There was a rise in Snap Inc.’s shares as much as 15%, as the company confirmed that it would cut 20% of its staff and also stated that it would scrap a number of projects.
This includes its Snap Originals premium shows that it had planned and its Pixy drone for taking photos.
On Tuesday, Evan Spiegal, the chief executive, announced the move via a memo. He informed employees of the firm that the business requires some restructuring in order to face some financial challenges.
He also stated that the year-over-year revenue growth rate of the company currently stood at 8%, which is lower than what they had been expecting.
The CEO said that Snap had built substantial cash reserves and also made a great deal of effort to not reduce the size of its team by cutting down spending in other areas.
However, he said that now they had no other choice but to deal with the consequences of reduced growth in revenue and adjust to the market environment.
Therefore, they had decided to restructure their business and three strategic priorities would receive the most focus, which include augmented reality, revenue growth and community growth.
The company has a staff of about 6,000 people and it will let go of 20% of it. They are also shutting down several projects including Snap Games and the Snap Minis third-party apps.
Spiegel also disclosed that the company has also begun to wind down its music feature called Voisey and its map product called Zenly, both of which had been obtained via acquisitions.
Moreover, the company also gave a promotion to its senior vice president of engineering, Jerry Hunter, who has now taken over the position of chief operating officer.
Spiegel stated that he would also head the engineering unit.
Other team changes
The company further disclosed that it had hired Ronan Harris as its president of Europe, Africa, and the Middle East region, who had served as vice president at Google and its managing director of Ireland and United Kingdom.
This is a new position and Harris will become a part of the executive team at Snap. Spiegel also said that there are two new roles that they have to fill.
These include presidents of Snap’s Americas and Asia-Pacific regions. The CEO stated that changes like these are never easy to make, but they have to be decisive.
He also said that he was proud of his team’s resilience and strength because they had dealt with the myriad of challenges in terms of expanding the business in a competitive industry, during times of uncertainty.
There had been a more than 25% drop in Snap’s shares in July after its second-quarter results missed expectations and it did not provide guidance for the third quarter.
At that time, Snap had said that it would slow its hiring rate substantially, along with the growth rate of its operating expenses.
Like other social media companies, it said that a combination of factors had hurt its business.