Snap Inc. to regroup its 5,000 employees into 'Startup Squads' of 10-15 to achieve profitability

Just months after announcing leadership restructuring, Snap Inc. CEO Evan Spiegel has announced restructuring of the entire organisation, following the company’s underwhelming Q2 results. The company registered a single 4% ad revenue year-over-year growth this quarter.

“Our current stock price reflects doubt. At this valuation, there’s startup-style return potential. But unlike a seed-stage company, we’re a team of 5,000, serving almost half a billion people every day. That means extreme accountability. Every line of code, every sales call, every minute, everyday matters,” Spiegel wrote in a 3,500-word-long letter.

The ‘middle child’ moment

The company is expected to cross the one-billion-Snapchatters mark next year, slower than Meta’s Instagram and ByteDance’s TikTok had achieved the milestone in 2012 and 2021 respectively.

“Our largest competitors are worth trillions, invest hundreds of billions in capital each year, and are being sued for monopolistic practices. We also face smaller, nimbler competitors growing ad revenues faster off a smaller base with leaner cost structures and higher gross margins. I suppose it’s a bit like being the middle child,” added Spiegel.

Snap is thus, reorganising its entire 5,000 employee network, to sharpen focus and drive growth. This will entail forming small, startup-like squads of 10–15 people, each led by accountable leaders and working in 90-day cycles with weekly demos. These teams will move fast, embrace risk, and prioritise innovation, supported by platform teams that provide tools and guardrails.

Spiegel identified that Snap’s strategy is to build on core strengths, differentiate from commoditised mobile video and advertising, and replicate the startup energy across the company to win user engagement and advertiser investment.

Spiegel says, however, this is not a worrisome but an opportune moment for the company achieve a higher scale and engagement compared to smaller players, while it still fights the competition with larger players.

What is next?

After having completed 14 years, Spiegel charted out the roadmap for Snap in coming years. For now, the company will be focusing on medium-sized advertisers to reaccelerate ad growth, where penetration is still below 0.5%. Direct revenue is another major growth area as it wants to expand its Snapchat+ memberships that is only at 15 million subscribers currently. Spiegel said that the company plans to expand this through livestreaming, premium features, and new creator monetisation tools, supported by investments in payments and lifecycle management to build a scalable multi-billion-dollar revenue stream.

Spiegel added that gross margin currently stands at 52%, lower than competitors due to infrastructure costs and revenue sharing, and the company will be targeting 60% margins by holding infrastructure spending flat through efficiency gains, adjusting creator and publisher revenue-sharing models, and building a first-party wallet to reduce platform fees.

Snap is also betting on its AR glasses, Specs, to diversify revenue. Specs are designed as an AI-driven computing platform that enables contextual interactions, shared AR experiences, and a marketplace for digital goods. They are positioned to replace multiple screens, reduce reliance on smartphones, and create new business opportunities with scalable, low-cost digital content.

Earlier in August, Spiegel had announced that Chief Business Officer Ajit Mohan will now oversee the company’s monetisation engineering team, integrating product development with revenue goals. The core applications team will continue to report to CTO Bobby Murphy. Mohan, who became CBO in February after joining Snap in 2022 as APAC president, already leads global advertising, revenue products, and business operations.

Yet is this worrisome?

At the time of writing, the company did not respond to a request for comment if this regrouping will impact Indian employees. However, it seems Snap Inc. is on a difficult journey on its way to profitability despite being popular.

“While our share price performance has not yet reflected the full potential of our business, we have a clear path forward. We must reaccelerate revenue growth, improve gross margins, and grow our community and engagement to expand our long-term potential,” said Spiegel.

And the latest letter only adds worries to Snap Inc.’s shareholders given Spiegel himself has said, “This moment isn’t just about survival. It’s about proving that a different way of building technology, one that deepens friendships and inspires creativity, can succeed in a world that often rewards the opposite.”