Snapchat is making around 1,300 staff redundant and cutting investment in projects such as augmented reality glasses, as the social media business fights on an advertising downturn.
The latest quarterly revenue growth of 8% was “well below” expectations and the company’s planning include assumptions that a weak advertising market continues into next year.
“Unfortunately, given our current lower rate of revenue growth, it has become clear that we must reduce our cost structure to avoid incurring significant ongoing losses”
said CEO and cofounder Evan Spiegel
Privacy changes implemented by Apple have also made it difficult for social media companies to target users with digital advertising or measure its impact.
In a presentation slide accompanying the announcement, Snap said it would be “narrowing” its investment in AR glasses, which overlay digital images on what a wearer sees.
The spectacles, which exist in a prototype form, have been much-heralded by Snap, but the company said it would now focus on long-term research and development for the glasses.
“By going ‘back-to-basics’ and streamlining its focus on to its core product, Snap has a good chance of coming out of this, though it will take time”
said Jasmine Enberg, an analyst at Insider
As part of the changes, Snap’s senior vice-president of engineering, Jerry Hunter, will be promoted to a new role of chief operating officer and will be responsible for improving coordination between engineering, ad sales and product teams, Spiegel said.
The company said it would focus on improving sales and the number of Snapchat users. The “clear and defining action” to refocus its business has reassured investors, said Paolo Pescatore, an analyst at PP Foresight.
If the 8% growth rate flagged in Snap’ statement holds, it would be the slowest Snap has recorded since becoming a public company in 2017 – a far cry from triple-digit growth rates recorded in previous quarters.
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.
