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Media Media Planning and Buying Social Media

Snap cracked: are redundancies making media agencies rethink ad spend?

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By John McCarthy | Media editor

September 6, 2022 | 8 min read

A slump in revenue growth has been blamed for widespread redundancies at Snap, where 20% of its staff (around 1,300 employees) are losing their jobs. The Drum asks media agencies what the shake-up means for advertising on the platform.

Snap

Snap cracked: Are redundancies making media agencies rethink adspend?

Augmented reality glasses, drone cameras and gaming are out at Snap, along with a fifth of its workforce, as the company tries to reverse a revenue slowdown and reassure investors and advertisers of the platform's merits.

"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," said chief executive Evan Spiegel in a memo to staff, as it announced that its current quarter revenues were growing at the slowest rate since going public in 2017 (8% on year, compared to 13% in the second quarter).

These are tough times in the social media space, with Facebook chief Mark Zuckerberg warning of an “intense period” ahead and TikTok making layoffs, including within its advertising team. Snap’s been quick to blame ad spend in the past – first after Apple introduced the restrictive ATT policy, then again more recently where it pointed the finger at “the combination of macroeconomic headwinds, platform policy changes and increased competition have limited the growth of campaign budgets”.

Key advertising figures including chief business officer Jeremi Gorman and VP of ad sales for the Americas, Peter Naylor, are among those to exit the company, though they announced their resignations prior to Spiegal's memo.

But do the job cuts impact marketers using the platform?

Marketers respond

Sophie Strong, joint head of media experience and managing partner of media agency PHD, is enthused by the ad product, considering it a leader in augmented reality ads and strong at delivering performance marketing outcomes. She also believes that Snap listens to its advertisers which "really helps us believe in the direction the platform is going in". The recent cuts are a commitment to making the platform better for users and advertisers, she thinks.

The redundancies also don’t seem to have impacted the agency’s ability to communicate with the platform. Contact with key reps and support remains and the ad product continues to offer self service.

Strong admits that social advertising is going through a “period of transformation following the IOS privacy update and as we face into the delayed Chrome cookie update”. With some brands cutting budgets as talk of recession grows ever stronger, these platforms may feel the pain.

"There is still a lot of value in using the social platforms," Strong says. "Our approach to targeting and creative, buying outcomes and more importantly measurement just needs to shift to be able to truly appreciate them. This is a really exciting time for our industry and not something brands or advertisers should shy away from."

Meanwhile, Brittany Wickerson, global head of media at We Are Social, points out that the tech sector goes through cycles of expansion and contraction – and the sector’s far from alone in cutting this year. “Layoffs are not necessarily a bellwether of doom. This can create value in organizations as they improve efficiency, increase focus and invest more strategically.”

She notes that Snapchat’s issue is that there’s a “low affinity” for the platform. Sure, more people use it than Twitter each month, but fewer people rank it as their favorite social platform (only 1.4% vs Twitter’s 3.3% and Instagram’s 14.8%). It needs grow the user base as well as each user’s average time in the app. For most advertisers, scale is the first thing they look at. Is their audience in the environment on a level that makes the buy worth the effort?

Wickerson adds: “For Snapchat to overcome this challenge, it needs to determine to what extent it focuses on developing exclusive Snapchat experiences versus how much it ties to copy other successful platforms and tactics. The latter can often deliver a short term boost but ultimately you need to give users (and advertisers) unique and creative ways of engaging with that community.”

But it has its merits. The platform apparently performs strongly in the Middle East for example, hints Wickerson, likely due to its “strong e-commerce” capabilities. Is this a strength that can play out more broadly? That remains to be seen.

She adds: “Advertisers tend to be swayed by bandwagon appeal. If they see others having success on a platform, or see massive user adoption, they often jump on board. I doubt that Snapchat will ever see the level of adoption of say TikTok, but that doesn’t mean it doesn’t have something valuable to offer brands.”

All in all, if Snap does focus on improving its core business, grow its audience and continue to lead the way in AR tools people actually want to engage with, “advertisers will follow”.

Finally, Lily Scotcher, digital account director at Yonder Media, has noticed no differences post redundancies and that the app continues to deliver "strong results, both at a brand and performance level".

But most damningly perhaps, Snap sits in its own in the media plan as a "complementary platform to extend reach amongst a certain demographic, rather than being the dominant spender".

In the short term, it should stop "all singing and dancing formats and more about proving success with the brilliant basics to begin with" by stepping up the account support, providing best practices, insightful analysis and brand life studies.

Sebastian Redenz, head of programmatic and paid social, Havas Media Group UK, points out that “the previous duopoly they had enjoyed with Instagram has effectively started to erode with TikTok grabbing huge shares of audience and consequently, share of spend, too. As long as we can continue to buy cost-effective media paired with meaningful results, then there’s no reason to be concerned about using Snap’s platform.”

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