Snap‘s ongoing financial woes are leading to another round of layoffs. The parent company of Snapchat will let go of “approximately 170 team members” as it shifts its priorities within its augmented reality (AR) division.
The layoffs will result in the dissolution of Snap’s AR Enterprise Services team. That business-facing division, known by the acronym ARES, is getting shuttered just six months after it was first unveiled.
In a letter shared with Snap employees, CEO Evan Spiegel shared a multi-part rationale for the latest round of pink slips. A key factor leading to the shutdown of ARES is the rise of generative AI. That technology has made it possible for brands to experiment with AR in a cost-effective manner, and Snap could not figure out a way to differentiate its offering.
Snap’s uneven revenue figures are also impacting its personnel decisions. The cA ompany’s stock dipped in July after its Q2 2023 earnings report predicted losses in the third quarter. Spiegel and co. are already recovering from a major round of layoffs that affected 20% of employees last year.
In justifying those cuts, Spiegel pointed to augmented reality as one of Snap’s primary pillars. Even with the demise of the ARES division, AR still figures to be a significant part of Snapchat’s future. 250 million users employ the app’s AR features, according to Spiegel. In addition, a recent update to the company’s monetization structure has enabled higher earnings for the creators of Snapchat’s most popular Lenses.
“While we have faced setbacks in our AR Enterprise strategy, we will continue to invest in supporting our CameraKit partners and the millions of people around the world who use augmented reality experiences powered by our AR platform,” Spiegel wrote in his letter. “We have also identified new opportunities to grow our Sponsored AR business on Snapchat and will continue to help our clients reach Snapchatters with unique and immersive augmented reality experiences.”
Snap reported 397 million users in its most recent earnings report. Despite the size of its user base, the tech company is not profitable.
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