Snap confirms it’s laying off around 1,300 employees

Snap has confirmed reports that it is laying off around 20 percent of its employees — about 1,300 employees — to cut costs. The company has also canceled most of the original Snapchat shows (with the exception of the long-running politics and news series Good luck America) and other projects on hold. For one, Snap said it’s putting games and mini-apps on maintenance mode. Also, the standalone Zenly and Voisey apps will be retired to focus on Snapchat’s Snap Map and Sounds features.

On the hardware front, Snap “restricts our investment space in Spectacles to focus on highly differentiated long-term research and development efforts.” Additionally, the company stopped further development of its Pixy selfie drone just a few months after the device went on sale.

Snap said in a note to investors that the layoffs, project cancellations and other restructuring will save the company about $500 million in annualized cash expense structure compared to the April-June quarter (for which Snap reported weak earnings results). The number includes a $50 million reduction in content costs. The restructuring costs amount to around 110 to 175 million US dollars. Approximately $95 million to $135 million of that will likely be in the form of adjusted operating expenses, primarily in the current quarter.

“Unfortunately, given our current lower revenue growth, it has become clear that we need to scale back our cost structure to avoid significant ongoing losses,” Snap CEO Evan Spiegel wrote in a letter to employees. “Although we have built up significant capital reserves and made extensive efforts to avoid reducing the size of our team by reducing spending in other areas, we are now faced with the consequences of our lower revenue growth and adapting to the market environment.”

Speigel noted that the company is restructuring around three pillars: community growth, revenue growth, and augmented reality. “Projects that do not directly contribute to these areas will be discontinued or receive significantly reduced investments,” he added.

Snap has felt the brunt of a broader economic slowdown. Its share price has fallen 80 percent this year (although it has rebounded slightly after news of layoffs and restructuring). So far in 2022, the company’s revenue growth is eight percent year over year, which Speigel says is “well below what we anticipated earlier this year.” However, the Snapchat+ subscription service has gotten off to a positive start, with more than a million users signing up within the first month or so.

Meanwhile, the company’s management team has a fresh look. This week, the two top advertising executives departed for Netflix, which will soon be offering an ad-supported tier. Snap has promoted its former senior vice president of engineering Jerry Hunter to chief operating officer. Ronan Harris, Google’s vice president and general manager for the UK and Ireland, will also be hired as president of the Europe, Middle East and Africa division.

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