By Sheila Dang
(Reuters) – Snap Inc said on Wednesday third-quarter revenue growth was at the slowest pace in company history, as high inflation, rising interest rates and deterioration of the economy continued to ravage the advertising industry.
As a result, Snapchat’s parent company said it would cut 20% of its entire workforce, restructure its advertising sales unit and shut down projects like mobile games and novelties like a flying drone camera, in order to focus on improving Snapchat sales and user numbers. Snap had more than 5,600 employees at the end of last year.
Investors viewed Snap as an early indicator of trends affecting other social media platforms, including Facebook-owner Meta Platforms, Pinterest and Twitter, as the company is usually the first to report quarterly results or provide updates. commercial days.
Snap’s warning in May that it would miss revenue targets due to deteriorating economic conditions sparked a sell-off in social media stocks.
Shares of Santa Monica, Calif.-based Snap closed 2.5% lower at $10 on Tuesday after The Verge first announced Snap’s layoff plans, and AdAge announced Snap’s departure. two senior advertising executives.
Revenue growth so far in the third quarter is up 8% from a year earlier, which is “well below what we expected,” chief executive Evan Spiegel wrote in a note to the media. employees which was also made public on Wednesday.
If that growth rate continues, it would be the slowest revenue growth Snap has seen since becoming a public company in 2017 — a far cry from the triple-digit growth rates it has seen over the past few years. previous quarters.
Two of Snap’s top ad sales executives — chief commercial officer Jeremi Gorman and vice president of ad sales Peter Naylor — are leaving to join Netflix and grow the streaming service’s ad business.
Gorman, a longtime advertising executive who previously worked at Amazon, was instrumental in growing Snap’s advertising business, said Jasmine Enberg, principal analyst at research firm Insider Intelligence.
Gorman and Naylor’s departures come after Snap reported a disappointing second quarter and faced more competition from TikTok, she said.
“Snap is clearly going through a tough time,” Enberg said.
‘ASSUME THE CONSEQUENCES’
Despite spending cuts in some areas, Snap must now “address the consequences of lower revenue growth and adapt to the market environment,” CEO Spiegel wrote in the memo.
Senior vice president of engineering Jerry Hunter will be promoted to chief operating officer and will be responsible for improving coordination between the engineering, ad sales and product teams, Spiegel said.
Snap and other social media platforms, including Meta, have all suffered from the privacy updates Apple introduced to iPhones last year. These have made it difficult for digital ad sellers and advertisers to target ads to relevant audiences and measure their sales results.
Closer collaboration between engineering and sales could potentially help Snap improve the targeting and measurement of its ads.
The restructuring of the advertising sales division also includes three new president positions who will oversee the Americas, Europe, Middle East and Africa, and Asia Pacific regions.
Snap will also stop investing in its Pixy flying drone camera, just months after its debut in May.
(Reporting by Sheila Dang in Dallas; Editing by Kenneth Li and Kenneth Maxwell)