So SNAP lays off another 7% of their workforce to save $34M a year whilst their CEO pockets $638M in compensation (3rd highest CEO payout ever) before they're remotely close to profitability. Not sure if company-wide layoffs and paying their CEO more are going to achieve their growth/profitability aspirations.
The logical conclusion of today's corporate structure is a company with a single employee, the CEO, who is paid all the profits, while all the actual labour is performed by zero-hour sub-minimum-wage contractors, all either funded by VC money or floated but posting zero dividends.
And these CEOs, on average, shovel money politicians to pay less and less taxes and kill more and more programs that would help those that are laid off.
Wonder how long the american proletariat will accept that?
You're conflating two very different things as it pertains to their actual business.
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.
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?
This is why the 10/20/30/40 vesting schedule which companies like Snap have is so problematic. Snap is laying people off and are saying that they expect to save a large amount of costs related to stock based compensation because of it (given they are a business I don't blame them for this line of thinking). However, from the laid off employee perspective this is pretty bad: 1) they worked hard to get Snap to this point but didn't get an equitable share of the rewards given backvested stocks 2) some of them might have just ended year 2 or year 3 of their tenure at snap and the big pay off was about to come and just like that they were laid off. Worse, being laid off destroys your negotiating position as you are trying to get a compensation package from your next company. An equitable 25/25/25/25 vesting schedule would have dealt with this much more fairly from the employee's standpoint.
If I was a prospective employee, I would probably write off ever working for Snap due to this story combined with the vesting schedule.
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.
Correct, however they also give 2 signing bonuses, that bring you to an "equivalent" total compensation, so at least you are getting straight cash, not hoping for a stock payout that may not come.
Yeah but they don't give 2 signing bonuses right? That seems downright weird from a terminology perspective... how can you legally have 2 signing bonuses if you sign only once? :)
They mean that the signing bonus is divided into two yearly payouts instead of one. It's a single bonus.
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.
That is not really true. It depends on how much you get in stocks. Fkr example, it is not typical for these companies to give out $200k stock/yr and then the backvested schedule is really packed against you. It is very unlikely they will give you $200k sign on bonus and make it up during year 2 as well.
My offer was competitive. With the 2yr cash bonus and the stock taking over in year 3 my total comp is projected to evenly ramp up 5-15% per year. Who knows where the stock will be until we get to the vest dates, but so far it's tracking well ahead of the 15% yearly growth that the company plans on.
If I am correct, it means you can make use of 10% of stock options that you are given as compensation after the first year of employment, 30% after the second year, 60% after the third, and all of it after the fourth.
It means that you have barely more than a quarter even after two years, and barely more than half after three.
I suspect (and somebody else please correct me if I'm wrong) that it refers to how much of your options vest over a period of time.
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.
I did some accidental market research on Snap with my girlfriend's 9 year-old cousin this weekend.
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.
One of my friends does this with his long-term girlfriend. I think they're at something like a 3 year streak at this point. They've exchanged username/password credentials to keep the streak alive in the event one of them forgets or my friend messes up his phone so badly he can't get it to boot. He's very enthusiastic about custom ROMs on Android so bricking his phone is not out of the ordinary.
Someone should let them know not to keep having layoff rounds periodically. It is better to have one deep round and that's it. What they are doing creates so much uncertainty, anxiety, and kills employee morale.
Or.. they could save a couple of hundred million a year by moving off of GCE/AWS into their own infrastructure... ( they have an insane $500M commit for both of these cloud providers.. higher than the $400M that all of google spent on infra in 2012 )
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.
Note that the 400k/year is cost per employee, which does not directly translate to "paychecks and benefits per employee".
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).
I really hope Snap's struggles as a public company don't effect other "Unicorns" going public. Judging from Spotify's weird IPO filing I think other companies are getting spooked.
Me too, but for a different reason. I feel like many privately held unicorns aren't really worth as much as their last VC investment would imply. If we get more of these companies publicly traded then we can see how much they are really worth, bringing a much needed correction to the tech startup investment scene. It's starting to look like the year 2000, but instead of a dot com bubble we have an "Uber for x" bubble and a couple other templates that get way too much investment money.
I hope it does. Snap was clearly overvalued to an absurd level. If things like this don’t make investors more discerning, then you’ve got the workings of a bubble on your hands.
People said that about Facebook as well and yet now its super profitable.
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.
They're not really comparable when you look at the numbers. Facebook had 500 million active users, a steadily growing user base (1 billion was projected within a year at the time of the IPO), and a clear monetisation strategy.
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.
There was documentary posted here yesterday, The China Hustle. It showed Chinese companies showing fake transactions to boost revenue numbers. This could be that kind of scam, hire lots of people to show growth.
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.
as a former TMT investor i have learned that when hot tech companies go from focusing on topline growth to bottomline savings it is never a good thing. classic "look over here!"
