Just two years ago, the metaverse (an extended virtual world), which had become a global craze and a new growth engine, has rapidly faded. As concerns over an economic downturn grow, even major corporations like Walt Disney and Microsoft (MS) are withdrawing from metaverse-related projects that are not immediately profitable. Monthly active users and land prices within the metaverse have also plummeted.
The daily Wall Street Journal (WSJ) reported on the 29th (local time) that technology companies, aiming to cut costs amid recession fears, have recently abandoned metaverse-related projects during restructuring processes.
Disney decided to dismantle its metaverse strategy division while carrying out a planned layoff of 7,000 employees earlier this year. The approximately 50 team members in the division were all placed on the layoff list, and the department head is currently on administrative leave. This comes just one year after the division was launched under former CEO Bob Chapek’s leadership, receiving acclaim as a "pioneering ground for next-generation storytelling." MS also shut down its metaverse-related social media (SNS) platform, AltspaceVR, earlier this month. Acquired in 2017, AltspaceVR is a platform that allows avatars to chat and play games in a virtual reality space. Despite these investments, MS reportedly struggled to realize its metaverse vision, including metaverse platforms and augmented reality (AR) headsets.
The situation is similar for Meta Platforms, which even changed its corporate name to focus on the metaverse as a new growth engine. Just 18 months ago, CEO Mark Zuckerberg identified the metaverse industry as the next computing platform, but during a conference call following last month’s earnings report, he indicated that the company’s focus is shifting toward artificial intelligence (AI). WSJ reported that during the conference call, Zuckerberg mentioned AI 28 times, compared to only 7 mentions of the metaverse. This year, Meta has significantly downsized its Reality Labs division, as well as its hardware and metaverse departments. It is also reported that a considerable number of metaverse-related engineers were included in the recent second round of layoffs.
Scott Kessler, a tech analyst at research firm Third Bridge Group, evaluated, "When companies reduce headcount or spending, this kind of (metaverse) project is an easy target." Despite Meta’s large-scale investments in the metaverse following its name change, it still faces challenges in securing users and turning a profit. The monthly active users of its own VR platform, Horizon Worlds, stood at 300,000 as of the end of last year, far below the target of 500,000. Sales of the ambitiously launched VR headset have also been sluggish. It is estimated that Meta’s cumulative losses in the metaverse business exceeded $13.7 billion last year.
The cooling of the metaverse craze is evident not only in corporate actions but also on metaverse-related platforms such as virtual real estate. According to Wemeta, which tracks land transaction flows within the metaverse, land prices on the metaverse platform Decentraland have dropped by about 90% compared to a year ago. WSJ reported that the "Metaverse" has rapidly become the "Meh-taverse." This uses the colloquial interjection "Meh," which typically expresses indifference or boredom, to describe the sharply cooled metaverse craze.
However, there is also growing analysis that recent metaverse layoffs do not signify giving up on the metaverse. The prevailing interpretation is that companies are cutting back on metaverse investments, which require large immediate costs and do not generate quick profits, in preparation for an economic downturn. Analyst Kessler said, "It is clear that the bubble around the metaverse has deflated, but it should not be misunderstood as a lack of progress."
Recently, major tech companies including Meta and MS have been expanding their AI investments, fueled by the ChatGPT craze. CEO Zuckerberg previously confirmed, "AI is Meta’s biggest investment category." According to research firm PitchBook, about one-fifth of corporate acquisitions and investments since 2019 have been related to AI companies.
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