chat’s parent layoff 10% of the workforce to reduce hierarchy, In order to best position our business to execute on our highest priorities, and to ensure we have the capacity to invest incrementally to support our growth over time.
On Monday, Snapchat announced a 10% employment decrease, making it the latest digital company to lay off workers. Headcount numbers Snap disclosed in November 2023 showed small-scale layoffs of its then-north of 5,000 employees, affecting 500-plus workers.
The layoffs were reported in an SEC filing, where Snap claimed the move was necessary to support its ongoing expansion.
“In order to best position our business to execute on our highest priorities, and to ensure we have the capacity to invest incrementally to support our growth over time, we have made the difficult decision to restructure our team,” the filing stated. “As a result, we currently estimate that we will incur pre-tax charges in the range of $55 million to $75 million, primarily consisting of severance and related costs, and other charges, of which $45 million to $55 million are expected to be future cash expenditures.”
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Snap noted the majority of those expenditures would be incurred in the first quarter of 2024, while local legislation and other variables may see some costs extending into Q2. The company is set to disclose its earnings after the market’s close on February 6.
“We are reorganizing our team to reduce hierarchy and promote in-person collaboration,” noted a Snap spokesperson in a statement. “We are focused on supporting our departing team members and we are very grateful for their hard work and many contributions to Snap,” they stated.
This second wave of layoffs in a couple of months followed a smaller workforce decrease late last year when Snap reconfigured its product team, again with an emphasis on lowering layers and enhancing decision-making speed, the firm claimed at the time. Snap’s VP of Engineering, Nima Khajehnouri, also departed then, joining less than 20 others in the product business. Snap last September dissolved its enterprise services section after less than a year. The company’s investments in hardware items, such Snap Spectacles and its Pixy drone, have also not paid off, with the latter discontinued and recently recalled over a fire risk.
In 2022, Snap lost 20% of its workforce amid a wider restructuring.
When Snap released its Q3 earnings in October, it surprised analysts with higher-than-expected sales and earnings per share of $1.19 billion and 2 cents, compared to projections of $1.11 billion and a 4-cent loss. This caused Snap’s stock price to initially soar. In terms of user growth, the company outperformed expectations, posting 406 million daily active users globally, as opposed to the anticipated 405.7 million. Nonetheless, the company’s quarterly net loss of $368 million increased by 2% year over year.
Snap warned investors that the ad market was still unstable despite the earnings beat, pointing out that it had observed some of its clients’ ad campaigns paused. Research firm Insider Intelligence estimates that the company holds a 0.6% market share in digital ads worldwide. According to the firm’s forecasts, Snap’s net worldwide ad income in 2024 will be $4.12 billion.
“The layoffs don’t bode well for the state of Snap’s business ahead of its Q4 2023 earnings,” said principal analyst Jasmine Enberg. “Meta’s blockbuster report is a tough act for Snap to follow, and Snap is likely trying to garner some goodwill with investors, who rewarded its competitor for its cost-cutting measures and its continued “do more with less” mantra going into 2024. We expect Snap to report a 2023 year-over-year ad revenue decline of 3.3%,” Enberg added.
As per its Q3 press release, Snap employed 5,367 people as of Q3.
According to Business Insider, Snap started laying off employees on Friday, letting go of several dozen workers before making a statement to the entire firm. This week, further layoffs were anticipated, according to the article.
