In August, several of Snap’s executives departed. To cut costs, the company laid off 20 percent of its employees and discontinued at least six products, including a drone camera it had announced only four months earlier. It appointed a chief operating officer, a position that had been vacant for seven years. And Mr. Spiegel, 32, vowed to get the company back on track by focusing on growing Snap’s community, revenue and augmented reality technology.
“Unfortunately, given our current lower rate of revenue growth, it has become clear that we must reduce our cost structure to avoid incurring significant ongoing losses,” he wrote in an email to employees at the time. “I am deeply sorry that these changes are necessary to ensure the long term success of our business.”
On Thursday, Derek Andersen, Snap’s chief financial officer, said in an earnings call that the company continued “to believe we have significant room to grow our advertising business.” But he added, “As you’ve seen the macro challenges compound on some of the platform changes we saw last year, certainly we’ve been demand-challenged.”
Snap has been betting on augmented reality for growth, even as Meta and others are pushing into immersive digital spaces in the so-called metaverse. Snap started selling augmented reality glasses, called Spectacles, in 2016 and has developed software for businesses to use its augmented reality technology. But the most recent version of Spectacles was given only to some content creators and is not for sale yet. Mr. Spiegel has said the glasses may not enter the mainstream for another decade.
The company also faces more competition for the attention of young people from TikTok and the photo-sharing app BeReal. This year, in a survey by the investment bank Piper Sandler, 38 percent of American teenagers said their favorite social media platform was TikTok, and 30 percent said Snapchat. From 2016 through 2021, Snapchat had held the top position in the semiannual survey.
Snap has faced scrutiny from legislators and regulators for exposing young people to potentially harmful content, which critics have said can worsen eating disorders and contribute to other mental health problems. The company has been accused of enabling teenagers to buy drugs like fentanyl through its platform as well.
Snap’s sales have struggled partly because TikTok has excited advertisers and is gaining a larger share of the advertising market, said Brent Thill, an equity analyst at Jefferies. But, he added, “There’s no question there’s headwinds moving to advertising in a bigger way.”