Snap Employees Are Eyeing Exit As Stock Sinks

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October 24, 2018
Updated 4mo ago

By Alex Heath

Snapchat employees are looking to jump ship in growing numbers after a botched app redesign and drop in stock price soured many on the company’s future, according to an internal, anonymous survey.

In the survey obtained by Cheddar, 40 percent of Snap’s ($SNAP) roughly 3,000-person workforce indicated that they didn’t plan to stay at the company. The response marked an 11 percentage point increase from the last time Snap conducted the survey in the first quarter of 2018.

Despite the increase in predicted turnover, 75 percent of employees reported overall satisfaction with working at Snap, down 5 points from when the survey was last conducted in the first quarter of this year. Snap’s stock has sunk more than 60 percent since its first-quarter highs, and shares currently trade at roughly $7 per share.

During all-hands meetings in recent weeks, Snap executives have attempted to downplay questions about morale inside the company, according to current and former employees, all of whom requested anonymity to speak freely.

The company’s engineering chief, Jerry Hunter, recently told staffers that Snap’s employee turnover is normal compared to industry peers, according to two people who heard the remarks. A study earlier this year conducted by LinkedIn found that the average, yearly turnover rate in the internet tech industry is 14.9 percent. Snap has not publicly disclosed its yearly turnover rate.

Hunter also said that Snap wasn’t planning additional layoffs. Snap laid off roughly 120 engineers in March and made prior cuts in its content and hardware divisions. Wall Street analysts have estimated that Snap will have to aggressively cut costs in order to reach CEO Evan Spiegel’s goal of achieving profitability in 2019.

Snap is still reeling from the fallout of its unpopular app redesign, announced last November, which led to its first-ever decline in daily users last quarter and could result in another quarterly decline when the company reports earnings on Thursday. In a lengthy memo recently sent to employees, CEO Evan Spiegel said the company “rushed our redesign, solving one problem but creating many others.”

Internally, much of the blame for the redesign, which was codenamed “Cheetah,” has been placed on Snap’s engineering outpost in San Francisco, according to current and former employees.

Established in 2016, the office led the engineering work on a number of big initiatives, namely the algorithmic feeds that powered the ranking of messages and content from publishers in the initial Snapchat redesign. Users revolted against the changes, and the algorithmic ranking of messages from friends was quickly changed back to chronological order.

The two engineering heads of Snap’s San Francisco office, Wisam Dakka and André Madeira, quietly left the company a few months ago. Neither responded to a request for comment. A Snap spokesman declined to comment for this story.

Snap has lost roughly a dozen senior executives since the company went public in early 2017. And the departures have trickled down to other longtime staffers across the organization, according to current and former employees. Tim Sehn, Snap’s former engineering chief, announced this week that he poached two senior and longtime Snap engineers for his new cloud data business.

On Wednesday, shortly after this story was published, Snap announced two executive hires to replace its departing Chief Strategy Officer, Imran Khan. Jeremi Gorman, who previously ran worldwide ad sales at Amazon, will be Snap's new Chief Business Officer and lead all of its ads sales and business operations.

Jared Grusd, who was formerly the CEO of The Huffington Post and an ex-Spotify executive, also joined as Chief Strategy Officer. Snap said he will oversee its content efforts along with corporate development and strategy.

Hopes of a turnaround

Hopes for Snap’s turnaround are currently set on the company’s Android app redesign, internally codenamed “Mushroom.” Snap sees the new app as having potential to kickstart growth on the world’s largest mobile phone platform, which is especially dominant in less developed countries where Snapchat is not yet popular.

“Everyone thinks it’s the silver bullet,” one current Snap employee told Cheddar.

Snap has begun testing its Android redesign in a public beta of the app, indicating that the redesign’s widespread release could happen in the coming weeks.

Another bright spot for Snap has been its efforts to develop mobile-first video shows for the app. The company recently rolled out its own slate of original shows and is planning an international push in the coming weeks to get more content from outside publishers in countries like France, Germany, Saudi Arabia, and India. Over 18 Snapchat shows currently reach over 10 million unique viewers per month.

Snap is planning a redesign of the Discover section of its app that displays its shows and content from publishers, according to people familiar with the matter. The company is also working on new design tools for media organizations that will make it easier to create original content for the app, the people said. And Snap plans to give outside publishers the ability to stream live video in Discover after seeing high engagement with its own tests for events like the Brett Kavanaugh Senate hearing, which was watched live by 4.3 million people in the app.

Another initiative that could help Snap reignite growth is a gaming platform the company is working on, internally codenamed Project Cognac. The platform will feature games from outside developers and comes on the heels of gaming giant Tencent buying a large stake in Snap on the public market back in November 2017. The Information earlier reported details of the gaming platform.

When Snap reports third-quarter earnings on Thursday, Wall Street analysts expect the company to report $282.8 million in revenue and a loss of roughly 1 million daily users. Snap reported $262 million in revenue last quarter on a $353 million net loss. The analyst firm MoffettNathanson recently predicted that Snap would need to raise outside capital to offset its cash burn in the second half of 2019.