Meta’s monumental wager on digital actuality ended final week, with the corporate reportedly shedding roughly 1,500 workers from its Actuality Labs division — about 10% of the unit’s employees — and shutting down a number of VR recreation studios, based on The Wall Road Journal. It’s an enormous reversal for an organization that, simply 4 years in the past, staked its whole id on the idea.
Few are going to overlook it.
As trade watchers would possibly keep in mind, Fb rebranded itself as Meta in 2021, promising to usher in a brand new period of know-how led by VR gadgets.
Partly, the choice was a wager on Gen Z’s choice to socialize in on-line video games like Fortnite and Roblox versus conventional social media apps. The change additionally helped Meta distance itself from the negativity surrounding its Fb model. Through the years, the model had been broken by knowledge privateness scandals like Cambridge Analytica; studies from Fb whistleblower Frances Haugen, who shared paperwork indicating Fb knew of its damaging impacts on youngsters and teenagers; Congressional hearings over Fb’s digital surveillance; its function within the unfold of misinformation; its monopolistic practices, and extra.
Meta’s imaginative and prescient on the time was that the metaverse can be the subsequent large social platform, the place customers linked in a digital world by way of Meta’s Horizon Worlds app and performed video games on their VR headsets.
Quick-forward, and the metaverse has successfully been deserted in favor of AI.
In accordance with CNBC, among the casualties embrace studios making VR titles inside Meta, like Armature Studio (“Resident Evil 4 VR“), Twisted Pixel (“Marvel’s Deadpool VR“), and Sanzaru (“Asgard’s Wrath). In the meantime, the VR health app Supernatural, which Meta acquired in 2023 for $400 million, will not produce new content material and can transfer into “upkeep mode.” Camouflaj, the studio behind the “Batman: Arkham Shadow” VR recreation, has additionally been impacted by layoffs, as reported by GeekWire.
And final week, The Verge famous that Meta’s program to carry VR to work, Workrooms, is shutting down, as nicely.
The information follows an earlier Bloomberg report from December, which stated that Meta was slashing the digital actuality division’s funds by as much as 30%. Across the identical time, Meta introduced that it was pausing its program to share its Meta Horizon working system, which runs on its Quest-branded VR headsets, with different third-party headset machine makers.
In contrast to the information of Meta’s rebrand, the deprioritization of the corporate’s metaverse efforts ought to come as no shock — the division misplaced cash at an extreme fee, worrying traders, and had by no means turned a revenue.
In complete, the corporate had funneled some $73 billion into Actuality Labs. To place that into context, you’d must spend $1 million per day for 200 years to match that form of spending.
“Constructing within the open” fails
Apart from being overhyped by traders and analysts alike, preliminary variations of the metaverse had been simply dangerous merchandise. The goofy, soulless avatars didn’t even have legs, and one metaverse selfie of Meta CEO Mark Zuckerberg was so dangerous it even turned a viral meme. Briefly, Meta was overpromising a future whereas its product nonetheless under-delivered. It was a failure of the “construct within the open” mannequin, the place early tech merchandise are shipped to customers in hopes of getting suggestions that can be utilized to iterate.
That mannequin works when clients are actively concerned about a know-how. However within the case of the metaverse, there was solely middling shopper demand. Although Meta shortly gained a majority share of the VR market with its Oculus headsets, the headsets noticed declining gross sales. Final spring, Counterpoint Research noted that international VR headset shipments had fallen by 12% year-over-year in 2024, which was their third consecutive 12 months of declines. Meta had accounted for 77% of these 2024 headset shipments.
Meta, betting on the “if you happen to construct it, they may come” technique, was extra within the earnings that may very well be comprised of working its personal platform for apps and video games than whether or not or not customers even needed these so-called face computer systems.
Particularly, Zuckerberg was searching for a technique to bypass the power of Apple and Google to faucet into Meta’s income by way of their app shops.
“This era has…been humbling, as a result of as large of an organization as we’re, we’ve additionally discovered what it’s wish to construct for different platforms. And residing beneath their guidelines has profoundly formed my views on the tech trade,” Zuckerberg stated in a keynote speech on the firm’s Fb Join 2021 occasion, referencing the Apple-Google duopoly. “I’ve come to imagine that the shortage of selection and excessive charges are stifling innovation, stopping folks from constructing new issues, and holding again the complete web financial system.”
He proposed that the metaverse may develop to a billion folks within the subsequent decade, internet hosting “lots of of billions” of {dollars} in digital commerce. Analysts like McKinsey & Co. and funding financial institution Citi backed up this questionable forecast with their very own heady estimates of the metaverse turning into a multi-trillion-dollar platform by 2030.
Meta might have had greenback indicators in its eyes, however the apps constructed for the metaverse weren’t being adopted in huge numbers, a minimum of for an organization of Meta’s dimension.
