Snap is cutting 10% of staff as social media cope with ad slump
Snap Inc. is reducing its workforce by roughly 10% worldwide, joining the chorus of technology companies that have announced fresh rounds of cuts since the start of the year.
The cuts are being made to “best position our business to execute on our highest priorities,” Snap said in a securities filing Monday. A spokesperson added that the social media company is reorganizing the team to reduce hierarchy and promote in-person collaboration.
Snap shares fell 1.8% to $16.75 in New York, tracking a broader pullback in the stock market.
Like its social media peers, Snap has been working to offset a deceleration in ad revenue, coping with the slump by cutting jobs and culling projects that are no longer seen as a priority.
Snap, the parent of the Snapchat app, and Meta Platforms Inc. were badly affected by changes Apple Inc. made to its privacy policy in 2021, which made it harder for advertisers to track users. But Meta has bounced back, posting a 25% gain in sales in the fourth quarter, its biggest quarterly increase in two years.
As tech giants lay off scores of workers amid a sector-wide downturn, employees who once considered the Silicon Valley companies a safe long-term bet are reconsidering their allegiances.
Snap employed about 5,400 workers as of September. A 10% reduction based on that total would amount to about 540 jobs lost. Snap said the mass layoffs may extend into the second quarter while the company works to comply with local laws.
“The layoffs don’t bode well for the state of Snap’s business” ahead of its fourth-quarter earnings report scheduled for Tuesday, said Jasmine Enberg, an analyst at Insider Intelligence. “Meta’s blockbuster report is a tough act for Snap to follow.”
Enberg expects Snap to report a 3.3% decline in ad revenue in 2023 from a year earlier.
Three months ago, Snap reported a return to revenue growth after two periods of declines but cautioned that its progress may be blunted by advertiser delays brought on by the war in Israel and Gaza.
Snap’s job cuts add to the slew of grim announcements that have been made by technology companies since the beginning of this year as they seek to further cut costs.
Microsoft Corp., Google parent Alphabet Inc., Amazon.com Inc. and Salesforce Inc. are among the more than 100 tech companies that have signaled layoffs in the last month, affecting close to 32,000 employees, according to data compiled by Layoffs.fyi.
Investors have generally cheered on the cost-cutting measures. Meta and Amazon added a combined $336 billion in market value last week after beating quarterly earnings and outlook estimates, validating the belt-tightening strategies that have come to define the tech industry in the last year.
Snap has made deep cuts to its business before. In 2022, it fired 20% of its workforce and cut projects that it didn’t expect to help revenue growth or the company’s augmented reality technology. Chief Executive Evan Spiegel later told employees he expected them to be in the office 80% of the time starting in early 2023.
Just four months ago, Snap announced it was closing a division focused on making augmented reality services for businesses, pulling the plug on what was its latest attempt to diversify the ad-dependent company. Closing the business was expected to result in 170 job cuts.
The social-media platform estimated that the reductions will result in pretax charges of $55 million to $75 million from severance and related costs, as well as other charges, including $45 million to $55 million in future cash expenditures. Most of these costs will occur in the first quarter.
