“The layoffs, which Snap has been planning for the past several weeks, will begin on Wednesday and hit some departments harder than others. For example, the team working on ways for developers to build mini apps and games inside Snapchat will be severely impacted. Zenly, the social mapping app Snap bought in 2017 and has since run separately, will also see deep cuts.”
Even more concerning for the company’s longer-term prospects, Snap will also be looking to cut staff from its hardware division, which is currently focused on AR-enabled Spectacles. Snap also recently announced that it willcease production of its Pixy selfie drone, which it launched just four months ago as a new way to capture content.
AR in particular is a key focus for Snap’s future development, with the platform continually leading the way on the latest AR innovations, despite competing against far bigger companies in Apple and Meta on the same.
If Snap’s forced to take a back seat with its AR Spectacles, that could be a major blow for the company’s plans, which could eventually see its competitors take over the space, and force Snap to the outer, limiting its growth potential.
But at the same time, Snap has to do something.
Shares in Snap are down 80% this year, due to various factors, including the war in Ukraine, which has impacted European ad spend, along with rising global interest rates, and Apple’s iOS privacy changes, which have impacted ad targeting capacity in the app.
That, in turn, has reduced ad effectiveness, and thus, advertiser interest, though Snap has been working to reassure ad partners that it is developing solutions. It’ll just take time.
Incidentally, that advice came from Snap Chief Business Officer Jeremi Gorman during the company’s Q1 earnings call in April this year, and Gorman is now among those that will be departing Snap amid this latest shift (Gorman and another former Snap exec, Peter Naylor, are both joining Netflix to oversee its development of a cheaper, ad-supported subscription model).
Snap had already announced that it would ‘substantially reduce’ hiring as part of its broader cost-cutting efforts, while in May, it also issued a profit warning due to a worsening‘macroeconomic environment’.
As such, the news of potential job cuts is no real surprise. But the scale here is significant.
How will cutting 20% of its headcount impact development, and change the course of the app, potentially for years to come? We don’t know how long the latest economic downturn will last, nor how long it might take for Snap to reimagine its ad targeting system, but right now, both seem like they’re a way off.