Snap restructures ad business amid worst sales growth in history.

In this photo taken on September 15, 2017, the Snapchat app logo is seen on a smartphone. REUTERS/Dado Ruvic/Illustration/File Photo

Aug 31 (Reuters) – Snap Inc ( SNAP.N ) said on Wednesday that third-quarter revenue growth was at the slowest pace in the company’s history, as high inflation, rising interest rates and a slowing economy continue to wreak havoc on the advertising industry. .

As a result, Snapchat’s parent company said it would cut 20% of all employees, restructure its ad sales department and shut down projects including mobile games and innovations such as in-flight drone cameras to focus on improving sales and sales numbers. Snapchat users. Snap had more than 5,600 employees at the end of last year.

Investors look to Snap as an early indicator of trends affecting other social media platforms, including Facebook owner Meta Platforms ( META.O ), Pinterest ( PINS.N ) and Twitter ( TWTR.N ), as the company usually reports quarterly earnings. or provide business updates.

In May, Snap’s warning that it would miss its revenue target due to a worsening economic climate sent shares of the social media company into a selloff. Read more

Santa Monica, Calif.-based Snap fell 2.5% to $10 on Tuesday after The Verge first reported Snap’s plans to downsize and TheAdAge reported the departure of two top advertising executives.

Revenue growth in the third quarter was up 8 percent from a year earlier, which was “below our expectations,” CEO Evan Spiegel wrote in a memo to employees released Wednesday.

If that rate of growth continues, it would be Snap’s slowest revenue growth since going public in 2017 — a far cry from the triple-digit growth rates it has seen in previous quarters.

Two of Snap’s top ad sales executives — chief business officer Jeremy Gorman and vice president of ad sales Peter Naylor — are leaving to join Netflix ( NFLX.O ) and build the streaming service’s ad business. Read more

Gorman, a longtime advertising executive who previously worked at Amazon, was instrumental in building Snap’s advertising business, said Jasmine Enberg, principal analyst at research firm Insider Intelligence.

Gorman and Naylor’s departures came after Snap reported a disappointing second quarter and is facing more competition from TikTok, she said.

“Snap is clearly going through a tough time,” Enberg said.

‘Face the Consequences’

Despite cutting costs in some areas, Snap must now “face the consequences of our lower revenue growth and adapt to the market environment,” CEO Spiegel wrote in the memo.

Jerry Hunter, senior vice president of engineering, will be promoted to chief operating officer and will be responsible for improving coordination between the engineering, ad sales and product teams, he said.

Other social media platforms, including Snap and Meta, have suffered from privacy updates that Apple ( AAPL.O ) introduced to iPhones last year. These enable digital advertising marketers and advertisers to target ads to relevant audiences and measure their sales results.

Close collaboration between engineering and sales can help Snap improve the targeting and measurement of its ads.

The restructuring of the ad sales division includes three new president roles overseeing the Americas, Europe, Middle East and Africa, and Asia-Pacific regions.

Snap is ending its investment in Pixxy’s flying drone camera, just months after its launch in May.

Reporting by Sheila Dang in Dallas; Edited by Kenneth Lee and Kenneth Maxwell

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