8 ms·

Snap expects layoffs to save $34M a year

77 points by fancyfacebook 9y ago

mbrumlow 9y ago
Why so many people to start with? Seems like they hired a ton of people.
- rtx 9y ago
  There was documentary posted here yesterday, The China Hustle. It showed Chinese companies showing fake transactions to boost revenue numbers. This could be that kind of scam, hire lots of people to show growth.
  - gxs 9y ago
    You are right, it's definitely a possibility. But as an aside, when I worked as Zenefits, we hired irresponsibly, but the intentions weren't to be deceptive; the mistake was thinking that the hockey stick curve would climb forever.
    - iaw 9y ago
      Look, at this rate in ten years we'll be making 10x global GDP! Just have to make sure we keep up on hiring...
- deleted 9y ago
  [deleted]
product50 9y ago
This is why the 10/20/30/40 vesting schedule which companies like Snap have is so problematic. Snap is laying people off and are saying that they expect to save a large amount of costs related to stock based compensation because of it (given they are a business I don't blame them for this line of thinking). However, from the laid off employee perspective this is pretty bad: 1) they worked hard to get Snap to this point but didn't get an equitable share of the rewards given backvested stocks 2) some of them might have just ended year 2 or year 3 of their tenure at snap and the big pay off was about to come and just like that they were laid off. Worse, being laid off destroys your negotiating position as you are trying to get a compensation package from your next company. An equitable 25/25/25/25 vesting schedule would have dealt with this much more fairly from the employee's standpoint.
- Bahamut 9y ago
  If I was a prospective employee, I would probably write off ever working for Snap due to this story combined with the vesting schedule. Last thing you want as a software engineer is coworkers under artificial pressure from worries of not performing enough to the point that they will get laid off & lose the upside of working for a public company offering stock - there are enough real world pressure situations I would rather save that for.
- Domenic_S 9y ago
  > the 10/20/30/40 vesting schedule which companies like Snap have is so problematic. What?! I've never heard of this, other companies follow this madness? Who are they so I can stay away?
  - fasteddie 9y ago
    Amazon, actually. It's something like 5/15/40/40, maybe a current/former employee can chime in.
    - kevan 9y ago
      That's correct. Source: Current AMZN employee
      - influx 9y ago
        Correct, however they also give 2 signing bonuses, that bring you to an "equivalent" total compensation, so at least you are getting straight cash, not hoping for a stock payout that may not come.
        Eridrus 9y ago
        Other top companies also give signing bonuses as well as the usual vesting schedule, so I'm not sure this really evens it out.
mythz 9y ago
So SNAP lays off another 7% of their workforce to save $34M a year whilst their CEO pockets $638M in compensation (3rd highest CEO payout ever) before they're remotely close to profitability. Not sure if company-wide layoffs and paying their CEO more are going to achieve their growth/profitability aspirations.
- gameswithgo 9y ago
  And these CEOs, on average, shovel money politicians to pay less and less taxes and kill more and more programs that would help those that are laid off. Wonder how long the american proletariat will accept that?
- pjc50 9y ago
  The logical conclusion of today's corporate structure is a company with a single employee, the CEO, who is paid all the profits, while all the actual labour is performed by zero-hour sub-minimum-wage contractors, all either funded by VC money or floated but posting zero dividends.
  - jobigoud 9y ago
    If the service can be implemented as a decentralized autonomous corporation running on a Blockchain you might not even need the CEO.
    - maxxxxx 9y ago
      Who can then pocket all the money?
      - lukewrites 9y ago
        The GPs at the venture funds, just like nature intended.
        maxxxxx 9y ago
        "just like nature intended." :)
dec0dedab0de 9y ago
34 Million a year for 220 employees? I know that includes office space, equipment, and benefits, but that still seems like a lot to me. Edit: I must have had a brain fart when I wrote this, because I was thinking over a million per employee. Now it seems too low.
- pianom4n 9y ago
  Not really, that's only $155k per person. The cost per engineer is probably around $400k.
  - JustSomeNobody 9y ago
    I feel so underpaid right now it's not even funny.
    - foobaw 9y ago
      Even considering insurance/benefits, stock options, and various bonuses, 400K/year is a lot more compared to 150K.
      - CocaKoala 9y ago
        Note that the 400k/year is cost per employee, which does not directly translate to "paychecks and benefits per employee". The employer pays payroll taxes, needs to pay rent on square footage for the office to support the employee, etc. That's all going into cost per employee, but isn't money the employee sees directly.
