Tech · AI · Startups

Snap Carves Out AI Video Unit to Create Gaming-Focused Company Dotmo

Snap is spinning off an internal generative AI video team into a standalone startup called Dotmo, focused on AI-powered gaming and interactive entertainment. CTO Bobby Murphy will back Dotmo personally while Snap retains a significant equity stake — its second major spinout of 2026.

Snap is separating an internal generative AI video team into a standalone company called Dotmo, a move aimed at advancing AI technology for interactive gaming experiences while reducing the costs associated with developing the technology in-house, according to a TechCrunch report.

The move is Snap’s second major spinout initiative in 2026. Earlier this year, the company had separated its Specs smart glasses business into an independent entity focused exclusively on wearable hardware development. Together, the two spinouts signal a deliberate strategic shift by Snap — shedding internal projects that sit outside its core business and finding new ways to extract value from them without carrying the full financial weight.

What is Dotmo and what will it do?

Dotmo is being built around Snap’s generative AI video technology, specifically for gaming and interactive entertainment applications. The founding team will be made up of existing Snap employees who are leaving the company to build the new venture. Although Dotmo will operate as an independent company, it will maintain close links with Snap — receiving a licence to use and adapt Snap’s technology for its target markets.

A Snap representative told TechCrunch that Dotmo differs from the Specs spinout because it will focus on creating digital experiences that are outside the company’s current core business priorities. However, the representative added that Dotmo could potentially work alongside Snap in the future if opportunities emerge — leaving the door open for a deeper integration down the line.

Bobby Murphy’s personal bet on Dotmo

Snap’s chief technology officer Bobby Murphy will serve as Dotmo’s lead investor through a personal investment and will hold a substantial stake in the company. This makes Murphy one of the most prominent individual backers of the new venture from day one. Crucially, however, Murphy will continue in his role at Snap and remain responsible for the company’s generative AI research and development efforts — meaning he is simultaneously stewarding Snap’s AI direction while personally betting on a spinout built from Snap’s own AI technology.

“Dotmo will focus on creating digital experiences that are outside the company’s current core business priorities — but could potentially work alongside Snap in the future.”

What Snap gets in return

In return for providing talent and technology rights, Snap will receive a significant equity position in Dotmo. The move enables Snap to lower the financial burden of pursuing certain AI projects while maintaining exposure to any future value creation through its ownership stake in the new company. The company said the startup could also explore raising capital from external investors at a later stage — which would bring additional resources into Dotmo without requiring further commitment from Snap.

For Snap, this is a calculated way to remain exposed to potential future gains from the AI-focused startup without carrying the full operational cost of building it internally. If Dotmo succeeds and raises capital at a higher valuation, Snap’s equity stake becomes more valuable. If it doesn’t, Snap has still shed a costly development effort from its books.

Snap’s 2026: spinouts, layoffs, and strategic reset

The Dotmo announcement comes against a backdrop of significant restructuring at Snap in 2026. The company has undergone workforce reductions this year, with around 1,000 jobs eliminated. Alongside the Dotmo spinout, Snap also separated its Specs smart glasses business into an independent entity focused exclusively on wearable hardware development earlier in the year.

Taken together, these moves paint a picture of a company tightening its focus on its core social camera and messaging platform while finding creative ways to remain exposed to adjacent bets — AI video, smart glasses — without putting them on the balance sheet.

Snap’s 2026 restructuring: a timeline

Why this structure makes strategic sense

Spinning out a team rather than shutting it down — and retaining equity while licensing technology — is an increasingly common playbook in big tech when internal projects don’t fit the core roadmap. It lets the parent company claim operational savings while preserving a financial upside if the spinout thrives. For the founding team, it offers the autonomy and incentive structure of a startup without starting from zero.

For Dotmo specifically, the gaming and interactive entertainment angle is a logical fit for generative AI video technology. Real-time AI-generated video — environments, characters, cutscenes — is one of the most capital-intensive research areas in gaming today, and Dotmo enters the space with a technology base it didn’t have to build from scratch, a licence from one of the world’s leading social media companies, and a CTO-level backer with deep AI expertise.

This article is based on reporting by TechCrunch and Storyboard18. Original source: Storyboard18 · June 2026. This piece is for informational purposes only.