According to news on February 6, on Monday U.S. time, the social media company Snap announced that it would lay off 10% of its employees worldwide, affecting about 500 employees. According to the company, the layoffs are partly to "promote face-to-face collaboration." Snap CEO Evan Spiegel said the layoffs, which include multiple executives, are partly to reduce stock-based compensation paid to executives.
These include content director Sam Corraoclon, vice president of content engineering Ding Zhou, and vice president of platform partnerships Konstantinos Papamiltiadis.
Like many smaller technology companies, Snap reported quarterly results in which stock-based compensation accounted for a high percentage of revenue, which severely depressed its operating profit. For example, Snap reported nearly $1 billion in stock-based compensation expenses through the first three quarters of last year, after the company generated $3.2 billion in revenue. After stock-based compensation charges, the company's operating loss amounted to $1.1 billion.
Snap has made multiple rounds of layoffs since 2022, most recently in November when the company laid off a small portion of its product team staff. The last major layoffs occurred in August 2022, when the company cut 20% of its workforce and restructured its operations.
Snap expects the layoffs to incur costs of $55 million to $75 million, according to regulatory filings. A Snap spokesperson confirmed: "We are reorganizing our team structure to reduce layers and promote more direct face-to-face communication and collaboration. We will also fully support those team members who are leaving."
As the latest technology company to continue laying off employees in 2024, Snap is not alone. In January alone, nearly 24,000 technology industry workers in the United States lost their jobs. This month, cybersecurity and identity company Okta and video conferencing platform Zoom also announced layoffs.
Spiegel testified before the U.S. Senate Judiciary Committee last week, becoming one of several social media executives facing scrutiny for their platforms' negative impact on young people.
Investors generally support layoffs at technology companies. For example, Facebook parent company Meta implemented the "Year of Efficiency" plan and carried out large-scale layoffs. Meta shares hit an all-time high after reporting strong earnings and declaring its first dividend.
At the same time, Amazon and Google parent Alphabet also made similar layoffs. Like Google and Facebook, Snap relies heavily on digital advertising for its revenue. While the company has struggled in some quarters, it managed to reverse a streak of declining revenue in its most recent quarter. Additionally, Snap launched a $500 million stock repurchase program.
In early trading, Snap's stock price fell 3%, but later recovered, and finally closed down 1.8%. However, Snap shares are still trading below the offering price and well below their 2021 highs of about $83.