Snap is closing an AR unit: ‘they just can’t make money’

Snap Inc (NYSE: SNAP) has decided to pull out of a business that it launched only in March. Its shares are still up 2.0% at writing.

Snap is pulling the plug on ARES

The social media company had introduced augmented reality for enterprise services (ARES) this year that particularly targeted retailers.

But Snap has not realised that the investment needed to grow that business is one that it “can’t make at this time”, as per its CEO Evan Spiegel.

ARES set out to build a virtual try-on tool that retailers could use on their website. Unfortunately, though, the rapid growth in artificial intelligence has removed the company’s competitive edge, the Chief Executive added.  

The announcement arrives only days after the New York listed firm said it had accumulated over 5.0 million subscribers at Snapchat+.

Is Snap stock worth buying?

Snap expects to cut about 170 jobs now that it’s pulling the plug on ARES. But a few of its employees at that division may be rehired at other positions, it added.

The California-based company has been committed to trimming costs amidst a continued decline in revenue (read more). On CNBC’s “Power Lunch”, Victoria Greene of G Squared Private Wealth said this week:

Snap is a no for me. They just can’t make money. Social media has been growing but they can’t seem to grow. They’re burning cash and their operating margins are going backwards.

She’s dovish on Snap stock even though the company recently teamed up with Microsoft on ads.