A social plan for 1,200 people, or 20% of the workforce. This kind of announcement is unusual in the digital sector. However, this is the measure that Snap formalized on Wednesday August 31. “It has become clear that we need to reduce our costs to avoid continuing to incur significant losses,” justified Evan Spiegel, founder of the social network, in a memo to the address of his employees.
This wave of layoffs is explained by the difficulties specific to Snap, structurally in deficit since its creation in 2017. But the decision also illustrates more broadly the cold snap affecting “tech”, after a period of stock market euphoria.
Born five years ago, Snap is known for having introduced “stories”, a video format of a few tens of seconds. But he has since failed to carve out a comfortable place for himself in the social media industry. Its number of daily users has certainly grown by 20% in 2021 and exceeds that of Twitter but, with 347 million members, it remains low compared to Facebook’s 1.9 billion (and 3.6 billion if Instagram, Messenger and Facebook are added). WhatsApp) or to the billion of TikTok.
Headwinds
Above all, the company has never been profitable (except for a balanced quarter at the end of 2021). Last year, despite a 64% increase in its turnover to 4.1 billion dollars (4.1 billion euros), it still lost 488 million dollars. And its activity deteriorated in 2022: in the second quarter, growth slowed sharply and the loss reached 422 million dollars, against 152 million in the same period the previous year.
The stock has lost 80% of its value since the start of 2022.
“We are not satisfied with our results”, then admitted Evan Spiegel, planning savings measures. Snap had published figures lower than the forecasts of financial analysts, however revised downwards after a warning formulated by the management. On the stock market, the stock has lost 80% of its value since the start of 2022. However, it recovered 7% on Wednesday morning, as investors seemed to appreciate the planned layoffs.
The job cuts will notably affect many hirings made by Snap since the start of the pandemic, which had sparked stock market euphoria around technology stocks. Between March 2020 and the end of the first half of 2022, the company had grown from 3,400 to 6,400 employees.
In search of $500 million in annual savings, management is cutting activities now considered non-priority: it stops Snap Originals video productions, services responsible for creating small applications and games on the platform. , the Pixy camera drone and the Zenly applications (locating your contacts on a map) as well as Voisey (connecting musicians)…
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