Snap Inc. has acquired AI Factory Inc., a two-year-old startup that makes computer vision and video analysis software, for a reported $166 million.

The acquisition became public this morning via media reports that were later confirmed by a Snap spokesperson. The company didn’t comment on the reported $166 million price tag, but the figure is certainly plausible given the strategic nature of the acquisition.

Snap uses AI Factory’s computer vision software to power a Snapchat feature called Cameos that became generally available last month. With Cameos, users of the company’s messaging app can take a photo of their face and virtually insert themselves into about 150 short clips. AI Factory’s algorithms make all the necessary visual adjustments, including the addition of facial expressions where needed.

The startup, which has offices in San Francisco and Ukraine, was co-founded two years ago by onetime Snap engineering director Victor Shaburov. Shaburov originally joined the social network in 2015 when it acquired a previous startup of his called Looksery. Looksery’s technology ended up forming the basis of Snap’s Lenses feature, video filters that are popular among users and double as an advertising medium for which the social network charges brands up to $700,000 per day.

It’s possible the company has similar plans for Cameos. The format certainly lends itself to advertising: Snap could let marketers add branded videos to the catalog of prepared Snapchat clips into which users can edit themselves. 

The acquisition of AI Factory will enable Snap to guarantee its future access to the startup’s technology as it builds out an advertising offering atop Cameos. Had it not swooped in, a rival such as Facebook Inc. might have seized the opportunity.

Facebook has replicated several of Snapchat’s most distinguishing features in its messaging services over the years, including Lenses, and it may do the same with Cameos if the capability proves popular. But without the ability to license or acquire AI Factory’s technology, building a comparable feature from scratch would likely take some time. That could provide a valuable first-mover advantage for Snap in the rapidly shifting social media market. 

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