Snap Inc. has made the strategic decision to shutter its augmented reality (AR) division tailored for enterprise solutions just months after its inception, reflecting the challenges faced by the advertising-driven social media giant in the current economic climate.
This decision will inevitably lead to a reduction of approximately 170 jobs within the company. Snap, like its counterparts in the social media industry, has been grappling with the adverse impact of reduced advertising expenditures stemming from the economic turmoil that began over a year ago due to inflationary pressures.
Snap, renowned for its popular photo messaging app Snapchat, unveiled AR Enterprise Services (ARES) in March as part of an initiative to diversify its revenue streams beyond its predominant digital advertising sector, which constitutes the bulk of its earnings. Regrettably, ARES faced formidable obstacles on its path to success.
Snap's CEO, Evan Spiegel, conveyed in an internal communication to the company's workforce, "Expanding our enterprise offerings for retailers would necessitate substantial additional investment, a step we are unable to take at this juncture." He further underscored the imperative of channeling their resources toward bolstering the core advertising arm of the company.
Spiegel also acknowledged the escalating adoption of generative artificial intelligence as a key factor hindering Snap's ability to differentiate its AR technology offerings, especially in the context of businesses creating their own custom AR experiences.
It's worth noting that Snap had previously announced plans to reduce its workforce by 20%, restructure its advertising sales division, and discontinue various projects, including certain mobile games, all in a concerted effort to concentrate on enhancing its sales performance.
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