Welcome back to closing bell on cheddar news everyone.
The recent bout of tech layoffs are now extending to
snap, starting today snapchats. Parent company is planning
to lay off about 20% of its more than 6400
employees. The layoffs will impact some departments harder than
others, including the team working on snaps, many
apps and games as well as the company's selfie,
drone pixie joining us now is Brent ville tech sector
analyst at the investment banking company jeffries. Thank you
so much for joining us. What do you make
of this news about snap and what do you think
it means for the company's future? I think the
most important thing is they're getting the costs under control
. We're heading into an uncertain time. The rest
of tech is seeing a lot of same headwinds that
snap a scene. So we're seeing layoffs across the
board, obviously 20% a big one. But when
you see layoffs in, in, you know,
drone camera, other kind of non mission critical areas
that, that I wouldn't consider chord of the investment
thesis. We actually like that move. We don't
want people to lose their job, but we like
that they're actually being more forceful on focusing the comedy
what matters. And so I think ultimately, you
know, Wall Street taking this positive today stocks up
almost 10% And I think ultimately the business and the
last just couple of weeks ago was running flat now
it's running up eight. So it says that the
business is getting better into recorder. Uh, and
that they're preparing potentially for some broader headwinds. Um
, my sense is we kind of hit the summer
lows. I think as we go into the fall
, advertisers will pick activity back up. Yeah,
there's dollars shifting away from snap to Tiktok to proven
platforms like google and amazon. But I do think
snap is still in a really good spot. Um
, and you look, you can't, you can't
talk about the story without talking about the departures of
their two ad execs. And, and that is
a big blow. That is no question, it's
going to be a big shoes to fill. But
I, I think that, you know, the
stock has been over hit and, and it's due
for a bounce and I think they're getting, You
know, that the cost structure, right? So
it's, it's, it's, it's not a great
thing to have layoff, especially the magnitude of 20%
, but I think this really re centers that Comey
and restore some of the financial health. So it's
good for, it's good for shareholders obviously unfortunate for
their employees, but the dust will settle and I
think they're going to be in a stronger position given
the focus. Yeah. And I'm glad that you
mentioned investors seem to like this today, but you
noted departures. So let's talk about that snaps.
Ad sales organization is being restructured after its Chief business
officer, Jeremy Gorman departed to run ads for netflix
? It was poached by netflix. What are the
ways do you think snap's business could change following this
particular departure and what do you think would be the
best way for the company to set up its ad
sales organization for success. As you talk about heading
into this next quarter into the fall and potentially being
able to see a rebound after some of the issues
we've seen with the ad sales part of the business
. I mean the best analogy here is like this
is like the live tour versus the P. G
. A. I mean players are leaving the P
. G. A. For the live for more
money and more fame and, and I think netflix
is an unbelievable place to go. So if you
get that opportunity to run the ad business, which
obviously netflix has never been in. What an incredible
opportunity. So I think that was a hard one
to say no to probably from uh, you know
, the company and then I would assume their comp
package has been pretty good. So I think,
you know, in terms of the role, I
don't think anything's gonna change, they're just gonna have
to fill the role. They still have to deal
with advertisers. They were obviously to inspirational leaders and
everyone looked up to and she was at amazon and
help lead the ad business and has a great reputation
and so does her partner there. So you know
, that's a big hole to fill? I don't
think it changes anything as it relates to it.
They just have to get two other execs in to
fill in for that role and ultimately what they do
and how it looks and how it lays out?
I think we have, it's yet to be announced
, but I don't think that again, uh,
that two individuals are going to really shape the overall
, uh, focus, you know, there's over
5000 people at sea map. There's, there's a
, you know, the advertiser base still really loves
the direction they're going, especially for the younger audience
. So, um, again, I don't want
to minimize the departures, but they'll find others that
are in. And ultimately, I think again,
the technology and the direction of where they're taking the
platform is gonna be more important than where, you
know, two people go on the go to the
market, so it's a blow. I'm not trying
to cover it up, it's just, I don't
think it's gonna be, it's the end because they're
gone. We also have to talk about some of
the casualties of this restructuring though and the re prioritization
of getting back to basics with community building, revenue
building and also, oddly enough, still maintaining the
work that they've done in augmented reality, but some
of the things that are going away, originals production
and also the mini apps and games, the pixy
camera drone? Those are all going to be affected
by this restructuring? Do you think these are putting
on the far back burner or do you think these
could return as projects for snap's future? Maybe they
return, but I don't think there's a single investor
that, that wasn't excited about canning a drone video
solution, that hardware is just low margin, Right
? So from an investor perspective, they're doing back
flips that they got rid of this. Gaming is
not their core original content. Yeah, the little
bombed, you know, there's some good, good
things are happening, but I think they can leverage
other content that's out there. And at the end
of the day, I still think when you look
at the platform, they're trying to be a digital
software slash internet platform, they're not trying to be
, you know, hardware company that's not the route
you want to go down for an investor, right
? So maybe for consumers exciting, but I don't
think that ultimately investors and I'm speaking from my world
that, you know, they're excited by this because
they didn't want them chasing those projects anyways, that's
not their core. That's not what they're good at
their good at creating a community of younger audience that
connects and share thoughts and ideas and communicate. My
kids use it and they block me out because they
don't want me to see me on the them on
the map. So I don't even know if they're
home in 9 to 11, but uh, I
can't see them on the map, but they love
the map and so I think there's just incredible opportunity
that go back to the core, go back to
go back to refocus and you know, it's unfortunate
right? This company's going 50% and now they're going
zero and now they said they're going to eat just
a few weeks after. So I think what we're
learning is the advertising ecosystem right now is incredibly volatile
. This is not snap specific, this is specific
to the advertising industry, medicine, it uh,
twitter seeing it, Everyone else has seen it.
It's not just them, right Brent ville tech sector
analyst at jefferies. So good to have your insight
and best of luck on this journey you're having with
your own kids on snap and social media.