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Snap, the social media powerhouse, is gearing up for a significant workforce reduction, planning to let go of about 10 percent of its team after the struggles with advertising. Starting the year 2023 with around 5,300 employees, Snap had previously undergone notable staff cuts in 2022, along with a more modest 3 percent reduction in 2023. This strategic move comes as Snap grapples with hurdles in expanding beyond its beloved social networking hub.
Ventures into hardware, like augmented reality glasses and a selfie drone, didn’t quite take off, and even in-app features such as Spotlight and the Snapchat Plus subscription service fell short of the growth projections. Snap is also wrestling with broader industry challenges, including a shrinking ad market and the ripple effects of Apple’s restrictions on user tracking on iOS.
While Snap celebrated increased revenue in the third quarter of 2023 after weathering two quarters of decline, meeting internal targets and the ambitious goals set by CEO Evan Spiegel remains a challenge. In the pipeline for 2024, Snap aims for a 17 percent boost in daily users, a 20 percent spike in ad revenue, and a doubling of the current 7 million Snapchat Plus subscribers.
The decision to trim the workforce, accounting for 10 percent of Snap’s employees, aligns with the company’s strategy to position itself for future growth and make incremental investments. Snap is preparing to allocate up to $75 million for severance and related costs, emphasizing the need for flexibility to support upcoming growth initiatives. This narrative echoes a broader trend seen across the tech industry.
Snap now joins the ranks of tech giants like Microsoft, PayPal, and eBay, all navigating workforce reductions to adapt to evolving market dynamics. The rationale behind such decisions is clear – a combination of cost-cutting and gaining flexibility to invest in future opportunities.
This trend of job cuts, initiated by major tech players years ago, has nothing new about it. Even traditional companies like Estée Lauder, Xerox, and UPS have announced substantial workforce reductions. Positive responses from the stock market signal that investors see these cost-cutting measures as strategic moves for future success.
In the broader U.S. labor market, where white-collar job cuts coexist with overall job growth, leaders find justification for making these decisions.
The corporate strategy playbook in 2024 underscores the prevalence of job cuts as a powerful force in corporate America. This trend, observed in both the tech and non-tech sectors, highlights companies’ inclination to align with industry shifts and optimize their workforce in response to evolving market conditions. As Snap navigates these challenges, the success of its future growth initiatives hinges on adapting to the ever-changing landscape of the advertising market.
