Snap to cut costs, lay off 20% of employees

Snap plans to lay off about 20% of its more than 6,400 employees, according to people familiar with the matter. The layoffs are mainly concentrated in the team that builds mini apps and games in Snapchat and Zenly, a social map app that Snap acquired in 2017 and has been operating separately since then.

In addition, Snap's hardware division will also be significantly laid off, which is responsible for AR Spectacles glasses and Pixy flying camera, which was discontinued just a few months after its launch. The company's advertising sales department is also being reorganized, and Chief Business Officer Jeremi Gorman and Vice President of Advertising Sales in the Americas Peter Naylor will join Netflix.

Snap spokesman Russ Caditz-Peck declined to comment on the layoffs.

Although Snap's layoffs were large, they were also expected. Since the company announced its Q2 results on July 21, its stock price has fallen nearly 39%. Since the beginning of the year, Snap's stock price has plummeted by nearly 80%. In May, Snap said it would slow down its hiring plans and seek ways to cut costs. With the company's dismal second-quarter earnings, it did not give a Q3 earnings outlook in a volatile environment.

Like its other tech peers, Snap has been actively hiring during the pandemic. The number of employees reached 3,427 in March 2020 and 6,446 in the second quarter, an increase of 38% over the same period last year. In May 2021, Snap acquired WaveOptics, the supplier of AR displays used in its latest glasses, for more than $500 million, its largest acquisition ever.

Last month, Snap said some advertisers continued to face supply chain disruptions and labor shortages, and many others struggled with rising costs amid inflation, leading to cuts in ad spending.

The problem is that Snap's business has not performed well in the pandemic, and it has also been adversely affected by the recession and the trouble it has encountered with Apple's crackdown on ad tracking in iOS apps. However, Snap's user base continues to grow strongly, with an average of 347 million daily active users, even surpassing Twitter.

Snap shares fell 4% in after-hours trading after the layoffs were announced, as Wall Street was cautious about the future of its advertising business. Snap has only turned a profit once since its IPO in 2017.

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