Snap will lay off around 20 percent of its workforce on Wednesday, according to a memo from Snap CEO Evan Spiegel sent to employees. The layoffs will see more than 1,200 employees cut, with the company expecting to save about $500 million.
“The scale of these changes vary from team to team, depending upon the level of prioritization and investment needed to execute against our strategic priorities,” Spiegel wrote. “The extent of this reduction should substantially reduce the risk of ever having to do this again, while balancing our desire to invest in our long term future and reaccelerate our revenue growth.”
Employees impacted by the cuts will receive at least 4 months of severance, with the company telling shareholders it expects to take as much as $175 million in contract termination and impairment costs.
Spiegel also outlined a complete restructuring of the company, which will see it refocus its efforts in certain key areas. As a result, the company’s Snap Originals content push will be scrapped, and instead content from creators and partners will be prioritized.
Snap Originals are company-funded original programming. This year’s slate included programs from the D’Amelio family, and gymnast Simone Biles. The company says all programs that have already been ordered will run as planned.
“Our content business remains a top priority. We’re proud of the work we’ve done to enable creators and partners to tell great stories on Snapchat,” a Snap spokesperson said.
Good Luck America, the very first Snap Original, which is hosted by Snap executive Peter Hamby, will continue to run, as will programming made by partners for the platform, like NBC News’ Stay Tuned, and ESPN’s SportsCenter, the spokesperson added.
The company expects to save about $50 million on an annualized basis by eliminating originals.
But original programming was not the only business line cut.
Spiegel wrote that the company is restructuring “to increase focus on our three strategic priorities: community growth, revenue growth, and augmented reality.”
As a result, minis and games, the company’s standalone apps Voisey and Zenly, and hardware investment will be significantly reduced (in the case of Spectacles) or cut entirely (in the case of the Pixy drone).
In addition, Spiegel announced that Snap’s senior VP of engineering Jerry Hunter would be promoted to COO, effective immediately.
Snap, which said it employed 6,446 full-time staffers in its Q2 earnings report, has been particularly impacted by declining ad revenue, supply chain delays, Apple’s iOS privacy changes and the ongoing war in Ukraine. In May, ahead of its Q2 earnings, the company disclosed it would not meet the low end of its revenue and Adjusted EBITDA guidance because “the macroeconomic environment has deteriorated further and faster than anticipated.”
In the company’s July letter to investors, Snap CEO Evan Spiegel said the company would be implementing “a substantially reduced rate of hiring” and looking to cut other operating costs. Snap also said it would not issue any guidance for Q3 due to “uncertainties related to the operating environment.”
“We are not satisfied with the results we are delivering, regardless of the current headwinds,” Spiegel said at the time.
On Wednesday, Snap said that its quarter-to-date revenue growth is up about 8% year-over-year.
Snap stock has tumbled more than 70 percent in the last six months, though the early response from Wall Street Wednesday was positive.
The Snapchat parent company last laid off employees in 2018, with 22 staffers — including some on the content team — getting cut. Wednesday’s planned layoffs will impact a significantly larger number of staff.
This article was originally published by The Hollywood Reporter.