Snap breaks into ‘startup squads’ as ad revenue stalls

Snap Inc. is undergoing a significant internal transformation as it seeks to navigate challenging market dynamics. In a recent annual letter to shareholders, CEO Evan Spiegel revealed the company's strategy to reorganize into small teams, dubbed 'startup squads,' consisting of 10 to 15 members each. This initiative aims to enhance competition against larger rivals in the tech landscape. The restructuring comes at a critical time for Snap, which has seen its advertising revenue growth stagnate at 4% in the second quarter. Additionally, the company recorded a 2% decline in daily active users in North America, dropping to 98 million—a concerning trend for its most vital market. On a more positive note, Spiegel pointed out that Snapchat+ subscriptions are thriving, generating over $700 million in annual recurring revenue from more than 15 million subscribers. This direct revenue stream represents one of Snap's most promising growth opportunities. In a bold move towards innovation, Snap is also intensifying its focus on augmented reality, particularly with its upcoming AR glasses, which Spiegel believes could ultimately replace smartphones. He described this initiative as a "once-in-a-generation transformation towards human-centered computing,” a vision that aligns with similar ambitions from tech giants Meta and Google, who have partnered with eyewear brands like Ray-Ban and Warby Parker. While Spiegel acknowledged the current stock price, which reflects skepticism about the company's future, he emphasized the potential for startup-style returns at Snap's current valuation of approximately $12 billion. This figure, however, is a stark contrast to the company's market cap of over $116 billion in September 2021, during the peak of social media hype.