Snap overhauls operations amid slowing ad revenue & user Decline

Snap Inc. is restructuring its operations into small ‘startup squads’ of 10 to 15 people, CEO Evan Spiegel said in the company’s annual letter. The move is aimed at boosting competitiveness against larger rivals as the 5,000-person company struggles with slowing growth.

Snap’s advertising revenue rose just 4% in the second quarter, while North American daily active users fell 2% to 98 million, a decline in its most important market.

Spiegel pointed to subscriptions as a rare bright spot. Snapchat+ now has more than 15 million paying users, generating over $700 million in annual recurring revenue. He described direct revenue as ‘one of Snap’s fastest-growing opportunities.’

The company is also investing in its augmented reality hardware. Snap is developing its own AR glasses, which Spiegel has described as a ‘once-in-a-generation transformation towards human-centered computing.’ Rival firms Meta and Google are pursuing similar bets, working with Ray-Ban and Warby Parker, respectively.

Acknowledging market concerns, Spiegel wrote that Snap’s stock price ‘reflects doubt’ but argued the company still carries ‘startup-style return potential’ at its roughly $12 billion valuation. The figure, however, is down 90% from September 2021, when Snap’s market cap peaked at $116 billion during the height of social media optimism.

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