Snap is set to establish an independent company, divesting its internal generative AI video team. This new entity, named Dotmo, will concentrate on developing AI models capable of creating interactive gaming experiences, as confirmed by Snap to TechCrunch.
The primary rationale behind this strategic spin-off, according to Snap, is the substantial financial outlay associated with conducting such advanced development work internally.
Despite operating as a distinct corporate entity, Dotmo will maintain close operational ties with its progenitor, Snap. Notably, Snap will grant Dotmo a license to adapt its proprietary technology for use across various gaming and interactive entertainment platforms. Furthermore, the inaugural team at Dotmo will comprise a group of current Snap employees who are transitioning from their roles to launch this new venture.
While Dotmo will not receive direct funding from Snap, the company has disclosed that Bobby Murphy, Snap's Chief Technology Officer, will serve as the lead investor, acquiring a significant personal equity stake in the nascent firm. Importantly, Murphy will continue his full-time tenure as Snap's CTO, remaining at the helm of its generative AI research and development initiatives.
In exchange for providing both talent and the technology license, Snap will secure a substantial equity stake in Dotmo, a position that could yield significant returns should the company achieve future success. Snap also indicated that Dotmo might eventually pursue external funding to support its growth.
This move represents Snap’s second significant spin-off endeavor within the current year. Earlier, Snap divested its Specs division into a new company, dedicating it exclusively to the development of its smart glasses product line. The recent unveiling of Specs, however, did not meet with widespread acclaim; Snap’s stock experienced a decline following market concerns regarding the approximately $2,200 price point of the new smart glasses. Additionally, Snap undertook a round of layoffs earlier this year, resulting in the elimination of roughly 1,000 positions.
A Snap representative clarified that Dotmo signifies a different type of spin-off compared to the Specs operation. Its team will focus on developing digital experiences that currently fall outside Snap’s core business priorities. Nevertheless, the representative added that a future partnership with Dotmo could be considered if strategic alignment becomes apparent.
Spin-offs often serve as a cost-saving mechanism for companies, though they can also fulfill other strategic objectives, such as highlighting a specific asset, attracting investor interest, or fostering greater operational flexibility for the involved team. By spinning out Dotmo, Snap is likely mitigating the financial burden associated with its ambitious AI initiatives, while simultaneously preserving exposure to potential future upsides through its retained equity stake.
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