Snap ends planned AI feature with Perplexity

Snap said in its latest earnings report that it and US-based AI search startup Perplexity ended a deal announced in November to add AI search to Snapchat.

The move scraps a planned US$400 million cash-and-equity payment over one year and removes any revenue contribution Snap had expected from 2026.

Snap said the feature was tested with a small user group in Chat but the companies did not agree on a wider rollout.

Snap also said first-quarter revenue rose 12% and net loss narrowed to US$89 million from US$140 million.

Daily active users hit 483 million and North America revenue growth slowed to 2%.

The update came about a month after Snap announced plans to cut 1,000 jobs, or about 16% of its full-time workforce.

🔗 Source: The Economic Times

🧠 Food for thought

Implications, context, and why it matters.

Perplexity’s legal issues hung over the US$400 million deal

The deal carried risk for Snap. Perplexity was fighting lawsuits from Reddit and News Corp, which owns The Wall Street Journal, over alleged data scraping and copyright issues 1.
That raised worries about brand harm and rules around content. Snap would have needed to make sure AI search results inside Snapchat did not create fresh legal trouble 1.
The feature was set to run beside Snap’s My AI chatbot as a separate assistant. Snap already works with OpenAI and Google on My AI 2.

A warning for the AI partnership rush

If the deal falls away, Snap could lean harder on subscriptions. Ad revenue rose 3%, while non-advertising revenue climbed 87% 3.
Snap also aimed to cut annualized costs by more than US$500 million through layoffs. The company did not say that target was meant to cover the deal’s expected value 4.
The setback warns tech companies that quick AI tie-ups can bring execution problems and brand risk, especially when startups are involved 1.
It also exposes the risk of depending on partners facing lawsuits over data collection, a common problem across generative AI companies 1.