Snap didn't fire its AI team. It made a new company instead.
Two months after cutting 1,000 jobs.
Why is AI development this expensive?
Look at Snap's 2026 decisions in order, and a pattern emerges. In January, they spun off the AR glasses team. In April, they cut 1,000 people — 16% of the workforce — with a target of reducing annualized costs by over $500 million. Then on June 18, they spun off the AI video team into a new company called Dotmo.
The stated reason: the internal cost of developing generative AI models was simply too high.
For a consumer app company running on ad revenue, funding AI research with weak ties to the core business is a different kind of burden. But killing the team means losing years of accumulated tech and talent. Snap found a third way out of that dilemma.
There are actually three options
When an AI project gets too expensive, most companies think of two choices: kill it or carry it. What Snap showed is that there's a third path sitting right between them.
| Kill (disband) | Keep (internal) | Spin-off | |
|---|---|---|---|
| Cost burden | Eliminated | Ongoing | Eliminated |
| Tech & talent | ❌ Lost | ✅ Kept | ✅ Kept |
| Upside | ❌ None | ✅ Internal | ✅ Via equity |
| Core focus | ✅ Improves | ❌ Diluted | ✅ Improves |
The structure is clever. Snap gives Dotmo a technology license and receives a large equity stake in return. The team moves to Dotmo, but Snap captures a share of any future success without spending a cent. Dotmo may also eventually raise outside funding.
What two spinoffs in six months reveals
Snap first ran this playbook in January, spinning off its AR glasses team into a separate entity called Specs Inc. The reasoning was similar — AR hardware sits outside Snap's core social business, and the spinoff served both focus and cost efficiency.
Specs Inc. went on to debut $2,195 AR glasses in June. The stock dropped 5% on the news, but Snap didn't carry that risk. Transfer the cost, keep the equity — they ran this playbook twice in a row.
One more thing worth noting: Dotmo's lead investor is Bobby Murphy — Snap's co-founder and CTO — who's putting in personal money while continuing to run GenAI R&D at Snap. He keeps the job and takes the personal bet. That reads less like a corporate cost-cut and more like a signal: I genuinely believe in this technology.
Why AI gaming?
Dotmo is focused on "AI models for interactive gaming experiences". It's a step away from Snap's core social media business, but a natural extension of the AI video technology Snap has been building for years. Nothing stopping them from doing it internally — but no reason to prioritize it either. That's exactly when a spinoff makes the most sense.
How to actually use this model
Snap's spinoff pattern isn't exclusive to big tech. It's a framework you can apply when an AI project drifts from core and costs start piling up. Five checkpoints:
- Assess independence
How far is this project from your core business? Does the team and tech have what it takes to operate as a standalone company? If both answers are yes, a spinoff is worth examining. - Design the value exchange
What the parent gives: technology license, existing infrastructure, network access. What the parent gets: equity. The key isn't just letting go — it's structuring your upside. - Confirm team buy-in
Spinoffs only work when the team genuinely wants it. Real startup intent is required. Forcing people out leads to talent loss, not a new company. - Define a champion connection
Having a parent-company leader invest personally (as Bobby Murphy did) creates a trust signal. Decide whether that connection looks like investment, advising, or technical bridging — and make it explicit. - Leave room for a future relationship
Don't sever all ties at spinoff. Snap kept potential partnership doors open with Dotmo. With an equity relationship in place, collaboration or re-acquisition becomes a natural option down the road.
Go deeper
Snap spins off AI video team into Dotmo The original TechCrunch article covering the spinoff structure and Bobby Murphy's role. techcrunch.com
Snap gets serious about Specs, spins AR glasses into standalone company The January spinoff — compare the structure to Dotmo and the pattern becomes clear. techcrunch.com
Snap is cutting 1,000 jobs, 16% of its workforce The April layoffs and the $500M+ annualized cost reduction target. techcrunch.com
Snap Specs AR glasses debut at $2,195 How the spun-off AR product launched independently. techcrunch.com
Snap stock drops after Specs launch The market reaction — and why the spinoff structure kept the risk off Snap's books. techcrunch.com
