Shulou(Shulou.com)11/24 Report--

In early September, Snap, a US social media company, shocked the outside world when it suddenly launched a plan to lay off more than 1200 people. It is said that the layoff process is very chaotic, the company's internal morale is also extremely low, and some employees begin to question the leadership ability of the company's top management.

As early as the beginning of this summer, it emerged that Snap would include at least 10 per cent of its staff in its performance improvement plan. Being included in the plan usually heralded the possibility of layoffs, but companies were unimpressed at the time. "everything seemed normal," one employee said at the time.

But one day a few months later, they were laid off. Ivan Spiegel, chief executive of Snap, has laid off about 20 per cent of his workforce, with layoffs of up to 40 per cent in some departments. In addition, he has eliminated many products and projects. Suddenly, in the face of such great changes, many laid-off employees are on the verge of collapse. Observers can't help but worry about the company's future.

This is CEO Spiegel's sudden shift in the company's business strategy. As a co-founder, he has been under great pressure to run the social media company for years, trying to avoid short-term profit requirements and focusing on the company's technological advances and experimental product development for a long time. These experimental products include Pixy drones. But in late August, everything suddenly changed shockingly-Spiegel abandoned his philosophy and began to pursue deep cost-cutting and cash flow.

In the past, Snap's job felt more stable. But now, employees feel like they are working for Amazon, and the indicators are under a lot of pressure and the atmosphere is suffocating.

In hindsight, there are signs of all this. Snap's share price has also fallen 75 per cent during this year's collapse in US technology stocks. In the face of hiring freezes and layoffs at US technology companies, Snap insisted earlier this year that the company would not freeze hiring, but had slowed its pace. The company has also said repeatedly that the number of employees will still increase by 10 per cent this year. Employees believe these stories, thinking that the company is going through a difficult time but will pull through. Many people do not realize that they will lose their jobs.

When the second-quarter financial statements came out, people found that the company's earnings were lower than expected, and finally began to be vigilant. In early August, the situation became clearer. In their weekly conference calls with Spiegel and other executives, some employees directly asked about the possibility of layoffs. Jerry Hunt, the head of the engineering department, said at the time that more news of the company's restructuring would be released soon. Some employees said that after that meeting, Spiegel, Hunter and other executives were basically invisible. This gives employees a sense that these executives are no longer as dedicated as they used to be.

But a spokesman for Snap said Spiegel worked tirelessly all summer, taking only three days off in August. Since early June, he has been working closely with the team to plan the company's layoffs and restructuring plans. It has been noted that in the past few weeks, some meetings that require senior executives have been cancelled, possibly to avoid employee inquiries. Some former employees said they felt very nervous throughout August, and the invisibility of the leadership had a great impact on the vitality of the company.

The chaotic layoffs were not released by the company's leadership until August 31, when details of the big layoffs and the company's future priorities were released. On the same day, all the employees who were laid off were notified. According to the plan, they need to have an one-on-one conversation with the direct leader or the HR manager. Some former employees who have been interviewed said that the personnel manager read them the employment notice and that they were unable to use the work computer before and during the conversation.

In addition, some teams were kicked out of the company's conference calls before the dismissal notice was officially issued, and Snap's internal technicians massively revoked the company privileges of laid-off employees. Some people can't even log on to the company account to go through the firing process. "everything is terrible," says one former employee.

Due to lack of access to the company's email or Slack account, employees who have been laid off know very little about the layoffs. They tried to contact Snap's personnel department for more information, but could not get any response. As a result, they have to contact unlaid-off employees for further information. These employees feel humiliated and feel that they have not received the respect and care they deserve during the whole process of leaving.

The day after the layoffs were announced, Spiegel held a company-wide meeting, including those who had not been laid off. At the meeting, he defended Snap's tough stance, saying that the "haters" were wrong and tried to unite existing staff. He said existing employees would be awarded "additional" restricted stock to bring their total compensation back to where they were when they first received the stock allowance.

A spokesman for Snap said the company's top priority is still to support laid-off employees and make sure they get the information they need to tide them over as soon as possible. He also apologized for the company's IT failure during this period and said the company was conducting an investigation and kept in touch with the laid-off employees.

Unpopular management, but employees still feel angry and frustrated. They believe that there is something wrong with the company's business strategy, leading to over-recruitment and underinvestment in profit-making departments, such as underinvestment in the Snap advertising platform.

Some employees said that the leadership's decision on layoffs was purely for cost savings, but did not take into account the future growth of the company. Another employee said that the leadership was very wrong in recruiting people. Snap has hired a large number of staff over the past two years, with a total of more than 6400 employees before layoffs, an increase of 60 per cent from the beginning of 2021. But this time it suddenly cut more than 1500 employees, bringing the number of employees back to where they were a year ago. It's really speechless to go back and forth like this.

The morale of the whole company is very low at present, and some people worry that this will further aggravate the loss of staff. Snap managers are said to have been told that another 10 per cent of their team may leave in the future, a Snap spokesman has vehemently denied.

Some people commented: "Snapchat's motto is to help others, innovate and be wise, but when things start to get worse, it's all over."

Wall Street analysts, whose concerns have always encouraged cost savings, were also surprised by the strength of Snap's layoffs. Mark Schmulick, a senior Internet analyst at Bernstein, said: "the layoffs are not small. For better or worse, this represents a major change in business strategy."

