At the beginning of September, Snap, an American social media company, suddenly implemented a plan of large-scale layoffs of more than 1200 people, which shocked the outside world. It is said that the layoff process is very chaotic, and the internal morale of the company is also extremely low. Some employees began to question the leadership of the company's top management.
As early as the beginning of this summer, it was reported that Snap would include at least 10% of its work teams in its performance improvement plan. Being included in the plan usually foreshadowed the possibility of being laid off, but at that time the whole company did not care about it. "Everything seems to be normal," one employee said at the time.
But a few months later, they were laid off. Ivan Spieger, CEO of Snap, cut about 20% of his staff this time, and some departments even cut 40% of their staff. In addition, he also abolished many products and projects. In the face of such a sudden change, many of the laid-off employees are on the verge of collapse. Observers can't help worrying about the company's future.
This is CEO Spieger's sudden turn to the company's business strategy. As a co-founder, he has been under great pressure for many years when running this social media company, trying to avoid short-term profit requirements, and focusing on the company's technological progress and experimental product development for a long time. These experimental products include Pixy UAV, etc. But in late August, everything suddenly changed. Spieger gave up his idea and began to pursue substantial cost reduction and maintain cash flow.
In the past, the work of Snap was relatively stable. But now, employees feel like they are working for Amazon. The pressure of indicator assessment is huge, and the atmosphere is suffocating.
In hindsight, there are traces of all this. Snap's share price also fell 75% in this year's US tech stock crash. In the face of the recruitment freeze and layoff tide of American technology companies, Snap insisted earlier this year that the company would not freeze recruitment, but slowed down its pace. The company has also repeatedly said that the number of employees will still increase by 10% this year. The employees believed these statements and believed that the company was going through difficulties but would eventually get through them smoothly. Many people do not realize that they will "lose their jobs".
When the second quarter financial statements came out, we found that the company's earnings were lower than expected, and finally began to be alert. At the beginning of August, the situation became clearer. In the weekly conference call between all employees and Spieger and other executives, some employees directly asked about the possibility of layoff. Jerry Hunter, the head of the engineering department, said that more information about the company's restructuring would be released soon. Some employees said that after the meeting, senior executives such as Spieger and Hunter were basically invisible. This left employees with a feeling that these executives are no longer fully engaged in their work as usual.
However, a Snap spokesman claimed that Spieger worked tirelessly all summer and took only three days off in August. Since the beginning of June, he has been working closely with the team to plan the company's layoff and restructuring plan. It has been noted that in the past few weeks, some meetings that require senior executives to attend have been cancelled, presumably to avoid employee inquiries. A former employee said that he felt very nervous throughout August, and the invisibility of the leadership also greatly affected the vitality of the company.
Chaotic layoffs
It was not until August 31 that the company's leadership released the details of major layoffs and the company's future priorities. On the same day, all laid-off employees were notified. According to the plan, they need to have a one-on-one conversation with the direct leader or the manager of the personnel department. Some former employees who have been interviewed said that the HR manager read the notice of employment to them; Before and during the interview, these employees cannot use the working computer.
In addition, before the dismissal notice was officially issued, some teams had been kicked out of the company's teleconference, and Snap's internal technicians also revoked the company's authority of the dismissed personnel on a large scale. Some people can't even log in to the company account to complete the dismissal procedure. "Everything is terrible," said one former employee.
Due to the inability to access the company's email or Slack account, the laid-off employees have very limited understanding of the layoff. They tried to contact Snap's personnel department for more information, but no response was received. As a result, they had to contact workers who had not been laid off to obtain further information. These employees feel humiliated and feel that they have not received due respect and care in the whole process of resignation.
The day after the announcement of layoffs, Spieger held a company wide meeting, which included those who had not been laid off. At the meeting, he defended Snap's tough stance, saying that those "haters" were wrong and tried to unite existing employees. He said that existing employees would be granted "additional" restricted stock to return their total compensation to the level when they first received the stock allowance.
Snap spokesman said that the company's top priority is still to support those employees who have been laid off and ensure that they get the information they need as soon as possible to help them tide over the difficulties. He also apologized for the company's IT failure during this period, and said that the company was conducting an investigation and kept in touch with the laid-off employees at all times.
The management of Nanfu
But employees still feel angry and frustrated. They think that there is something wrong with the company's business strategy, which leads to excessive recruitment and insufficient investment in the profit department, such as insufficient investment in the Snap advertising platform.
Some employees said that the leadership's layoff decision was purely based on cost saving, but did not take into account the company's future growth. Another employee said that the leadership had made a great mistake in personnel recruitment. Snap has recruited a large number of employees in the past two years. By the end of layoffs, the total number of employees had reached more than 6400, an increase of 60% over the beginning of 2021. However, this time, more than 1500 employees were suddenly cut, making the number of employees actually return to the level of one year ago. It's really speechless to toss and turn like this.
The morale of the whole company is very low at present. Some people worry that this will further aggravate the loss of personnel. It is said that Snap managers have been told that 10% - 20% of their team may leave in the future, but Snap spokesmen have strongly denied this.
Someone commented on this: "Snapchat's motto is to help others, innovate and be wise, but when things start to get worse, everything will be out of the question."
Worries of Wall Street
Wall Street analysts, who have always encouraged cost saving, were also surprised by the strength of Snap's layoffs. Mark Schmolik, a senior Internet analyst at Bernstein, said: "The layoffs are not small. Whether good or bad, it represents a major adjustment of the business strategy."
