Snap expects layoffs to save $34M a year
marketwatch.com
marketwatch.com
Wonder how long the american proletariat will accept that?
:)
The CEO compensation is coming from diluting shareholders, he's receiving stock compensation there. That $638m doesn't cost them cash. Is it morally obnoxious to be rewarding an outsized pay package on a business that is financially struggling to survive? Of course, it's reprehensible in my opinion, however that value judgment is entirely subjective in nature. What kind of business rewards huge stock compensation plans while accelerating toward a brick wall of insolvency?
What's not subjective, is cash going out the door and being unable to keep the lights on.
Snapchat firing employees improves their extremely bad cash burn situation. That's why they're doing it. In about five or six quarters at the current rate of burn, Snapchat will be in dire condition from a cash position, which will threaten their ability to continue as an operating business. That's especially true if growth doesn't dramatically pick up soon. When they hit seven or eight quarters out, they're on bankruptcy watch unless they raise a lot of capital or slash expenses deep (they could obviously sell the business as well).
They could offer it to their employees in exchange for a salary reduction totaling those $34M/year.
Alternatively, they could have sold that stock.
Or taken a loan using that stock as collateral.
It doesn't really matter. If the business is unsustainable then all such moves won't cut it anyway. Businesses typically lay people off when things aren't going well, and things aren't going well for snap.
They could pay them that money today but what about tomorrow?
In practice though, maybe Snap just can't grow that fast. Which is fine, but it's still sad that 220 people lost their jobs.
They seem like the smart money here.
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.
What?! I've never heard of this, other companies follow this madness? Who are they so I can stay away?
Source: Current AMZN employee
I personally don't see what's wrong with a N/2N/3N... vesting schedule for post-IPO companies. You're buying in long term, that's the deal. Is it sided to favor employee retention for the employer? Sure. The overall comp at AMZN is pretty competitive though. That's the deal.
It makes more sense for a fiscally stable company like Amazon, which actually sees reliable stock growth and a real business model as compared to snap with neither of those things-- but that's not a criticism of the vesting schedule, it's a criticism of snap's true value. That's the thing that would keep me from a company like that, not the length of my RSU vesting periods.
Source: ex AMZN employee
What does this mean?
So you'd get 10 percent of your options after one year, another 20 percent at the end of your second year, another 30 percent at the end of your third, and the remaining 40 percent at the end of your fourth year.
Note that in order to collect even half of your options, you need to work there for three years.
Source: I had an offer from Snap 3yrs back which I rejected because of this.
It means that you have barely more than a quarter even after two years, and barely more than half after three.
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.
edit: he says they've done that at least twice
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.
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.
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.
Office space in San Francisco is ~$5 per square foot per month, and an employee needs somewhere between 100-250 square feet of office space. So if you give them a small 175 square feet, then you're at ten grand per year.
Medicare is %2.9 percent of salary, half paid by the employee and half by the employer. Social security is %12.4 percent, again split between employer/employee for 6.2 percent from each. . It looks like California's unemployment tax is another %4.2
I have no idea what the average cost per employee things like health insurance and other benefits cost; I'm sure you can google as expertly as I can, so now that I've shown some good faith in giving you a starting point I trust you're willing to take it to the finish line.
There's probably some other taxes that I'm missing, since I don't run a business and have never had call to learn about the ins and outs of these things. Usually it comes up in conversations around negotiating for raises to give somebody some perspective about how much they care about an extra ten grand a year (a lot) versus how much their employer cares (it's basically a rounding error compared to how much their bottom line for retaining an employee is).
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.
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.
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.