The horror run continues for Snap, with the company reportedly planning to sack approximately 20 percent of its workforce as it looks at the drastic cutting of costs amid deteriorating market conditions.

According to The Verge, Snap will cut more than 1,200 full-time positions as part of a significant restructuring meant to put its business back on track.

According to The Verge:

The layoffs, which Snap has been planning for the past several weeks, will begin on Wednesday and hit some departments harder than others. For example, the team that comes up with ways for developers to build mini apps and games inside Snapchat will be severely impacted. Zenly, the social mapping app that Snap bought in 2017 and has since run separately, will also see deep cuts.

Even more alarming for the company's future prospects, Snap will also be seeking to trim employees from its hardware division focused on its AR-enabled Spectacles. Snap recently also announced that it will discontinue manufacturing its Pixy selfie drone, launched just four months ago as a new method of capturing content.

In particular, AR would be an important focus area for Snap's future growth as the company continues to pioneer the latest innovations in AR but does so while competing against much larger companies-including Apple and Meta-on essentially a level playing field.

If Snap is made to step back with its AR Spectacles, that will give its competitor a major upper hand as it continues on its way towards filling the space while pushing Snap out to the outer limit, limiting growth potential.
ButSnap also needs to do something.

The stock price for Snap has halved in 2022; it has been losing by 80% this year on the back of several factors, including the war in Ukraine, which has negatively affected European ad spend, coupled with a rise in global interest rates and changes in Apple's iOS affecting the company's ability to target ads in the app.

That has further dwindled ad effectiveness, and hence, advertiser interest, even if Snap has been assuring ad partners that it's working on solutions. Just takes time.

That guidance came incidentally from Snap Chief Business Officer Jeremi Gorman during the company's Q1 earnings call in April this year, and Gorman is now among those who will be exiting Snap as part of this latest pivot (Gorman and another former Snap exec, Peter Naylor, are both joining Netflix to oversee its development of a cheaper, ad-supported subscription model).
Snap had already warned that it would "significantly reduce" hiring as part of its broader cost-cutting moves, and in May also issued a profit warning because of a deteriorating 'macroeconomic environment'.

News of potential job cuts is no real surprise given that backdrop. But the scale here is significant.

How will cutting 20% of its headcount affect the development and, perhaps, the course of the app for potentially years? We don't know how long the latest economic downturn will last nor how long it might take for Snap to reimagine its ad targeting system, but right now, both seem a way off.

However, again as The Verge also notes, Snap more than doubled its headcount in the last couple of years and maybe this is a rationalization that has to happen - much like Meta's looming cuts that CEO Mark Zuckerberg says are a designed to 'turn up the heat' on poor performers.

That said, maybe it is not the destabilizing shift that at first blush it may appear to be.

We'll soon find out, as Snap has apparently asked for the process to begin this week.

UPDATE (8/31) Snap CEO Evan Spiegel has confirmed the cuts in explaining that:

"We are reorganizing our company to focus more intently on our three strategic priorities: community growth, revenue growth and augmented reality.". The investments we are making in those areas will continue to grow and expand. Those not contributing directly in these areas will be discontinued or receive substantially reduced investment. We have worked thoughtfully and deliberately to find the right balance between focusing our investments while continuing to innovate. As such, we have made the decision to discontinue our investments in Snap Originals, Minis, Games, and Pixy, among other areas. We have also begun to wind down the standalone apps Zenly and Voisey.

There seems little immediate impact from the changes on Snap's development of its AR tools though de-prioritization of Snap Originals, that was such a strong winner for the app, could have wider implications.