(Bloomberg) -- Snap Inc. is closing a division focused on making augmented reality services for businesses, pulling the plug on its latest attempt to diversify the ad-dependent company.
The ARES unit, short for augmented reality for enterprise services, was just announced in March. The idea was to let retailers adapt Snap’s AR technology for their own websites. But the company ultimately realized that the cost and complexity of the endeavor was too great, according to a memo from Chief Executive Officer Evan Spiegel that was reviewed by Bloomberg and confirmed by a Snap spokesperson.
ARES was one of Snap’s biggest new undertakings since the social media company was restructured last year, and its quick demise shows the challenges of adapting to a world roiled by the artificial intelligence boom.
The company is known for AR filters on its Snapchat mobile app, and was hoping to build on that experience to create virtual try-on tools for paying business customers. AR technology superimposes graphics onto real-world images, including users’ faces and whatever else they can see through their phone’s camera lens.
When Snap began the work, it became clear that it would be necessary to invest more on web tools, rather than the mobile software that the company is best known for. That technology was “both technically complex and less engaging for our customers,” Spiegel said in the memo.
The introduction of AI tools has wiped out Snap’s competitive advantage, Spiegel wrote, because the technology makes it easy for companies to create virtual try-on experiences — a centerpiece of Snap’s efforts.
“After exploring our options over the past few months, it became clear that it would take significant incremental investment to grow our enterprise offering for retailers and we simply cannot make that investment at this time,” Spiegel said. “It is very difficult to create a new business, and incredibly painful to wind it down, but it is the willingness to take risks and try new things that moves the world forward through innovation and experimentation.”
ARES had been a rare expansion project at a company contending with declining revenue, cost cuts and a reorganization. Shuttering the business will cut 170 jobs, though some workers could be rehired for other roles at Snap.
“Our business performance has reduced our capacity to invest in this incremental opportunity as we have had to focus our resources on our core advertising business,” Spiegel said.
The company also has launched a subscription offering, called Snapchat+, which has quickly lured more than 5 million users. They get early access to new AI features and app customizations.
The Santa Monica, California-based company will continue working on AR technology for the Snapchat app, advertisers and the CameraKit, which allows developers to build Snap’s AR technology into their own apps and websites.
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