Snapchat’s parent company Snap to lay off over 520 or 10% of employees to ‘reduce hierarchy’

Snap, the company behind Snapchat, has announced a workforce reduction of 10 per cent, affecting approximately 520 employees, according to a statement released on Monday. The decision, outlined in a filing with the US Securities and Exchange Commission (SEC), is part of Snap’s strategy to support future growth. The SEC filing explained the necessity of restructuring the team to align with the company’s highest priorities and ensure the capacity for incremental investments in support of long-term growth. The move is anticipated to incur pre-tax charges ranging from $55 million to $75 million, primarily covering severance and related costs, with $45 million to $55 million expected to be future cash expenditures. Snap stated that a majority of these costs would be incurred in the first quarter of 2024, but local regulations and other factors might extend some expenses into the second quarter. The company, set to report earnings after the market’s close on February 6, emphasized the reorganization’s focus on reducing hierarchy and fostering in-person collaboration. This recent round of layoffs follows a smaller reduction in headcount late last year when Snap reorganized its product team to streamline decision-making and reduce layers. In 2022, the company also underwent a larger restructuring, cutting 20 per cent of its staff. Snap’s strategic shifts come amid challenges in its hardware products, including the discontinuation and recall of the Pixy drone due to a fire risk. The company had previously shuttered its enterprise services division after less than a year. While Snap’s stock initially rose after reporting Q3 earnings in October, beating revenue and earnings estimates, concerns about the volatile ad market linger. Snap cautioned investors about paused ad campaigns, and research provider Insider Intelligence estimates that the company holds a 0.6 per cent share of the global digital ad market, projecting $4.12 billion in net worldwide ad revenue in 2024. Analysts suggest that the layoffs may reflect challenges for Snap ahead of its Q4 2023 earnings, with comparisons to Meta’s strong performance and cost-cutting measures. Principal analyst Jasmine Enberg predicts a 3.3 per cent year-over-year ad revenue decline for Snap in 2023. Reports from Business Insider and The Information indicate that the layoffs began on Friday, with additional job cuts expected throughout the week. Some senior staff, including director of content Sam Corrao Clanon, vice president of content engineering Ding Zhou, and vice president of platform partnerships Konstantinos Papamiltiadis, are among those affected. (With inputs from agencies)