Snapchat stated that Low revenue growth and adaptation to market conditions are the reasons to lay off roughly 1280 employees.
Snap estimates that the lays off will save the business $500 million per year. Snapchat and its companies have lost over $10 billion this year. The company’s shares are also at an all-time low, with the stock dropping to 80% in 2021-2022.
So far in the third quarter, revenue is increased to 8% from the previous year, which is “far behind what we were expecting,” according to CEO Evan Spiegel in a note to employees. If that growth rate continues, it will be the slowest since Snap went public in 2017 – a far cry from the triple-digit growth rates it has seen in previous quarters.
Just like Netflix, which laid off 150 employees as well as several contractors and part-time workers. Coinbase, a cryptocurrency trading platform, has fired 1,100 employees, accounting for approximately 18% of its workforce. Sonder, a short-term rental startup once thought to be a new contender to Airbnb, laid off one-fifth of its corporate staff.
In terms of Snapchat, CEO Evan Spiegel needs to pull up his socks because the once-popular instant messaging software is experiencing stiff competition from Meta services such as Instagram (and its Reels feature). The future of these content-based apps appears questionable as Instagram tries to adapt to new content trends.
The layoffs are part of Snapchat’s rethinking of its business strategy. The low user base generated by Snap’s other investments and verticals was also a substantial cause of loss. As a result, it has decided to phase out Snap Originals, Games, Minis, and Pixy, just a few months after its launch in May.