        pkaye 9y ago
        Assume 200k/year in the employee salary. Break down how much the other things you mentioned above will add?
        CocaKoala 9y ago
s2g 9y ago
how many hundreds of millions did they give the CEO again?
swyx 9y ago
as a former TMT investor i have learned that when hot tech companies go from focusing on topline growth to bottomline savings it is never a good thing. classic "look over here!"
toastking 9y ago
I really hope Snap's struggles as a public company don't effect other "Unicorns" going public. Judging from Spotify's weird IPO filing I think other companies are getting spooked.
- olympus 9y ago
  Me too, but for a different reason. I feel like many privately held unicorns aren't really worth as much as their last VC investment would imply. If we get more of these companies publicly traded then we can see how much they are really worth, bringing a much needed correction to the tech startup investment scene. It's starting to look like the year 2000, but instead of a dot com bubble we have an "Uber for x" bubble and a couple other templates that get way too much investment money.
- lulmerchant 9y ago
  I hope it does. Snap was clearly overvalued to an absurd level. If things like this don’t make investors more discerning, then you’ve got the workings of a bubble on your hands.
  - pm90 9y ago
    People said that about Facebook as well and yet now its super profitable. Not disagreeing with what you say; I would be very interested in a side by side analysis of FB and SNAP to see why one succeeded and one is struggling. Perhaps one main reason is simply that FB is aggressively trying to kill SNAP whereas FB itself didn't have that kind of a determined opponent.
    - lulmerchant 9y ago
      They're not really comparable when you look at the numbers. Facebook had 500 million active users, a steadily growing user base (1 billion was projected within a year at the time of the IPO), and a clear monetisation strategy. Snap had 150 million active users, most importantly it's growth was seriously stunted, and it's monetisation strategy was rather 2 dimensional. Facebook IPO'd at around $100 billion, Snap IPO'd at $20 billion, and it got very close to $30 billion in the trading immediately after. However nothing about it's numbers should justify that. Investors get seduced by the promise of a SaaS revenue hockey stick, and I hope people learn the lessons of Snap before they buy into future hype IPOs so easily.
breitling 9y ago
Someone should let them know not to keep having layoff rounds periodically. It is better to have one deep round and that's it. What they are doing creates so much uncertainty, anxiety, and kills employee morale.
- s73v3r_ 9y ago
  I don't think most investors or executives care about employee morale. "The beatings will continue until morale improves."
- slivym 9y ago
  I bet that each time they do the lay offs they genuinely believe that they're doing one more deep round and that's it.
besonmark 9y ago
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gaurav_v 9y ago
I did some accidental market research on Snap with my girlfriend's 9 year-old cousin this weekend. She had tons of snaps, but informed me that they were almost all blank images. She and her friends send each other these blank images to maintain 'streaks,' which count the number of continuous days that two people have messaged each other. So attached to these streaks were the cousin and her friends that if the 24 hour mark was approaching and the cousin hadn't sent a blank message to her longest streak, the counterparty would log-in to the cousin's snapchat and send _herself_ a message, to make sure the streak continued. My cousin said that the blowup in (blank) picture messages had slowed the app to a crawl, leading her not to use it anymore, aside of course for streaks. Not the kind of of daily-active-users that advertisers crave. I'm 28; never heard of streaks before this.
- majewsky 9y ago
  "A metric that becomes a target ceases to be a good metric." ;)
- kevindong 9y ago
  One of my friends does this with his long-term girlfriend. I think they're at something like a 3 year streak at this point. They've exchanged username/password credentials to keep the streak alive in the event one of them forgets or my friend messes up his phone so badly he can't get it to boot. He's very enthusiastic about custom ROMs on Android so bricking his phone is not out of the ordinary. edit: he says they've done that at least twice
keepper 9y ago
Or.. they could save a couple of hundred million a year by moving off of GCE/AWS into their own infrastructure... ( they have an insane $500M commit for both of these cloud providers.. higher than the $400M that all of google spent on infra in 2012 ) It's amazing that at their scale, they are still mostly in GCE. They are easily an order of magnitude larger than netflix, and at least netflix is smart enough to have built their own CDN.

