The popular DNA-testing company 23andMe recently announced plans to lay off approximately 40% of its workforce around 200 employees as the company faces significant challenges in a rapidly changing industry. These layoffs are part of a larger restructuring effort aimed at stabilizing the business amid severe financial pressures and fallout from recent data breaches. Anne Wojcicki, 23andMe’s co-founder and CEO, has publicly stated that the company remains committed to focusing on its core consumer business and research partnerships, despite these difficult times.
A Decline in the DNA-Testing Market
In the last decade, 23andMe was a pioneer in providing at-home DNA testing kits, offering users insights into their ancestry and health markers based on genetic information. It became one of the leading names in the industry, drawing millions of users, including notable figures like Warren Buffett and Snoop Dogg, who were drawn to its personalized genetic insights.
However, consumer interest in genetic testing has waned in recent years, particularly with rising concerns around data privacy and security. The COVID-19 pandemic also shifted many people’s financial priorities, resulting in a drop in demand for discretionary products like genetic tests. Additionally, fierce competition in the industry has further challenged 23andMe’s ability to retain its market share.
Compounding these challenges, the company has also seen its share price fall by over 70% this year, a dramatic decline that underscores investor uncertainty and skepticism about the company’s long-term viability. As Wojcicki works to pivot the company back to profitability, 23andMe is incurring one-time costs, estimated at $12 million, including severance packages. But it expects these efforts to yield savings of about $35 million.
Data Breach and Consumer Trust
The layoff announcement follows another major setback for 23andMe: a data breach that compromised the personal information of approximately 6.9 million users. While the company emphasized that no genetic data was accessed, hackers were able to steal other sensitive information, including family trees, birth years, and geographic locations of affected users.
The breach was reportedly made possible through hackers logging in with previously exposed email and password combinations, affecting not only the compromised accounts but also linked family members. This significant security lapse led to ongoing investigations by data watchdogs in the UK and Canada, who expressed concern over the company’s custodianship of highly sensitive personal information. According to the UK’s Information Commissioner’s Office, such genetic information is particularly vulnerable as it remains constant over a person’s lifetime, making breaches of trust potentially damaging in the long term.
Given that trust is central to companies like 23andMe, which handle highly sensitive data, this breach has been a blow to its reputation. The fallout has highlighted vulnerabilities in the security of consumer data a recurring theme in the tech industry as more companies collect extensive user information.
Internal Restructuring and Board Shake-Up
Another sign of internal turmoil is the recent resignation of seven out of eight independent directors from 23andMe’s board. In September, the board members stepped down after they reportedly failed to receive a satisfactory buyout offer from CEO Anne Wojcicki. This mass exodus of board members is unusual and raises questions about the company’s strategic direction and internal dynamics.
With most of the board members leaving, 23andMe is left with fewer independent perspectives to guide its decision-making during a critical phase. The company has also halted its development of therapeutic treatments, which had been a focus as it diversified its offerings beyond consumer genetic testing. Now, it is considering licensing or selling its therapy projects, a move that could help it recoup some value in areas where it can no longer invest.
The Future of 23andMe
Despite its challenges, 23andMe is still regarded as a giant in the DNA-testing industry. However, its future remains uncertain. Wojcicki’s efforts to restructure the company, coupled with renewed focus on core consumer products, may provide it with the stability needed to continue. But in an industry where privacy and security are paramount, the recent data breach and concerns over management shake-ups will require the company to rebuild consumer trust, secure its digital infrastructure, and perhaps consider new revenue streams.
As 23andMe moves forward, its journey may serve as a cautionary tale in the tech world underscoring both the potential and the pitfalls of collecting and handling sensitive user data. The company’s current struggles and strategic pivots could ultimately shape the future of the DNA-testing market, as companies find ways to balance consumer interest, data security, and sustainable growth.
