Meta’s monumental guess on digital actuality ended final week, with the corporate reportedly shedding roughly 1,500 staff from its Actuality Labs division — about 10% of the unit’s employees — and shutting down a number of VR recreation studios, in line with The Wall Avenue Journal. It’s an enormous reversal for an organization that, simply 4 years in the past, staked its complete identification on the idea.
Few are going to overlook it.
As trade watchers may bear in mind, Fb rebranded itself as Meta in 2021, promising to usher in a brand new period of expertise led by VR gadgets.
Partially, the choice was a guess 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. Over time, the model had been broken by information privateness scandals like Cambridge Analytica; stories from Fb whistleblower Frances Haugen, who shared paperwork indicating Fb knew of its unfavorable impacts on kids and youths; 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 could be the following large social platform, the place customers linked 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 keeping with CNBC, a few of 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 now 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 properly.
The information follows an earlier Bloomberg report from December, which mentioned that Meta was slashing the digital actuality division’s price range 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.
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 traders, 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 should spend $1 million per day for 200 years to match that type of spending.
“Constructing within the open” fails
In addition to being overhyped by traders 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 grew to become 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 with a expertise. 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 Analysis famous that world 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 “when you construct it, they are going to come” technique, was extra within the earnings that might be constructed from 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 in search of a technique to bypass the flexibility of Apple and Google to faucet into Meta’s income via their app shops.
“This era has…been humbling, as a result of as large of an organization as we’re, we’ve additionally realized what it’s wish to construct for different platforms. And residing beneath their guidelines has profoundly formed my views on the tech trade,” Zuckerberg mentioned 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 selection and excessive charges are stifling innovation, stopping individuals from constructing new issues, and holding again your complete web financial system.”
He proposed that the metaverse might develop to a billion individuals within the subsequent decade, internet hosting “tons 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 changing 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 large numbers, not less than for an organization of Meta’s measurement.
Although there’s no exterior visibility into Meta’s personal VR app retailer, you may take a look at Meta’s apps with iOS and Android counterparts as a proxy for adoption. In keeping 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 classes per each 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 might not have been sufficient for Meta.
For comparability, exterior of VR, Meta now has over 3.5 billion each day lively 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 in contrast to Fb’s early days as a social community, when companions like Zynga — whose video games included Farmville, and Phrases with Associates — drove double-digit income streams for Fb. (Finally, Fb’s 30% reduce 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 alternative: it charged extra.
Even earlier than VR grew to become a large platform price investing in, Meta introduced its plans to take a whopping 47.5% of the gross sales of digital property inside Horizon Worlds, consisting of a 30% {hardware} platform payment and one other 17.5% payment for Horizon Worlds itself. Creators, unsurprisingly, weren’t blissful.
As unhealthy, 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 somewhat than proactive about security options. For example, the corporate solely rolled out its “Private Boundary” characteristic, which put a buffer between avatars, after stories that customers have been experiencing sexual harassment within the metaverse. In some circumstances, customers had even engaged in digital rape and gang rape in Meta’s Horizon Worlds. Meta later dialed again the protection characteristic a bit by adjusting the Private Boundary to solely default to “on” when a person is partaking with “non-friends” within the metaverse and permitting customers to modify it off completely.
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 briefly take away disruptive individuals from venues that was in-built response to person suggestions. Regardless of outlining these instruments, Meta declined to say what kind of actions it might take to handle particular person unhealthy actors’ habits.
On the time, customers instructed TechCrunch that those that confronted abuse within the metaverse would usually react with an apparent transfer: as an alternative of recording the abuse, they’d take off their headset and take a break from VR. However after they returned, their harasser would nonetheless seem of their listing of current encounters, and it was too late to submit a report of the abuse with the video and audio hooked up.
A majority of these eventualities have been seemingly not thought via from the beginning, and detailed insurance policies round what constitutes abuse didn’t exist. When a metaverse code of conduct was later revealed, 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 venture as males. This is able to mirror the make-up of Meta general, so it’s not a foul guess!)
AR, blended actuality, and AI proved extra in style
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 current months. With options like the flexibility 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 satisfy shopper demand, Bloomberg reported this week.
With an eye fixed on AI, the corporate extra just lately launched Ray-Ban Show final 12 months, that are related good glasses that additionally embrace 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 somewhat, overly conservative stock forecasting.)
With different firms, together with OpenAI, Amazon, and numerous startups, seeking to {hardware} AI gadgets 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 components, and significantly the adoption of AI as a doable app platform, make it arduous 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 development, and giant language fashions.
