In the middle of another rough session on Wall Street, video services platform provider Vimeo (NASDAQ:VMEO) contributed its own jitters. On Wednesday, management announced to its employees that it would lay off 11% of the workforce. Citing various macro pressures, Vimeo’s decision to pivot to Software-as-a-Service (SaaS) may be exacerbating pain for VMEO stock, which slipped about 2% on Thursday early afternoon.
In an email message to staff, Vimeo CEO Anjali Sud expressed regret for the tough action. “This was a very hard decision that impacts each of us deeply,” wrote Sud. “It is also the right thing to do to enable Vimeo to be a more focused and successful company, operating with the necessary discipline in an uncertain economic environment.”
A Vimeo spokesperson confirmed the layoff announcement to Business Insider. During the process, the company will directly notify affected workers via email. Subsequently, they will have a chance to meet with their team leader and a member of human resources.
“With this reduction, we are well-positioned to both invest in our growth priorities and be sustainably profitable, with a strong balance sheet and a leading market position in enterprise video,” the spokesperson stated in part.
It’s not the first time that Vimeo underwent a headcount reduction. In July last year, the company cut 6% of its workforce. Unfortunately, Sud stated that the business has still deteriorated since those job slashes. Notably, in the trailing year, VMEO stock has fallen about 77%.
VMEO Stock Struggles With SaaS Woes
According to TechCrunch, Sud specifically mentioned that since the July layoffs, Vimeo witnessed a “further deterioration in economic conditions, in the form of prolonged geopolitical conflict, rising interest rates, and global recession fears.” Most of these represent understandable headwinds for VMEO stock.
In particular, the combination of rising interest rates (in response to skyrocketing inflation) and global recession fears sparked worrying lows in consumer sentiment. At the same time, balances left on credit cards soared to a record high. By logical deduction, this framework leaves fewer addressable opportunities for Vimeo, in turn impacting VMEO stock.
As various media outlets reported, digital advertising spending fell throughout 2022. Therefore, it’s not just VMEO stock feeling the heat. Competitors such as YouTube, under the Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) umbrella, also suffered significantly.
However, Vimeo’s decision to pivot toward a SaaS business model — which partners with major retail brands along with serving small businesses and individual entrepreneurs with video marketing solutions — could prove challenging in the present environment.
Essentially, the company pivoted away from a mere YouTube alternative to a marketing platform. Therefore, it’s no longer playing the high-volume game but rather emphasizing quality over quantity. In that respect, the third-quarter loss of about 100,000 subscribers against the prior quarter may impose a disproportionate impact on VMEO stock.
As well, Vimeo’s decision to suspend support for new customers in Russia, along with its decision to crack down on false and misleading content may hurt VMEO stock under this tough economic environment. While broadcasting objectionable content presents ethical concerns, the harsh reality is that such material gained momentum during the pandemic.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