77 points by fancyfacebook 9y ago

mbrumlow 9y ago

Why so many people to start with? Seems like they hired a ton of people.

rtx 9y ago
There was documentary posted here yesterday, The China Hustle. It showed Chinese companies showing fake transactions to boost revenue numbers. This could be that kind of scam, hire lots of people to show growth.
- gxs 9y ago
  You are right, it's definitely a possibility. But as an aside, when I worked as Zenefits, we hired irresponsibly, but the intentions weren't to be deceptive; the mistake was thinking that the hockey stick curve would climb forever.
  - iaw 9y ago
    Look, at this rate in ten years we'll be making 10x global GDP! Just have to make sure we keep up on hiring...
deleted 9y ago
[deleted]

product50 9y ago

This is why the 10/20/30/40 vesting schedule which companies like Snap have is so problematic. Snap is laying people off and are saying that they expect to save a large amount of costs related to stock based compensation because of it (given they are a business I don't blame them for this line of thinking). However, from the laid off employee perspective this is pretty bad: 1) they worked hard to get Snap to this point but didn't get an equitable share of the rewards given backvested stocks 2) some of them might have just ended year 2 or year 3 of their tenure at snap and the big pay off was about to come and just like that they were laid off. Worse, being laid off destroys your negotiating position as you are trying to get a compensation package from your next company. An equitable 25/25/25/25 vesting schedule would have dealt with this much more fairly from the employee's standpoint.

Bahamut 9y ago
If I was a prospective employee, I would probably write off ever working for Snap due to this story combined with the vesting schedule. Last thing you want as a software engineer is coworkers under artificial pressure from worries of not performing enough to the point that they will get laid off & lose the upside of working for a public company offering stock - there are enough real world pressure situations I would rather save that for.
Domenic_S 9y ago
> the 10/20/30/40 vesting schedule which companies like Snap have is so problematic. What?! I've never heard of this, other companies follow this madness? Who are they so I can stay away?
- fasteddie 9y ago
  Amazon, actually. It's something like 5/15/40/40, maybe a current/former employee can chime in.
  - kevan 9y ago
    That's correct. Source: Current AMZN employee
    - influx 9y ago
      Correct, however they also give 2 signing bonuses, that bring you to an "equivalent" total compensation, so at least you are getting straight cash, not hoping for a stock payout that may not come.
      - Eridrus 9y ago
        Other top companies also give signing bonuses as well as the usual vesting schedule, so I'm not sure this really evens it out.

mythz 9y ago

So SNAP lays off another 7% of their workforce to save $34M a year whilst their CEO pockets $638M in compensation (3rd highest CEO payout ever) before they're remotely close to profitability. Not sure if company-wide layoffs and paying their CEO more are going to achieve their growth/profitability aspirations.

gameswithgo 9y ago
And these CEOs, on average, shovel money politicians to pay less and less taxes and kill more and more programs that would help those that are laid off. Wonder how long the american proletariat will accept that?
pjc50 9y ago
The logical conclusion of today's corporate structure is a company with a single employee, the CEO, who is paid all the profits, while all the actual labour is performed by zero-hour sub-minimum-wage contractors, all either funded by VC money or floated but posting zero dividends.
- jobigoud 9y ago
  If the service can be implemented as a decentralized autonomous corporation running on a Blockchain you might not even need the CEO.
  - maxxxxx 9y ago
    Who can then pocket all the money?
    - lukewrites 9y ago
      The GPs at the venture funds, just like nature intended.
      - maxxxxx 9y ago
        "just like nature intended." :)

dec0dedab0de 9y ago

34 Million a year for 220 employees? I know that includes office space, equipment, and benefits, but that still seems like a lot to me. Edit: I must have had a brain fart when I wrote this, because I was thinking over a million per employee. Now it seems too low.

pianom4n 9y ago
Not really, that's only $155k per person. The cost per engineer is probably around $400k.
- JustSomeNobody 9y ago
  I feel so underpaid right now it's not even funny.
  - foobaw 9y ago
    Even considering insurance/benefits, stock options, and various bonuses, 400K/year is a lot more compared to 150K.
    - CocaKoala 9y ago
      Note that the 400k/year is cost per employee, which does not directly translate to "paychecks and benefits per employee". The employer pays payroll taxes, needs to pay rent on square footage for the office to support the employee, etc. That's all going into cost per employee, but isn't money the employee sees directly.
      - pkaye 9y ago
        Assume 200k/year in the employee salary. Break down how much the other things you mentioned above will add?
        CocaKoala 9y ago

s2g 9y ago

how many hundreds of millions did they give the CEO again?

