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Snap breaks into ‘startup squads’ as ad revenue stalls

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Snap breaks into ‘startup squads’ as ad revenue stalls

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In Brief Posted:

Snap is breaking itself apart and rebuilding from within. In a new annual company letter, CEO Evan Spiegel just announced the company is restructuring around small “startup squads” of 10 to 15 people to better compete against larger competitors.

The move comes as the 5,000-person company faces mounting pressure. Advertising revenue growth flatlined at 4% in the second quarter, and North American daily active users declined 2% to 98 million, a troubling sign in Snap’s most important market.

Spiegel does highlight one bright spot: Snapchat+ subscriptions now generate over $700 million in annual recurring revenue from more than 15 million paying subscribers, making direct revenue “one of Snap’s fastest-growing opportunities.”

Snap is also doubling down on Specs, building its own AR glasses that Spiegel envisions will replace smartphones entirely. He calls them a “a once-in-a-generation transformation towards human-centered computing.” (Meta and Google see the same future, partnering with Ray-Ban and Warby Parker, respectively.)

Spiegel acknowledges the current stock price “reflects doubt” but writes that there’s “startup-style return potential” at Snap’s roughly $12 billion valuation. Left unsaid: that number is down 90% from September 2021, when Snap’s market cap topped $116 billion during the height of social media mania.

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