Meta’s huge guess 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 workers — and shutting down a number of VR sport studios, in line with The Wall Avenue Journal. It’s an enormous reversal for a corporation that, simply 4 years in the past, staked its total id on the idea.
Few are going to overlook it.
As trade watchers may keep in mind, Fb rebranded itself as Meta in 2021, promising to usher in a brand new period of expertise led by VR units.
Partially, the choice was a guess on Gen Z’s desire 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. Over time, the model had been broken by information privateness scandals like Cambridge Analytica; studies from Fb whistleblower Frances Haugen, who shared paperwork indicating Fb knew of its detrimental impacts on kids and youths; Congressional hearings over Fb’s digital surveillance; its position within the unfold of misinformation; its monopolistic practices, and extra.
Meta’s imaginative and prescient on the time was that the metaverse could be the following large social platform, the place customers related in a digital world through 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 line with CNBC, a number of the casualties embody 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 sport, 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 effectively.
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 system makers.
Not like 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 charge, worrying buyers, and had by no means turned a revenue.
In whole, the corporate had funneled some $73 billion into Actuality Labs. To place that into context, you’d need to spend $1 million per day for 200 years to match that form of spending.
“Constructing within the open” fails
Moreover being overhyped by buyers and analysts alike, preliminary variations of the metaverse have been simply unhealthy merchandise. The goofy, soulless avatars didn’t even have legs, and one metaverse selfie of Meta CEO Mark Zuckerberg was so unhealthy 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 prospects are actively taken with a expertise. However within the case of the metaverse, there was solely middling client 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 Analysis famous that international VR headset shipments had fallen by 12% year-over-year in 2024, which was their third consecutive yr of declines. Meta had accounted for 77% of these 2024 headset shipments.
Meta, betting on the “in case you construct it, they are going to come” technique, was extra within the income that might be made out of operating its personal platform for apps and video games than whether or not or not customers even wished 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 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 dwelling underneath 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 consider that the dearth of alternative and excessive charges are stifling innovation, stopping individuals from constructing new issues, and holding again your entire web financial system.”
He proposed that the metaverse may develop to a billion individuals within the subsequent decade, internet hosting “a whole bunch 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 changing into a multi-trillion-dollar platform by 2030.
Meta could have had greenback indicators in its eyes, however the apps constructed for the metaverse weren’t being adopted in large numbers, at the least for a corporation of Meta’s dimension.
Although there’s no exterior visibility into Meta’s personal VR app retailer, you may have a look at Meta’s apps with iOS and Android counterparts as a proxy for adoption. In line with modeled estimates from app intelligence supplier Apptopia, the Meta Horizon app has been downloaded 60.4 million instances globally and 39.8 million instances within the U.S. since Could 2018. A greater estimate for adoption, nonetheless, is its app exercise.
From a U.S. panel, Apptopia has figures for the typical classes per each day energetic consumer 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 might not have been sufficient for Meta.
For comparability, exterior of VR, Meta now has over 3.5 billion each day energetic customers throughout its social apps Fb, Instagram, WhatsApp, and Messenger.
In fact, 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 companions like Zynga — whose video games included Farmville, and Phrases with Buddies — drove double-digit income streams for Fb. (Finally, Fb’s 30% minimize 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 want to faucet into developer income far too quickly. Meta may 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 gross sales of digital belongings inside Horizon Worlds, consisting of a 30% {hardware} platform charge and one other 17.5% charge for Horizon Worlds itself. Creators, unsurprisingly, weren’t glad.
As unhealthy, Meta wasn’t constructing the metaverse with consumer security as a high precedence. As with its rush to scale its social community, the corporate tended to be reactive fairly 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 have been experiencing sexual harassment within the metaverse. In some instances, customers had even engaged in digital 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 consumer is partaking with “non-friends” within the metaverse and permitting customers to change it off totally.
In Could 2022, TechCrunch requested a Meta rep to element its help 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 individuals from venues that was inbuilt response to consumer suggestions. Regardless of outlining these instruments, Meta declined to say what kind of actions it might take to deal with particular person unhealthy actors’ conduct.
On the time, customers advised TechCrunch that those that confronted abuse within the metaverse would usually 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 current encounters, and it was too late to submit a report of the abuse with the video and audio connected.
A majority of these situations have been seemingly not thought by 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 guess, we’d guess there weren’t as many ladies on the undertaking as males. This could replicate the make-up of Meta total, so it’s not a foul guess!)
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 client curiosity in current months. With options like the power to report 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 client demand, Bloomberg reported this week.
With a watch on AI, the corporate extra lately launched Ray-Ban Show final yr, that are comparable good glasses that additionally embody a show for apps, alerts, and instructions on the appropriate lens. The corporate has since paused its worldwide plans for this product, citing “unprecedented demand.” (Or fairly, overly conservative stock forecasting.)
With different firms, together with OpenAI, Amazon, and numerous startups, trying to {hardware} AI units as the following 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 elements, and significantly the adoption of AI as a attainable app platform, make it exhausting for Meta to proceed to justify spending on VR. As an alternative, Meta will give attention to the merchandise which have potential, like its Ray Ban and AI glasses, AI app’s development, and massive language fashions.
