Look, I may be one of the few holdouts who still thinks Meta’s metaverse concept isn’t dead, and that the company remains focused on bringing its social VR worlds to fruition for the next generation, even if it isn’t currently discussing those plans publicly.
But Meta’s own cost-cutting efforts don’t support that, as the company informs staff about it it is cutting another 10% of employees from its Reality Labs divisionthe department led by former Meta director Andrew Bosworth, and oversees the development of Quest VR headsets and AI glasses, among other things.
As reported by The New York TimesMeta is cutting back to increase focus on AI, unlike the Metaverse project.
According to NOW:
“The cuts to Reality Labs – which has approximately 15,000 employees – could be announced as early as Tuesday. The layoffs would represent a fraction of Meta’s total workforce of 78,000 but will disproportionately affect those in the Metaverse unit working on virtual reality headsets and a VR-based social network, said the people, who asked not to be named because they were not authorized to discuss confidential decisions. The cuts could ultimately affect more than 10 percent of the division, one of the people said.
Business Insider reported last week that Bosworth called an urgent staff meeting for next Tuesdayin which he is expected to outline the company’s vision for the future of Reality Labs, which is clearly tied to this workforce reassessment.
So what’s going on? Is Meta VR, and/or the metaverse more broadly, actually giving up?
I’d say no, but with so much investment in AI development, Meta is clearly rethinking its path forward and how it can use its AI systems to power the next phase.
I suspect this could be the main culprit, that Meta increasingly believes it can replace significant numbers of engineering and development staff with AI tools instead, which is exactly what Meta CEO Mark Zuckerberg said when interviewed about this last January.
During a performance op the Joe Rogan podcastZuckerberg discussed the rapid development of AI systems and noted that:
“Probably by 2025 we at Meta, as well as the other companies that are actually working on this, will have an AI that can basically be a kind of mid-level engineer that you have in your company that can write code.”
This is especially relevant to VR development, where AI systems now enable simplified creation of VR objects and environments based on conversational prompts.
So while this may seem like a significant workforce reduction, indicating a reassessment of its reverse ambitions, it may be that Meta simply believes it can replace staff in at least some of these roles with AI.
But on the other hand, Reality Labs is still operating at a significant loss, and this could also be a simple rationalization based on market demand.
Reality Labs cost Meta more than 70 billion dollars in development over the past six years, which explains the revenue benefits from increased interest in AI glasses and cumulative sales of VR headsets.
And the demand for both is slowly but surely increasing. Reality Labs grew its revenue by 40% by 2024, with the popularity of its Ray Ban Meta glasses help drive adoption of its cutting-edge products.
So there is interest there. But talk about billions and Meta is sinking at the same time hundreds of billions There will be some degree of cost crunch in the development of AI data centers, which, in this case at least, appears to have hit Reality Labs.
But again, I think this is Meta dog-fooding his own AI tools and reinforcing his own belief in what AI models can achieve.
Zuck is all about the potential of AI, which is still in its early stages, and I’d bet Meta plans to downsize its workforce over time as it continues to grow its AI capacity.
This will be a strategy that helps offset these huge development costs, and reinforce Zuckerberg’s belief that AI is the future.
Will that ultimately pay off? Well, at this level of investment, it will take a long time for Meta to cover its costs before it even thinks about making a profit.
But in Zuck we (or they) trust.
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