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The company that owns the social media app Snapchat said on Wednesday that it is letting go of 20% of its staff as part of a plan to reorganize and cut costs because sales are going down.
In a letter to employees that was posted on Snap Inc.'s website, CEO Evan Spiegel said that sales were not going as well as expected.
"Unfortunately, our current slower rate of revenue growth makes it clear that we need to cut our cost structure if we don't want to keep losing a lot of money," Spiegel wrote.
On Wednesday, Snap stock went up almost 9%, to $10.88.
Spiegel said that Snap was reorganizing its business to put more emphasis on growing its community, making more money, and augmented reality. Anything that doesn't help with these three things "will be stopped or have a lot less money put into it," Spiegel said.
Last fall, Snap said that a privacy crackdown on Apple's iPhones was hurting its ad sales, which made investors worried about the app's growth potential. Most social media sites make most of their money from ads, which is one reason why Facebook has been so vocal about Apple's recent changes to privacy settings.
Snap's last profitable quarter was in the fourth quarter of 2021. Since then, the company hasn't had much good news.
On May 24, Snap shares lost 43% of their value after the company said in an SEC filing that the "macroeconomic environment has deteriorated further and faster than expected" and that it would not meet its own sales and profit goals for the period. Shares fell by 39% more on July 22, one day after Snap reported quarterly results that were worse than expected.
In recent years, Snap's staff has grown to more than 5,600 people, and the company said that even after laying off more than 1,000 people, it will still have a bigger staff than it did a year ago.
Snapchat is a way to send video messages that automatically deletes messages after they have been seen.
Like most other social media companies, Snap grew quickly during the pandemic, when people spent more time online at home because they were sick. At their highest point, Snap shares were worth more than $83 each in late September 2021.
Snap said it would stop putting money into Snap Originals, Minis, Games, Pixy, and other parts of its business. It also said that the stand-alone apps Zenly and Voisey are "coming to an end."
Santa Monica, California-based Snapchat also said that Jerry Hunter will become chief operating officer right away and that there will be other changes in regional leadership.