Schmuelik pointed out that Snap is not a cash limited company. At the beginning, the company established some businesses for various reasons, but these businesses never made profits. Now, when suddenly in an uncertain macroeconomic environment, profitability and cash flow are so important that they have to downsize and restructure.
The $500 million cost saved by Snap from layoffs is the same as the amount of share repurchases that the company has just completed. Share repurchase is a way for companies to increase the value of shares by reducing the number of outstanding shares, and its effect is equivalent to returning funds to investors. With Spieger's commitment to provide new equity to existing employees, Snap may soon return to the starting point of its stock dilution.
Schmolik is also not sure whether it is wise for Snap to abandon so many products and projects, especially considering that some products have become popular. It is reported that Snap will close Pixy mini UAV, accelerator venture capital fund, Snap Originals, Snap Minis and other projects. It will also shut down Zenly, a map application, and Voisey, a short video application like TikTok. Zenly was acquired by Snap in 2017 at a price of $200 million, and Voise in 2020 at an unknown price.
Pixy mini UAV People are shocked by the closure of Zenly, because this map business has a huge growth. A staff member pointed out that Zenly has 40 million active users every month, "it's hard to understand why we should close this map application."
Snap's acquisition strategy has also been questioned. In addition to Zenly and Voisey, Snap has also acquired Wave Optics, Fit Analytics and Next Mind in the past few years. However, Snap has not shown enough strategic planning level to integrate these products and make them work. In response, a Snap spokesman said, "We have indeed made some strategic acquisitions and have done a lot of work in integrating these acquisitions."
There is a long way to go
Can Snap survive this crisis? People are not optimistic about this. The company's current business restructuring focuses on three major areas: user growth, revenue growth and augmented reality technology. Among them, augmented reality technology has been the focus of Snap's development for many years, including its popular augmented reality lens, coating and special effect technology for self taking and video, etc.
Snap Augmented Reality Technology The number of snap users is very large and growing. As of the second quarter, the number of daily active users was close to 350 million, which even exceeded Twitter Daily. The company's revenue is still growing, but the "prosperity" caused by the epidemic has disappeared, and the growth rate has also slowed down.
Insiders said that the strategy of Snap and other companies to recruit aggressively during the epidemic seems to be a huge mistake. In the past two years, due to the impact of the epidemic, people were trapped at home, and the demand for Internet access increased significantly. Like many technology executives, Snap CEO Spieger regards the short-term sudden increase of these usage as a long-term phenomenon and believes that a large number of people need to be recruited to meet relevant service needs.
In addition, with the growth of the company's revenue, Snap has opened many experimental projects, such as new hardware development, fashionable AR glasses, map applications and third-party applications. These projects are led by Jeremy Goldman, the newly departed chief commercial officer, and Peter Naylor, the deputy director of sales. During the epidemic, these projects did make some achievements, but in the end, the facts proved that these successes were very lucky.
At present, the future of Snap is not clear. Last fall, Snap's advertising business was hit for the first time because of changes in Apple's customer privacy policy. After updating the operating system, Apple users can choose not to be tracked by the application for the purpose of advertising positioning. Since then, the company's advertising business briefly recovered in February this year, but due to inflation, the rise of TikTok and the reduction of advertisers' demand and other factors, Snap's revenue growth slowed significantly.
The decrease in demand for advertisers is not mainly determined by the macroeconomic situation, but driven by the services of Snap and the intensification of social advertising competition. With Instagram, BeReal and TikTok launching their own real-time narrative function, Snap's service is losing its uniqueness.
As the surge caused by the epidemic gradually passed, the leadership of Snap advertising sales department began to surface. As Apple has limited its advertising positioning, Spieger has turned to focus on the performance of Snap itself and started to build Party A's tracking ability and direct response advertising platform. It was this advertising business model that created advertising giants like Facebook and Google. However, both Goldman and Naylor, executives of Snap in charge of advertising business, are traditional advertisers who are good at building relationships with advertisers, but are not good at how to improve platform performance and advertising positioning.
People familiar with the matter said that many people were frustrated by the leadership represented by Goldman. Therefore, the resignations of Goldman and Naylor are not coincidental and should be part of Spieger's restructuring plan. After leaving, they both went to Netflix, a streaming media giant.
Hunter has been promoted to the chief operating officer of the company, responsible for sales, advertising, growth, partnerships, content and products, while maintaining the supervisory authority over the engineering department. The engineering department is the largest department of Snap, and Hunter and Spieger are said to get along well. One employee said that he was highly respected. Hunt's years of experience in AWS, Amazon's cloud division, also proved his operational ability.
However, some people worry whether Hunter has taken too much responsibility. However, people familiar with the matter said that with the new Snap management in place, Spieger had to focus on sustainable development business. This is a change for Spieger. He became a technology prodigy and created Snap. Over the years, he has always rejected other people's offers to acquire, insisted on the independence of Snap, and invested funds in the big projects he likes. "Spieger's character has gradually matured, but he has always maintained a very strong entrepreneurial spirit," said a person close to the company.
However, whether Spieger's change of business thinking can save the company is another matter. Although Snap is a leader in the field of augmented reality, considering the consumer's acceptance of augmented reality technology, the prospect of this field is not as bright as expected.
Snap's revenue in the second quarter increased by 8% year on year, which has improved. However, experts estimate that it may take many years for Snap to reproduce the rapid growth in 2021.
