Snap plans to lay off 20% of all staff and shut down projects, including mobile games and novelties like a flying drone camera.
It will discontinue investment in its Pixy flying drone camera, just a few months after its debut in May.
It is undergoing struggles along with several other tech companies amidst high inflation and a deteriorating economy which has hit the advertising industry.
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Renewing hope among investors
With its new plans the company can save an estimated $500 million in costs annually.
It will now focus on improving sales and the number of Snapchat users.
The company’s “clear and defining action” to refocus its business has brought relief to investors.
Growth below expectations
Analysts and investors have viewed Snap as an early indicator for trends affecting other social media platforms since it is typically the first to report quarterly earnings or provide business updates.
Revenue growth so far in the third quarter is up 8% from the previous year, which is “well below what we were expecting”, Chief Executive Evan Spiegel wrote in a memo to employees.
If this continues it would be the slowest revenue growth Snap has had since becoming a public company in 2017 – a huge departure from the triple-digit growth rates it has recorded in previous quarters.
Major departures
Two of Snap’s top ad sales executives – Chief Business Officer Jeremi Gorman and Vice President of ad sales Peter Naylor – are leaving to join Netflix and build the streaming service’s ad business.
Gorman was instrumental in building Snap’s ad business.
Both departures come after Snap reported a disappointing second quarter and more competition from TikTok.
Shuffle at the top
Spiegel wrote that despite cutting spending, the company has to now “face the consequences of our lower revenue growth and adapt to the market environment”.
Senior vice president of engineering Jerry Hunter will be promoted to chief operating officer.
He will be responsible for improving coordination between engineering, ad sales and product teams.
The restructuring of the ad sales division also includes three new president roles that will oversee the Americas, Europe, Middle East and Africa, and Asia-Pacific regions.
Apple’s updates kill targeted ads
Snap and other social media platforms including Meta have all suffered from privacy updates that Apple introduced on iPhones last year.
The updates have restricted the ability for digital ad sellers and advertisers to target ads to relevant audiences and measure their sales results.
Improving coordination between the teams could potentially help Snap improve targeting and measurement of its ads.
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