Low revenue growth and adapting to market environment. These are the reasons cited by Snapchat as it plans to lay off over 1280 employees from the company.
What is Snapchat’s financial status? Snapchat axing off 20% of its employees shouldn’t come as a surprise as the app and its subsidiaries have suffered nearly $10 billion in losses this year. With the stock falling to 80% in 2021-2022, the company’s shares are also on an all-time low.
The layoffs come as a part of Snapchat reworking its business strategy. A major source of loss was also the low userbase that Snap’s other investments and verticals were generating. This is why it has also decided to discontinue Snap Originals, Games, Minis, and Pixy.
A major year for layoffs in Silicon Valley: Post-pandemic trends in the American tech world include several techies moving to other smaller towns (that are anyway ripe for investment) as Silicon Valley seems to be reaching its saturation point for some. The increasing layoffs from the Valley’s major companies is another negative phenomenon that is fuelling this shift. The pandemic also worked as a major disruption to the general professional scene.
Just take the case of Netflix, which laid off 150 employees along with several other contractors and part-time workers. 300 more were fired in a second round of job cuts that came out a few months later. Crypto exchange platform Coinbase went ahead with firing 1,100 people, nearly 18% of its workforce. Sonder, a short-term rental company that was once considered to be a new competitor to Airbnb, laid off one-fifth of its corporate employees.
Netflix cut all of its diversity departments including Strong Black Lead, Asian American-focused Golden, Latinx-focused Con Todo, and LGBTQ-focused Most pic.twitter.com/GqebuZKFRB— 𝖙𝖍𝖊 𝖆𝖈𝖗𝖞𝖑𝖎𝖈 𝖋𝖊𝖒 🍒 (@thebaddiegalore) May 18, 2022
Apart from layoffs, the other major trend in the Valley is hiring freezes. This is evident from how even tech giants like Meta, Google, Twitter, Uber, and Lyft have kept new hirings on a temporary hold.
What are the reasons behind the layoffs: What can be understood from these increasing layoffs is changing consumer patterns in the post-pandemic times. Experts are of the consensus that the reason why tech companies got a major boost at the start of the pandemic is because most of the First World demographics got increasingly dependent on technology.
For instance, Peloton emerged as a major at-home fitness company for those who couldn’t go to the gym. But as the pandemic situation normalised, Peloton’s business naturally went south with a fall in value from $47 billion to $4 billion between 2021 and 2022. And just like how Mr Big dies on the peloton in the Sex and the City reboot, the company also started witnessing its downfall.
Analyzing Peloton stock pic.twitter.com/efmSSOo108— Dr. Parik Patel, BA, CFA, ACCA Esq. (drpatel.eth) (@ParikPatelCFA) August 25, 2022
San Franciso-based economist Ted Egan told the Los Angeles Times that another crucial reason is the Federal Reserve increasing rates in Californian regions like the Valley.
What it means for the future: When asked if the Valley companies are in the endgame now, Egan adds that there is still some hope as despite the layoffs in San Francisco, “There are three open job listings for every hire, so a lot of jobs are still going unfilled.” After the pandemic, with a lot of Silicon Valley workforce still working from home, there are increasing concerns for moonlighting. While several companies have asked their employees to return to office and many are in the process of doing so, workers are not ready to just yet.
As for Snapchat, CEO Evan Spiegel needs to pull up his socks as the once-trending instant messaging app has been facing immense competition from Meta services such as Instagram (and its Reels feature). As Instagram itself struggles to adapt to new content trends, the future of these content-based apps seem uncertain.