Snap Spins Off AI Video Team into New Company, Dotmo, Due to Costs

Snap is creating a new company, Dotmo, from its internal generative AI video team, citing high internal costs as a primary reason for the separation. Dotmo will maintain close ties to Snap while focusing on AI-driven gaming experiences.

Snap Inc. has announced that it will be spinning off its internal generative AI video team into a newly formed company named Dotmo. The primary focus of Dotmo will be on developing artificial intelligence models aimed at creating interactive gaming experiences, according to a statement made to TechCrunch.

The decision to create Dotmo comes as Snap pointed to the significant costs associated with developing such initiatives internally as a key factor in the spinoff.

Although Dotmo will operate as a separate entity, it will maintain a strong connection to Snap. The company will provide Dotmo with a license to utilize its technology for gaming and interactive entertainment platforms. The founding team for Dotmo will primarily consist of existing Snap employees who are transitioning to the new venture.

In terms of financial backing, Dotmo will not receive direct funding from Snap. However, Bobby Murphy, Snap's chief technology officer, will serve as the lead investor and will hold a notable personal stake in the new company. Despite this investment role, Murphy will continue his full-time position at Snap, overseeing its generative AI research and development efforts.

In return for the talent and technology license provided to Dotmo, Snap will acquire a substantial equity stake in the new company. This investment could yield significant returns if Dotmo succeeds in its endeavors. Furthermore, Dotmo may pursue additional outside funding in the future, as indicated by Snap.

This spinoff represents Snap's second major separation initiative within 2026. Earlier in the year, Snap spun off a division called Specs, which is dedicated to the development of its smart glasses line. The launch of the new Specs was met with skepticism, leading to a decline in Snap's stock price, largely due to concerns about the high cost of the smart glasses, which retail for approximately $2,200. Additionally, Snap faced a round of layoffs earlier this year, resulting in the elimination of around 1,000 positions.

According to a representative from Snap, Dotmo's focus on creating digital experiences diverges from Snap's core business priorities. However, there remains the possibility of future collaboration if an appropriate partnership opportunity arises.

Spinoffs often serve as a strategy for companies to reduce costs, but they can also fulfill other objectives, such as highlighting specific assets, attracting investor interest, or offering operational flexibility to involved teams. By establishing Dotmo, Snap appears to be alleviating some of the financial burdens associated with its AI projects while still retaining potential benefits through its equity stake.