Snap, the company behind Snapchat, is planning to reduce its staff by 20% as a part of a larger restructuring. The Snap CEO, Evan Spiegel, wrote in a letter to the staff that the sales are not meeting the targets and it is becoming difficult keeping up with earlier projections. He said; “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.”
Snap to Reduce its Staff and Mitigate Costs
The company mentioned that the laid-off employees will receive four months of compensation along with financial assistance to enroll in COBRA. The company has also pledged to mitigate costs by slowing production on Snap-funded originals, minis and games, hardware, and standalone apps. It has also given up on the development of the palm-sized selfie drone, Pixy. The $230 drone was announced for users to take fun photos of themselves from multiple angles.
Snap was one of those companies that peaked during the pandemic when workers and students spent longer hours online at home. In September 2021 its shares were more than $83 per share. Spiegel said; “I am proud of the strength and resilience of our team as we have navigated the myriad challenges of growing our business in a highly competitive industry during uncertain and unprecedented times.”
Snap Shares Rise After Job Cuts
On 31st August, just as the CEO confirms the job cuts, the shares of Snap gained nearly 9% on heavy trading volume to close the day at $10.88. Overall, the shares have still plummeted 77% since the start of the year. Snap is currently planning to restructure its business to focus on growth. As noted by the CEO; “We are restructuring our business to increase focus on our three strategic priorities: community growth, revenue growth, and augmented reality.”