Chief Executive Evan Spiegel said he is bracing for a difficult turnaround as the company tries to reinvent itself and reignite sales growth at a time when digital ad spending is under pressure.
“We really have to focus on execution. It’s going to be tough,” Mr. Spiegel said Wednesday at the Code conference in Beverly Hills, California.
Despite near-term challenges that have sent Snap’s stock down about 85 percent over the past year, Mr. Spiegel said he remains optimistic about the future of the business he co-founded. “I think we’re a long way from reaching our full potential.”
Snap last week revealed plans to cut 20% of its workforce due to worsening market conditions and sales growth that had slowed from more than 40% at the start of the year to about 8% in the current quarter to today. “We don’t see a lot of things that make us optimistic, so what we’ve had to do is really restructure our business,” Mr. Spiegel said at Wednesday’s event.
In addition to announcing that it was laying off about 1,200 employees, Snap last week said it would also shut down several projects, including its recently released flying drone with a selfie camera, after posting its slowest sales growth in years in July. The company said it was prepared for a period of low revenue growth that could stretch into next year and that the changes it is making will cut annual costs by about $500 million.
Tech companies in general are scaling back their plans in the face of the economic slowdown. Google CEO Sundar Pichai said Tuesday that he aims to build Alphabet Inc.
company about 20% more productive. Amazon.com Inc.
CEO Andy Jassy said the company is slowing its staff growth rate.
Snap has been hit particularly hard by Apple’s disruption of the digital ad market Inc
The company said the ad market has deteriorated rapidly. In May, Snap issued an earnings warning, telling investors that quarterly revenue would likely fall short of forecasts made just a month earlier. He also said he would slow hiring and spending at that time.
Snap also said competition for its remaining ad spend has become more intense. That partly reflects the strong rise of TikTok, the video-sharing app owned by China’s ByteDance Ltd. which has become known in recent years.
Mr Spiegel suggested that TikTok’s growth rate was a surprise. “I think what nobody expected in the United States was the level of investment that ByteDance made in the US market, and of course in Europe, it was just unimaginable,” he said. “No startup could afford to invest billions and billions and billions of dollars in acquiring users like this around the world,” Mr. Spiegel added.
Having so many users submit content to TikTok has allowed the platform to scale and helped improve its algorithm, in part by enabling highly personalized streams, Mr. Spiegel said. Copying that complexity has been a challenge for established social media companies now trying to fend off TikTok, he said.
TikTok did not immediately respond to a request for comment.
Write to Meghan Bobrowsky at Meghan.Bobrowsky@wsj.com
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