swyx 9y ago

as a former TMT investor i have learned that when hot tech companies go from focusing on topline growth to bottomline savings it is never a good thing. classic "look over here!"

toastking 9y ago

I really hope Snap's struggles as a public company don't effect other "Unicorns" going public. Judging from Spotify's weird IPO filing I think other companies are getting spooked.

olympus 9y ago
Me too, but for a different reason. I feel like many privately held unicorns aren't really worth as much as their last VC investment would imply. If we get more of these companies publicly traded then we can see how much they are really worth, bringing a much needed correction to the tech startup investment scene. It's starting to look like the year 2000, but instead of a dot com bubble we have an "Uber for x" bubble and a couple other templates that get way too much investment money.
lulmerchant 9y ago
I hope it does. Snap was clearly overvalued to an absurd level. If things like this don’t make investors more discerning, then you’ve got the workings of a bubble on your hands.
- pm90 9y ago
  People said that about Facebook as well and yet now its super profitable. Not disagreeing with what you say; I would be very interested in a side by side analysis of FB and SNAP to see why one succeeded and one is struggling. Perhaps one main reason is simply that FB is aggressively trying to kill SNAP whereas FB itself didn't have that kind of a determined opponent.
  - lulmerchant 9y ago
    They're not really comparable when you look at the numbers. Facebook had 500 million active users, a steadily growing user base (1 billion was projected within a year at the time of the IPO), and a clear monetisation strategy. Snap had 150 million active users, most importantly it's growth was seriously stunted, and it's monetisation strategy was rather 2 dimensional. Facebook IPO'd at around $100 billion, Snap IPO'd at $20 billion, and it got very close to $30 billion in the trading immediately after. However nothing about it's numbers should justify that. Investors get seduced by the promise of a SaaS revenue hockey stick, and I hope people learn the lessons of Snap before they buy into future hype IPOs so easily.

breitling 9y ago

Someone should let them know not to keep having layoff rounds periodically. It is better to have one deep round and that's it. What they are doing creates so much uncertainty, anxiety, and kills employee morale.

s73v3r_ 9y ago
I don't think most investors or executives care about employee morale. "The beatings will continue until morale improves."
slivym 9y ago
I bet that each time they do the lay offs they genuinely believe that they're doing one more deep round and that's it.

besonmark 9y ago

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gaurav_v 9y ago

I did some accidental market research on Snap with my girlfriend's 9 year-old cousin this weekend. She had tons of snaps, but informed me that they were almost all blank images. She and her friends send each other these blank images to maintain 'streaks,' which count the number of continuous days that two people have messaged each other. So attached to these streaks were the cousin and her friends that if the 24 hour mark was approaching and the cousin hadn't sent a blank message to her longest streak, the counterparty would log-in to the cousin's snapchat and send _herself_ a message, to make sure the streak continued. My cousin said that the blowup in (blank) picture messages had slowed the app to a crawl, leading her not to use it anymore, aside of course for streaks. Not the kind of of daily-active-users that advertisers crave. I'm 28; never heard of streaks before this.

majewsky 9y ago
"A metric that becomes a target ceases to be a good metric." ;)
kevindong 9y ago
One of my friends does this with his long-term girlfriend. I think they're at something like a 3 year streak at this point. They've exchanged username/password credentials to keep the streak alive in the event one of them forgets or my friend messes up his phone so badly he can't get it to boot. He's very enthusiastic about custom ROMs on Android so bricking his phone is not out of the ordinary. edit: he says they've done that at least twice

keepper 9y ago

Or.. they could save a couple of hundred million a year by moving off of GCE/AWS into their own infrastructure... ( they have an insane $500M commit for both of these cloud providers.. higher than the $400M that all of google spent on infra in 2012 ) It's amazing that at their scale, they are still mostly in GCE. They are easily an order of magnitude larger than netflix, and at least netflix is smart enough to have built their own CDN.