Snap’s venture into the realm of Augmented Reality (AR) for Enterprise Services has turned out to be short-lived, resembling a fleeting moment much like the company’s vanishing messaging app launched over a decade ago.
Snap, the maker of the photo messaging app Snapchat, announced on Wednesday that it is shutting down its Augmented Reality for Enterprise Services (ARES) unit just six months after its launch. Launched in March, ARES was part of Snap’s strategic move to diversify revenue beyond its predominant source—digital advertising. However, Snap soon realized that ARES didn’t quite ignite the enthusiasm it had hoped for, facing hurdles in gaining traction.
Snap also confirmed that the closure of the AR division for enterprises will lead to about 170 job layoffs. Like many other social media companies, Snap has grappled with the challenges posed by reduced advertising spending from businesses affected by inflation since early last year.
Interestingly, the announcement of Snap’s division shutdown coincided with Meta’s revelation of their new AR smart glasses, designed to provide answers to queries, along with an upgraded virtual reality headset. According to an internal memo written by CEO Evan Spiegel, which Bloomberg reported on, Snap recognized that developing ARES would require a shift toward web tools rather than its customary mobile-focused development.
“It would take significant incremental investment to grow our enterprise offering for retailers and we simply cannot make that investment at this time,” CEO Evan Spiegel explained the company’s decision in a note to employees also confirmed by Reuters, adding that the company needs to redirect its resources towards its core advertising business.
Snap is renowned for its popular AR filters, allowing users to overlay 3-D graphics or engage in playful face distortions. But, as the company aspired to evolve beyond being solely a Gen Z chat app, it sought to leverage this technology in a more lucrative domain—one less reliant on the ever-fluctuating digital ad landscape. Consequently, Snap unveiled ARES in March, with the aim of assisting retail clothing brands in creating virtual fitting rooms using AR technology.
However, CEO Evan Spiegel revealed that significant additional investments would be required to expand their enterprise offering for retailers, an investment the company couldn’t justify at the moment. Instead, Snap chose to concentrate its resources on bolstering its core advertising business.
Spiegel acknowledged that the timing couldn’t have been less favorable, as Artificial Intelligence continued to overshadow the appeal of AR, with generative AI tools simplifying the creation of try-on experiences for customers across companies of varying sizes.
Snap’s journey into the realm of augmented reality has been underway for quite some time now. Back in 2021, we reported about Snap after it acquired the British augmented reality tech startup WaveOptics for over $500 million. The strategic acquisition provided Snap with a significant array of components necessary for the development of wearable glasses that enable users to view computer-generated imagery seamlessly overlaid in the real world.