Snapchat is taking strategic action to insulate its core social messaging business from potential losses by separating its AR glasses division into a distinct subsidiary called Specs Inc. The move comes ahead of the highly anticipated public launch of its first AR-enabled Spectacles later this year.
A Smart Financial Hedge
The separation provides Snapchat with significant operational advantages and financial protection. By establishing Specs Inc. as a wholly-owned subsidiary, the company gains greater operational focus, enables new partnerships, attracts potential minority investment, and creates clearer business valuation. Most importantly, it shields the main Snap Inc. business from potential losses that could result from poor hardware performance. This precaution is particularly wise given that Snapchat lost $40 million on unsold Spectacles from its first glasses launch in 2015.
Competing Against Meta’s Superior Technology
Snapchat faces significant competitive challenges from Meta’s in-development AR glasses. Early comparisons show Meta’s Aria device boasts a larger field of view, longer battery life, lighter frames, and more cameras than Snap’s Specs. However, Snapchat is betting on first-mover advantage, planning to launch its AR glasses approximately one year before Meta’s consumer device reaches the market.
The Path Forward
While the separation strategy protects Snapchat’s main business, questions remain about whether consumers will embrace the distinctive aesthetic of the AR Specs and feel comfortable with their recording capabilities. The stakes are high, but structuring the business separately demonstrates Snapchat’s recognition of the risks involved in the highly competitive AR market.