Snap to close AR division for enterprises months after launch

(Reuters) -Snap Inc is shutting its division focused on making augmented reality (AR) services for businesses within months of its launch, as the ad-dependent social media company struggles in a tough economy.

The closure of the division will result in about 170 job cuts, said Snap, which like other social media firms, has been facing the brunt of weak advertising spending from inflation-hit businesses since early last year.

Snap, the maker of photo messaging app Snapchat, started AR Enterprise Services (ARES) in March, looking to diversify its revenue beyond digital advertising that makes up the vast majority of its revenue. However, the division struggled to pick up.

"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 said in a note to employees, adding the company had to instead focus its resources on the core advertising business.

CEO Spiegel said rising adoption of generative artificial intelligence made it hard for Snap to differentiate its offering that allowed customers to use its AR tech on their sites as companies created their own experiences.

Snap said last year it would cut 20% of its staff, restructure its advertising sales unit and shut down some projects including mobile games in order to focus on improving sales.

(Reporting by Chavi Mehta in Bengaluru; Editing by Shinjini Ganguli)

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