Schmulick points out that Snap is not a cash-constrained company. At first, the company set up some businesses for a variety of reasons, but these businesses were never profitable. Now, when suddenly in an uncertain macroeconomic environment, profitability and cash flow have become so important that they have to lay off staff and restructure.

Snap's $500m cost savings from layoffs are the same as the company's just-completed share buybacks. Stock buyback is a way for a company to increase the value of its shares by reducing its tradable shares, which is equivalent to returning funds to investors. As Spiegel promises to offer new equity to existing employees, Snap may soon return to its starting point of dilution.

Schmulick is also unsure whether it would be wise for Snap to give up so many products and projects, especially given that some products are already popular. It is reported that Snap will close Pixy mini-drones, accelerator venture capital funds, Snap Originals, Snap Minis and other projects. It will also close map app Zenly and TikTok-like short video app Voisey. Zenly was acquired by Snap for $200m in 2017 and Voise in 2020 for an unknown price.

▲ Pixy Mini UAV

People are shocked by the closure of Zenly because of the huge growth of the mapping business. A staff member pointed out that Zenly has 40 million active users per month, "it is difficult to understand why to shut down this mapping app."

Snap's acquisition strategy has also been questioned. In addition to Zenly and Voisey,Snap, they have acquired Wave Optics, Fit Analytics and Next Mind in the past few years. However, Snap does not show sufficient strategic planning level to integrate these products to make them work. A spokesman for Snap responded: "We have indeed made some strategic acquisitions and have done a lot of work in integrating them."

Can Snap survive this crisis with a long way to go? People are not optimistic about this. The company's current business restructuring focuses on three areas: user growth, revenue growth and augmented reality technology. Among them, augmented reality technology is the focus area of Snap for many years, including its popular augmented reality lens and coating and special effects technology for selfie and video.

▲ Snap augmented reality technology

The number of Snap users is huge and growing. As of the second quarter, the number of daily active users was close to 350 million, which even exceeded the number of daily active users on Twitter. Corporate revenues are still growing, but the boom caused by the epidemic has ceased to exist and growth has slowed.

The strategy of hiring aggressively by companies such as Snap during the outbreak now appears to be a huge mistake, according to people familiar with the matter. In the past two years, due to the impact of the epidemic, people have been trapped at home, and the demand for Internet access has greatly increased. Like many technology executives, Snap CEO Spiegel sees these short-term surges in usage as a long-term phenomenon, arguing that a large number of people are needed to meet the demand for services.

In addition, as the company's revenue grows, Snap has launched a number of experimental projects, such as new hardware development, stylish AR glasses, mapping applications and third-party applications. The projects are led by Jeremy Goldman, the newly departed chief business officer, and Peter Naylor, deputy director of sales. During the outbreak, these projects did achieve some success, but in the end, these successes proved to be a lot of luck.

For now, the future of Snap is not clear. Last fall, Snap's advertising business was hit for the first time because of a change in Apple's customer privacy policy. After updating the operating system, Apple users can choose not to be tracked by the app for ad targeting purposes. Since then, the company's advertising business recovered briefly in February, but Snap's revenue growth slowed sharply due to inflation, the rise of TikTok and reduced demand from advertisers.

The decline in demand from advertisers is not mainly determined by macroeconomic conditions, but is driven by Snap services and increased competition in social advertising. As Instagram, BeReal and TikTok introduce their own real-time narrative capabilities, Snap services are losing their uniqueness.

As the surge caused by the epidemic has gradually passed, problems with the leadership of Snap's advertising sales department have also begun to surface. Due to Apple's restrictions on advertising positioning, Spiegel turned to focus on Snap's own performance and began to build Party A's tracking capability and direct response advertising platform. It was this advertising business model that created advertising giants like Facebook and Google. But Goldman and Naylor, Snap's advertising executives, are both traditional advertisers who are good at building relationships with advertisers, but not good at how to improve platform performance and advertising positioning.

Many people are frustrated by the leadership represented by Goldman, according to people familiar with the matter. Therefore, the departure of Gorman and Naylor is no coincidence and should be part of Spiegel's restructuring plan. After leaving, both went to Netflix, a streaming giant.

Hunter has been promoted to chief operating officer of the company, responsible for sales, advertising, growth, partnerships, content and products, while maintaining oversight of the engineering department. The engineering department is the largest division of Snap, while Hunter and Spiegel are said to get along well. One employee said he was highly respected. Hunter's years of experience in AWS, Amazon's cloud division, is also proof of his operational ability.

However, there are also concerns about whether Hunter is taking on too much responsibility. But with the new Snap management in place, Mr Spiegel was able to focus on sustainable business, according to people familiar with the matter. This is a change for Spiegel. He started out as a tech prodigy and founded Snap. For years, he turned down offers, insisted on Snap's independence and invested money in big projects he liked. "Spiegel matured, but always maintained a very aggressive spirit," one person close to the company said of him then.

But whether Spiegel's shift in business thinking can save the company is another matter. Although Snap is a leader in augmented reality, the outlook is not as bright as expected, considering consumer acceptance of augmented reality.

Snap's second-quarter revenue grew by 8% year-on-year, which has improved. But experts estimate that it may take many years for Snap to repeat the rapid growth of 2021.

Welcome to subscribe "Shulou Technology Information " to get latest news, interesting things and hot topics in the IT industry, and controls the hottest and latest Internet news, technology news and IT industry trends.