Although there’s no exterior visibility into Meta’s own VR app store, you’ll be able to have a look at Meta’s apps with iOS and Android counterparts as a proxy for adoption. In accordance with modeled estimates from app intelligence supplier Apptopia, the Meta Horizon app has been downloaded 60.4 million occasions globally and 39.8 million occasions within the U.S. since Might 2018. A greater estimate for adoption, nevertheless, is its app exercise.
From a U.S. panel, Apptopia has figures for the common periods per day by day lively person within the U.S., which grew from 3.49 in January 2023 to 4.93 in January 2026. Whereas that’s nonetheless a high-water mark for the app, it could not have been sufficient for Meta.
For comparability, outdoors of VR, Meta now has over 3.5 billion day by day lively customers throughout its social apps Fb, Instagram, WhatsApp, and Messenger.
After all, had this all succeeded, Meta would have created a brand new social empire, constructed on the again of VR gaming — not not like Fb’s early days as a social community, when partners like Zynga — whose video games included Farmville, and Phrases with Buddies — drove double-digit income streams for Fb. (Finally, Fb’s 30% lower of digital items gross sales, mixed with restrictive platform insurance policies, drove Zynga to launch its personal gaming portal and pivot to cellular.)
However this time, Zuckerberg telegraphed his need to faucet into developer income far too quickly. Meta might need had a greater shot at attracting builders to construct for VR if it promised to undercut Apple or Google’s customary 30% charges, or these of different gaming platforms. As an alternative, Meta did the other: it charged extra.
Even earlier than VR turned a large platform price investing in, Meta introduced its plans to take a whopping 47.5% of the sales of digital assets inside Horizon Worlds, consisting of a 30% {hardware} platform payment and one other 17.5% payment for Horizon Worlds itself. Creators, unsurprisingly, were not happy.
As dangerous, Meta wasn’t constructing the metaverse with person security as a high precedence. As with its rush to scale its social community, the corporate tended to be reactive moderately than proactive about security options. As an illustration, the corporate solely rolled out its “Private Boundary” characteristic, which put a buffer between avatars, after studies that customers had been experiencing sexual harassment within the metaverse. In some instances, customers had even engaged in virtual rape and gang rape in Meta’s Horizon Worlds. Meta later dialed again the security characteristic a bit by adjusting the Private Boundary to solely default to “on” when a person is participating with “non-friends” within the metaverse and permitting customers to modify it off fully.
In Might 2022, TechCrunch requested a Meta rep to element its assist measures for Horizon Worlds. The corporate described a number of instruments, together with blocking and reporting options, a “protected zone” button for customers to immediately block and mute others, and a characteristic to quickly take away disruptive folks from venues that was inbuilt response to person suggestions. Regardless of outlining these instruments, Meta declined to say what kind of actions it could take to handle particular person dangerous actors’ habits.
On the time, customers advised TechCrunch that those that confronted abuse within the metaverse would typically react with an apparent transfer: as an alternative of recording the abuse, they might take off their headset and take a break from VR. However once they returned, their harasser would nonetheless seem of their checklist of latest encounters, and it was too late to submit a report of the abuse with the video and audio connected.
Some of these situations had been seemingly not thought by way of from the beginning, and detailed insurance policies round what constitutes abuse didn’t exist. When a metaverse code of conduct was later printed, it nonetheless didn’t element any penalties past saying Meta would “take motion on customers.”
Additionally round this time, Meta declined to share the make-up of its crew constructing the metaverse with TechCrunch. (But when we needed to wager, we’d guess there weren’t as many ladies on the challenge as males. This could reflect the makeup of Meta overall, so it’s not a nasty wager!)
AR, combined actuality, and AI proved extra widespread
One other nail within the proverbial coffin for the metaverse was the success of Meta’s Ray-Ban AR glasses, which have seen elevated shopper curiosity in latest months. With options like the power to document hands-free, stream music, and chat with Meta AI, the glasses started to outsell conventional Ray-Bans in some retail shops in 2024. The corporate is now contemplating doubling the output of the glasses to fulfill shopper demand, Bloomberg reported this week.
With a watch on AI, the corporate extra lately launched Ray-Ban Show final 12 months, that are related sensible glasses that additionally embrace a show for apps, alerts, and instructions on the fitting lens. The corporate has since paused its worldwide plans for this product, citing “unprecedented demand.” (Or moderately, overly conservative stock forecasting.)
With different corporations, together with OpenAI, Amazon, and varied startups, trying to {hardware} AI gadgets as the subsequent potential computing platform, VR appears much more of a dated relic of a imaginative and prescient for the net that by no means got here to cross.
Mixed, these components, and significantly the adoption of AI as a doable app platform, make it laborious for Meta to proceed to justify spending on VR. As an alternative, Meta will deal with the merchandise which have potential, like its Ray Ban and AI glasses, AI app’s progress, and enormous language fashions.
