June 08, 2023
Tech Layoffs Are Becoming More Prevalent, and Here's the Reason.
In an effort to restructure certain aspects of its business and overcome a stalled initial public offering (IPO), community discussion platform Reddit has announced plans to lay off approximately 5% of its workforce and scale back its hiring goals for the year. Reddit CEO Steve Huffman shared this news with employees in an email, emphasizing that these layoffs will position the company for success in the future, particularly after a promising first half of the year, as reported by the Wall Street Journal.
Huffman also mentioned that Reddit will reduce its hiring efforts for the remainder of the year, aiming to bring on around 100 new employees instead of the initially planned 300. Reports indicate that a company representative has confirmed these adjustments to the workforce.
Earlier this year, in January, Insider interviewed four current and former employees of Reddit, along with a company spokesperson, who revealed that the company had started downsizing after conducting performance reviews. The affected employees were primarily in software engineering, creator relationships, community management, and data science. At the time, Reddit informed its workforce about potential further layoffs, but the exact number of individuals affected by the January downsizing remains undisclosed.
Last month, Reddit introduced new features to its native Android and iOS apps to facilitate content sharing across other platforms. Consequently, the company intends to raise prices for third-party app developers, stating the need for fair compensation to sustain developer support, as reported by Bloomberg. This decision has raised concerns among developers, with one of Reddit’s Apollo app developers expressing worry about the announced pricing, likening it to Twitter’s rates and estimating that Apollo would have to pay Reddit $20 million per year to continue operating as is.Among Reddit’s primary objectives following the layoffs is achieving breakeven status by next year.
The reduction in workforce and the price increase for developers follows a report by The Information in February, which indicated that Reddit was exploring the possibility of going public, potentially in the latter half of the year. Insiders familiar with the matter revealed that while Reddit still had a way to go in terms of profitability, it was maintaining up-to-date paperwork in preparation for the IPO.
Reddit initially submitted its IPO paperwork confidentially in December 2021, with an estimated valuation of $15 billion. However, during a private fundraising round in August 2021, the company’s value was assessed at $10 billion.
Fidelity, one of Reddit’s major investors, recently revised its estimated equity stake in the social media platform, reducing it by 41%. According to Fidelity’s April disclosure, its Reddit stake was valued at $16.6 million, down from the $28.2 million it had invested in the platform in August 2021.
While Reddit’s situation is notable, it is just one of the many tech companies that have resorted to staff layoffs this year. Data from layoffs.fyi reveals that at least 746 tech companies have collectively laid off 202,259 employees in 2023.