Snap Puts Augmented Reality Services for Business to Rest; A Business Strategy Reformulation?

In a surprising turn of events, Snap Inc., renowned for its innovative technological pursuits, has vindicated its decision to wind up its recently launched Augmented Reality Services for Business (ARES). This decision, according to the company, is part of a strategic move to recalibrate and concentrate on other pivotal areas.

Launched with the aim of allowing enterprises to integrate Snap's Augmented Reality (AR) tools within their applications and activations, ARES, which seemed to hold considerable potential, is biting the dust after less than six months. A particular focus was on empowering retailers to incorporate Snap’s AR technology into physical store displays. However, as per Bloomberg, the project had registered hefty operational costs, leading to the closure of the division and the loss of approximately 170 jobs.

In his address, Snap CEO Evan Spiegel provided a detailed insight into the reasons for this sudden move. He mentioned technical complexities and reduced engagement associated with web-based augmented reality as one of the reasons. Further, the advent of generative AI, which has eased the creation of customer try-on experiences, has made it challenging for Snap to distinguish its offering. Finally, strained business performance led to a shift in focus to their core advertising business.

Unquestionably, Snapchat has found it challenging to scale its ad business, primarily because of Apple’s iOS 14 update, which prompted many users to limit their data, thus adversely affecting its extended ad targeting capacity. Furthermore, the broader economic downturn led to a decrease in digital ad spend, prompting Snap to rethink and realign its efforts to mitigate ongoing exposure. Last year, in a similar move, Snap laid off over 1,000 employees.

Despite the dissolution of the ARES platform, Snap intends to persist with supporting its CameraKit partners, providing another avenue to incorporate its AR tools in third-party apps. Moreover, it plans on amplifying its Sponsored AR business to enhance its eminence in the sector. With infrastructure costs soaring in its latest earnings report, it is a strategic retreat for Snap. However, this opens up a narrative of intrigue around how this move will impact the overall AR development and how Snap's performance will evolve in days to come.