The news: Snapchat parent Snap is planning layoffs, as reported by The Verge. CEO Evan Spiegel had said in May that the business would drastically cut back on recruiting and "find significant cost reductions."
Ads under attack: Snap has suffered on two key fronts:
Since then, its user base has surpassed Twitter with 347 million daily users—but Snap hasn’t been able to increase its ad revenue as much as many analysts expected. It has turned to other initiatives to drive revenue, including its nascent Snapchat+ subscription model, which has fared better than Twitter Blue, its rival’s subscription offering. But those moves won’t be enough to offset slowing ad sales anytime soon.
ARmbitions: A big portion of Snap’s future lies in its augmented reality (AR) roadmap.
The big takeaway: Given the uncertainty in the market, platforms like Snap are in a bind. They can’t support a bloated headcount—Snap’s employees as of June 30 were up 38% year over year, while the company’s net loss this past quarter was nearly three times greater than 2021’s Q2. That’s just not sustainable right now.
At the same time, the company needs to innovate to stay relevant to attract new users.