Snap, the maker of the messaging app Snapchat, will cut a fifth of its workforce and scrap a host of new projects, as the company looks to recover from a year of punishing financial results.
The cuts to the workforce will see 1,300 of Snap’s 6,400 employees let go, the company said. On top of that, at least six new projects are being shut down, including a division that produced short shows with celebrities and influencers, its social mapping app Zenly, a music creation app called Voisey and hardware initiatives like the drone camera Pixy.
A year ago Snap was valued at around $130 billion, but now the company is worth less than $20 billion. The cuts are expected to save the company an estimated $500 million in annual costs, although CEO Evan Spiegel said the job losses would be “difficult.”
“While we will continue our work to re-accelerate revenue growth, we must ensure Snap’s long-term success in any environment,” he wrote. He added, “I am deeply sorry that these changes are necessary to ensure the long-term success of our business,” Spiegel said in an email to employees.
He also said he wanted the company to focus on its traditional lifeblood — advertising. Snap has more than 347 million active users globally, but last month reported its slowest ever rate of growth since it went public in 2017. Since the beginning of the year the company’s stock price had dropped 76%, but popped on the news of restructuring, ending the day up more than 8%.
Snap is not the only social media company to struggle in recent times. Advertising, which makes up the vast majority of their revenues, traditionally drops amid a recession, as companies become reluctant to spend on ads. Snapchat was also affected by privacy updates enacted by Appy which made it more difficult for advertisers to track people on their phones, making advertising less focused and ultimately less valuable.