Snap, the parent company of the popular photo messaging app Snapchat, has decided to close down its augmented reality (AR) Enterprise Services (ARES) division only months after its launch. This strategic move is a response to the challenging economic environment and aims to streamline the company’s focus and resources.
The closure of the ARES division will unfortunately lead to approximately 170 job cuts. Snap, like many social media firms, has grappled with the impact of weak advertising spending due to economic challenges and inflation affecting businesses since early last year.
Snap initially launched ARES in March, envisioning it as a means to diversify its revenue streams beyond its primary income source, digital advertising, which constitutes a significant portion of its overall revenue. The objective was to venture into the realm of augmented reality services for businesses. However, the division faced difficulties in gaining traction and achieving its intended objectives.
Snap CEO Evan Spiegel emphasized that expanding their enterprise offerings for retailers would necessitate substantial incremental investment, a commitment the company cannot make at this juncture. The decision to close the ARES division is aligned with the need to refocus resources on Snap’s core advertising business.
Spiegel noted that the growing adoption of generative artificial intelligence has made it challenging for Snap to differentiate its AR offerings in a way that adds value to customers, especially as companies increasingly develop their own experiences using AR technology.
Last year, Snap had already announced measures to streamline its operations, which included a 20 percent reduction in staff, restructuring of its advertising sales unit, and discontinuation of certain projects, such as mobile games, to enhance its sales operations. These strategic adjustments were aimed at driving improvements in sales and optimizing the company’s resources.
Snap’s decision to close the ARES division underscores the ever-changing dynamics of the tech industry and the need for adaptability and focus to thrive in challenging economic conditions. The company remains committed to innovating and aligning its strategies to navigate the evolving landscape of technology and social media.