Snap shares rose as much as 15% after it confirmed reports it will cut 20% of its more than 6,000-person workforce and said it will scrap several projects, including its Pixy photo-taking drone and its lineup of Snap Originals premium shows.
CEO Evan Spiegel announced the moves in a memo Tuesday, and told employees the company needs to restructure its business to deal with its financial challenges. He said the company’s current year-over-year revenue growth rate for the quarter of 8% “is well below what we were expecting earlier this year.”
“While we have built substantial capital reserves, and have made extensive efforts to avoid reductions in the size of our team by reducing spend in other areas, we must now face the consequences of our lower revenue growth and adapt to the market environment,” Spiegel said. “We are restructuring our business to increase focus on our three strategic priorities: community growth, revenue growth, and augmented reality.”
Other projects the company nuked include its Snap Minis third-party apps and Snap Games. Spiegel said Snap is also starting the “process of winding down” its Zenly map product and Voisey music feature, which were both inherited through acquisitions.
Snap has also promoted Jerry Hunter from senior vice president of engineering to chief operating officer. Hunter will continue leading Snap’s engineering unit, Spiegel said.
The company said it hired Ronan Harris, Google’s vice president and managing director of U.K. and Ireland, to be its president of the Europe, Middle East and Africa region, a new position. Harris will join Snap’s executive team.
Spiegel said Snap is currently searching for presidents of the company’s Asia-Pacific and Americas regions, also two new roles.
“Changes of this magnitude are never easy, and we must act decisively to meet this moment as a team,” 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.”
In July, Snap shares cratered more than 25% after the company reported second-quarter results that missed on both the top and bottom lines and said it would not provide guidance for its current quarter.
The company said at the time that it planned to “substantially” slow its hiring rate and operating expense growth rate.
Like other social media companies, including Facebook parent Meta, Pinterest and Twitter , Snap said a confluence of factors has simultaneously hurt the company’s business. They include a weakening macroeconomic environment and Apples 2021 iOS update, which made it more difficult for social media companies to track users on behalf of third-party advertisers.
The rise of TikTok’s short-video service has also posed a significant challenge for Snap and its competitors.
Snap said it was scrapping development of its Pixy drone after reports surfaced that the company was pausing its work on the device. The drone was supposed to be a fun way for users to take photos of themselves from multiple angles. Snap has been trying to build a consumer hardware business and announced the $230 drone in April.