It’s been somewhat of a ghostly week for Snap.
On Tuesday, it lost two of its top ad executives — chief business officer Jeremi Gorman and vice president of sales Peter Naylor — who were poached by Netflix to lead the streaming giant’s new ads business. (Both are key figures in the ad industry and have been instrumental to Snap’s growth over the past few years.)
On Wednesday, the company announced layoffs for 20% of its employees — around 1,200 of its current 6,400 employees — as part of a broader corporate restructuring. Other changes include shelving various other projects including its self-flying Pixy camera drone, newer standalone apps including the social map app Zenly and the music-focused platform Voisey. Snap will also stop producing new content for Snap Originals but will keep shows that already exist and shift its Minis and Games products into “maintenance mode” with reduced investment.
Despite Snap’s major restructuring, marketers say the company has a chance to refocus the social platform around its key differentiators such as augmented reality. And that seems to be part of the plan.
In a memo to staff this week, Snap CEO and co-founder Evan Spiegel said the consolidations are an attempt to refocus on three core areas: “community growth, revenue growth and augmented reality.” (Snap estimates that total savings from the restructuring will be around $500 million compared to the second quarter of 2022.) As part of the changes, the company has promoted a number of executives. Jerry Hunter, who joined the company six years ago after nearly a decade at Amazon, has been promoted from senior vice president of engineering to the role of chief operating officer. Ronan Harris, who will lead Snap’s EMEA efforts, is also joining from Google, where he was vice president and managing director of U.K. and Ireland.
“I believe Jerry’s promotion will result in both better short term execution as well as a higher velocity of long term innovation,” Spiegel wrote.
For years, Snap has pioneered the use of augmented reality lenses through in-house efforts and collaborations with creators and brands. According to Steven Moy, CEO of the advertising agency Barbarian Group, Snapchat’s augmented reality capabilities are “almost like a 1.1 of the metaverse” and something brands are increasingly testing as they move beyond social commerce and into virtual reality, Snapchat becomes even more appealing.
“It’s kind of like an entry-level metaverse,” Moy said. “You don’t need to go all the way into Decentraland and a lot of those metaverse experiences that are still a little clunky.”
Several advertising executives noted that Snap’s ability to quickly experiment and roll out new products for augmented reality and other formats gives it a chance to play an even bigger role in driving innovation with content. (It also gives it an edge amid the clone wars played by other social networks.) In an interview last month about the broader social media landscape, Ellie Bamford, global head of media and connections at R/GA, said Snap has been smart to quickly innovate and diversify.”
“There’s a ton that they’ve done to try to look at these pockets where they can provide value and infiltrate,” Bamford said. “That’s smart, and I certainly by no means think Snap is done or out of the game or irrelevant. Their product development team is exceptional.”
Kelsey Chickering, a principal analyst at Forrester, said Snap has been an industry leader with various features such as augmented reality. However, she said it hasn’t been able to keep up with the “addictive nature” of TikTok and hasn’t “captured the same magic.” According to Forrester’s 2022 Media and Marketing Benchmark survey, 42% of U.S. online adults between 18 and 25 said they thought TikTok was an “addictive” platform, but just 21% said the same about Snapchat.
“Advertisers aren’t turning to Snapchat with ‘always on’ social media budgets, like they are Meta,” she said. “Snapchat is a great channel for seasonal or tentpole-based activations, making it a ‘nice to have’ line item on a media plan. The economic uncertainty in which marketers are operating will make them more focused on the tried and true, hardworking channels, leaving platforms like Snapchat behind.”
Despite Snap’s recent struggles, some marketers praise the results they’ve seen on the platform. For example, it’s still a top platform in the U.S. for New Balance’s fashion and lifestyle products, said New Balance CMO Chris Davis. He said the platform continues to eclipse other social networks when it comes to return on ad spend and impressions, especially with lower funnel marketing. Last year, New Balance — which has been a beta test partner for new tech with Snap — created an augmented reality campaign starring NBA star Kawhi Leonard for the launch of its limited edition sneaker in collaboration with Jolly Rancher. The campaign reached more than 7.3 million users and sent 250,000 to the brand’s website.
“Their team is eager to incorporate us into new initiatives and technologies, as exemplified by AR activations in the past,” Davis said. “We have seen brand favorability increase in these launches as well.”
Vinny Rinaldi, head of media analytics, data and technology at The Hershey Company, said Snapchat still continues to reach “a ton of eyeballs and time spent on the platform” — especially from ages where purchase behavior is shifting — and that the chocolate company’s marketing on the platform continues to be effective.
“I wouldn’t say Snap is doomed in any capacity,” Rinaldi said. “Like everyone else, the ad tech headwinds are real based on market dynamics and we’re seeing hiring freezes as well as company layoffs, but a lot of these companies were overvalued based on the market to begin with.”