Snap Inc. said Wednesday it is reducing its workforce by approximately 20% and overhauling its business to cut costs and compete as American social media companies face challenges from competitors, regulators and users’ diverted attention.
Snap owns the social media platform Snapchat, which became popular by showcasing images and videos and featuring vanishing messages. As the company restructures its products, Snap CEO Evan Spiegel said his company’s three strategic priorities will now be community growth, revenue growth and augmented reality.
“As a result, we are sunsetting several projects, reducing the size of our team by approximately 20%, and announcing the promotion of Jerry Hunter to chief operating officer,” Mr. Spiegel said in a statement. “Changes of this magnitude are always difficult, and we are focused on supporting our departing team members through this transition.”
Products whose development have stopped or will get shuttered altogether include the flying camera drone Pixy, various games, and separate apps Zenly and Voisey.
Snap estimated that the layoffs affecting its employees will save $500 million, with its workforce reportedly totaling more than 6,000 employees.
Snap is hardly the only social media platform making dramatic changes to its business and looks to be following in the footsteps of Facebook, which has restructured as Meta to focus on the metaverse, or its augmented reality offerings.
Facebook’s ongoing changes have included making plans to quit or reevaluate its newsletter service Bulletin and how it pays news publishers via Facebook News.
The changes to the social media businesses come amid the rapid popularity of TikTok, and established social media platforms looking to cater to the creative audience on the China-owned platform.
Meta’s Tom Alison, who oversees the Facebook app, told the Verge that his platform is retooling how it feeds people content that he described as “almost like a throwback to old-school Facebook” by ordering content in chronological order.
He said he believes TikTok is chasing Facebook and not the other way around.
“I was scrolling through TikTok and there was a unit that said “people you may know.” I managed the “people you may know” team at Facebook as my first management job,” Mr. Alison told the Verge. “We created a system and then I’m literally seeing it on TikTok.”
Facebook posted its first year-over-year revenue decline in 2022’s second quarter, which marked a third straight quarter of shrinking profits, according to MarketWatch.
Snap’s stock traded 15% higher during trading on Wednesday after news of its restructuring became public, per CNBC.