Snap, the social media giant behind popular instant messaging app Snapchat has revealed its plans to lay off around 10% of its workforce.
The announcement came on Monday, just a day before the company reported its results for the fourth quarter of 2023. Notably, the previous quarter saw Snap report a net loss of $368m (£294m).
We are reorganizing our team to reduce hierarchy and promote in-person collaboration.Snap spokesperson
Considering the social media giant reported having 5,000 employees in November 2023, it’s expected to cut approximately 500 jobs.
The job cuts are necessary to “reduce hierarchy” and support the company’s growth, Snap explained in the SEC filing where it announced the layoff.
The layoffs are estimated to incur pre-tax expenses of anything between $55 million and $75 million.
The spokesperson also emphasized the company’s prioritization of supporting the laid-off employees and its gratefulness towards their contribution.
Severance and other related costs will account for most of it, the company revealed, adding that $45 million to $55 million of it will likely be future cash expenses.
According to Snap, the company will be incurring most of these costs in the first quarter of 2024. However, some of them might extend to the second quarter due to local laws and other factors.
Expert Expresses Concern Over Snap’s State of Business
According to Jasmine Enberg, Insider Intelligence’s principal social media analyst, the job cuts don’t “bode well” for the state of the social media giant’s business ahead of its earnings announcement.
Pointing to Meta’s latest earnings report, which indicates a major surge in users, a tripling of year-on-year quarterly profits, increased ad sales, and lower costs, Enberg said that this would be a tough feat for Snap to follow.
The social media analyst also went on to add that the layoffs might be an attempt to garner goodwill with investors, who rewarded Meta’s cost-cutting measures and ongoing attempts to increase efficiency.
Compared to Meta, Snap’s advertising revenues have been recovering at a slower rate from the digital ad slowdown too. While Snap tried to expand its portfolio beyond Snapchat and even experimented with augmented reality (AR) glasses, it failed to find a market for its other products.
In 2023, the company eventually closed a division dedicated to offering AR services to its customers.
It’s worth noting that the latest wave of layoffs comes just months after the previous one in November 2023, which was small-scale and saw less than 20 roles being cut. However, in August 2022, the company laid off a whopping 20% of its workers.
Rising Tech Layoffs
Layoffs.fyi, which keeps track of job cuts in the tech sector, reports that the industry saw more than 232,000 layoffs last year.
This trend continued in January 2024, as more than 25,000 roles were cut from the tech sector. Giants like Amazon, Microsoft, eBay, Unity, and Discord laid off thousands of employees even after a surge in stock market indices.
Experts have linked these layoffs to the increased use of AI in the tech sector. Apart from this, companies are now moving towards optimum resource utilization and doing away with non-value-adding roles to improve their ROI rates. The job market is at an interesting crossroads as of now.