Peter Naylor.
Reported growth in revenues was at 8% as of August 29. Due to uncertainty over the operating environment, the company will not provide expectations for revenue or adjusted EBITDA in Q3 of 2022. Snap anticipates pretax charges associated with the headcount reduction in the range of $110 million to $175 million, the majority of which will be incurred in the third quarter of 2022. Jerry Hunter has been proposed by Spiegel as the new Chief Operational Officer in place of Gorman.
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