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Snap Gets Hit With Another Round of Layoffs

By Evan Niu, CFA - Jan 19, 2018 at 4:25PM

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Third time's not the charm.

Snapchat parent company Snap (SNAP 4.78%) is laying off approximately two dozen people across eight different departments. The cuts were heavily concentrated in the young company's content team, which is responsible for moderating user posts as well as managing relationships with publisher partners that produce content for its Discover section. Snap has been suffering from various engagement problems for many features within the service, including the important Discover section, which is a meaningful part of its ad business.

Including a restructuring in September and another round of layoffs in October, this makes the third batch of job cuts in less than six months. The news was first reported by Cheddar's Alex Heath, who broke many other Snap scoops while at Business Insider.

Snapchat logo

Image source: Snap.

Three's company

As I pointed out in October, Snap's total headcount had more than quadrupled from the end of 2015 to the summer of 2017 (approximately 2,600 employees at the end of the second quarter), as the company was in growth mode. But Snap overshot with hiring at a time when its advertising business was still inchoate. Even today, the company remains in the early innings of building an advertising business.

What's most peculiar about these layoffs is that they're within one of Snap's most important divisions. The cuts late last year were mostly concentrated in hardware (Spectacles), hardware marketing, and recruiting. These are easily justified by the fact that Spectacles were an utter flop and waste of resources, and if Snap plans on hiring less, then it naturally doesn't need as many recruiters. On the other hand, relationships with publishers and prominent media outlets are of critical importance to the business.

Snapchat utilizes human content editors to review user-submitted photos and videos, although the company said in November that it would embrace algorithmic curation. It's possible that Snap is merely replacing some of these editors with algorithms. But Snap hopes a greater human element will help differentiate it from larger rival Facebook, whose own algorithms have created all sorts of controversies revolving around fake news, ad targeting, and election meddling.

Meanwhile, Snap is in the process of rolling out its major redesign, although it has been dragging its feet. The company had hoped to deploy the new version widely last month, but is now targeting the end of Q1 2018, according to the report. Snap should proceed carefully, though, as Facebook investors are anxious about that company's own effort to separate social content from publisher content.

Snap hasn't announced when it will report fourth-quarter earnings, but shortly after it does it will file its first ever 10-K annual report. Investors will then have a definitive figure for how Snap's headcount changed in 2017.

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