Snap Inc. (NYSE:SNAP) Chief Executive Evan Spiegel announced a major organizational restructuring on Monday, implementing startup-style “squads” to accelerate growth initiatives as the social media company grapples with slowing advertising revenue and intensifying competition from tech giants.
In a memo sent on Monday, Spiegel outlined plans to form five to seven teams of 10-15 employees each, operating like independent startups within the company. The restructuring comes after Snap’s advertising revenue growth decelerated to just 4% year-over-year in the second quarter of 2025, marking a significant slowdown for the Snapchat parent company.
Ad Revenue Challenges Drive Strategic Pivot
Snap’s advertising struggles reflect broader competitive pressures from Meta Platforms Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) and ByteDance‘s TikTok. The company reported a net loss of $263 million in the second quarter, despite improvements in operating cash flow to $88 million from a $21 million loss year-over-year.
“Our largest competitors are worth trillions, invest hundreds of billions in capital each year, and are being sued for monopolistic practices,” Spiegel wrote, describing Snap’s position as “squeezed between the tech giants and smaller competitors.”
The CEO emphasized targeting medium-sized customers where penetration remains below 0.5%, with each new business development activation contributing nearly $6 million in annualized revenue on average in the U.S. market.
User Growth Momentum Stalls in Key Markets
Snap’s user growth is showing signs of deceleration, particularly in North America, where daily active users declined 2% year-over-year to 98 million in the second quarter. Guggenheim analyst Michael Morris cited third-quarter data indicating global audience growth of 2.3%, down from 3.9% in the prior quarter.
Financial Performance Pressures Mount
Snap’s stock has declined 33% year-to-date, trading around $7.22 as of Monday close. The company’s 52% gross margin trails competitors due to higher infrastructure costs and revenue-sharing arrangements with creators and publishers.
Analyst sentiment remains cautious, with 14 analysts providing an average price target of $9.62, ranging from $7.00 to $12.00.
The company projects third-quarter revenue between $1.47 billion and $1.50 billion, meeting consensus estimates of $1.47 billion.
Squad Model Aims to Replicate Snapchat+ Success
Spiegel’s squad strategy draws from Snapchat+’s success, which scaled from zero to approximately 15 million subscribers and nearly $700 million in annual recurring revenue within three years. The subscription service now drives more than half of Snap’s incremental revenue growth.
“Weekly demo days, 90-day mission cycles, and a culture of fast failure will keep us moving,” Spiegel explained, emphasizing the need for “startup energy” at enterprise scale.
The restructuring reflects Spiegel’s broader vision to position Snap for what he calls “the most consequential year yet,” targeting one billion users by 2026 and potential Fortune 500 status with analyst estimates suggesting nearly $6 billion in 2025 revenue.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: NYCStock via Shutterstock
