Snap Inc., the parent company of Snapchat, is undergoing a significant internal overhaul as it grapples with stagnating advertising revenue, according to a recent report. Chief Executive Evan Spiegel announced the company is restructuring into small “startup squads” of 10 to 15 employees each, aiming to recapture the agility that propelled Snap’s early success against tech giants like Meta Platforms Inc.

This move comes amid broader challenges in the digital advertising market, where Snap has seen its ad revenue growth slow considerably. In an open letter to employees, Spiegel described the current period as a “crucible moment,” emphasizing the need for faster innovation to compete with larger rivals that dominate user attention and ad dollars.

Restructuring for Agility in a Competitive Market
As detailed in a TechCrunch article published on September 8, 2025, these startup squads are designed to operate like independent ventures within the company, fostering rapid experimentation and decision-making. This approach echoes strategies employed by other tech firms during periods of stagnation, but Snap’s implementation is particularly aggressive, potentially reshaping how the company develops features for its 800 million monthly active users.

Industry insiders note that Snap’s ad revenue has been under pressure from macroeconomic factors, including advertiser caution amid economic uncertainty. Earlier reports from TechCrunch in 2023 highlighted similar slumps, with Snap missing revenue estimates due to decreased ad demand, a trend that appears to persist into 2025.

Subscription Growth as a Revenue Lifeline
Amid these ad woes, Snap has found some solace in its Snapchat+ subscription service, which now boasts over 15 million paying users and generates more than $700 million in annual recurring revenue. Spiegel’s letter, as covered in the same TechCrunch piece, underscores this as a bright spot, suggesting the company could expand such non-advertising streams to offset volatility in the ad sector.

However, critics argue that relying on subscriptions alone won’t suffice for long-term growth. Posts on X (formerly Twitter) from investors like Turner Novak have long speculated on Snap’s potential to scale Snapchat+ to 100 million subscribers, potentially yielding $20 billion in high-margin revenue, but achieving that requires overcoming user engagement hurdles.

Broader Implications for Tech Innovation
The squad model could accelerate Snap’s investments in augmented reality (AR) and artificial intelligence, areas where the company has differentiated itself. For instance, recent earnings transcripts from Investing.com reveal Snap’s balanced investment strategy, with CFO Derek Anderson noting efforts to align spending with revenue growth for positive cash flow.

Yet, engagement metrics paint a concerning picture. A SWOT analysis from Investing.com in July 2025 pointed to an 8.5% year-over-year drop in time spent on the platform in the U.S., Snap’s most lucrative market, which could further erode ad impressions.

Strategic Risks and Future Outlook
This restructuring isn’t without risks; breaking into smaller teams might lead to silos or coordination challenges, as seen in past reorganizations at companies like Google. Snap’s history of layoffs, including a 20% workforce reduction in 2022 reported by TechCrunch, suggests ongoing efforts to streamline operations.

Looking ahead, Snap’s pivot to startup squads could position it better against competitors, but success hinges on reigniting ad revenue growth. As one X post from investor Roman Iospa highlighted, Wall Street may be undervaluing Snap’s AI and AR strengths, which span years of Gen Z behavioral data. If executed well, this could mark a turning point, transforming Snap from an ad-dependent player into a more resilient innovator in social media.