Meta’s big bet in virtual reality ended this week with the company reportedly shutting down approximately 1,500 employees from its Reality Labs division — about 10% of the unit’s staff — and shut down several VR game studios, according to The Wall Street Journal. It is a great reversal for a company that, just four years ago, staked its entire identity on the concept.
Some will miss it.
As industry observers may remember, Facebook changed name itself as Meta in 2021, promising to enter a new era of technology led by VR devices.
In part, the decision is a bet on Gen Z’s preference for socializing in online games like Fortnite and Roblox as opposed to traditional social media apps. The change also helped Meta distance itself from the negativity surrounding the Facebook brand. Over the years, brands have been damaged by data privacy scandals like Cambridge Analytica; report from a Facebook whistleblower Frances Haugenwhich shows documents that show Facebook is aware of the negative impact on children and adolescents; Congressional hearings on Facebook’s digital surveillance; role in spread of misinformation; independent monopoly practice, and more.
Meta’s vision at the time was that metaverse would be the next social platform, where users are connected in the virtual world through Meta’s Horizon Worlds apps and play games on a VR headset.
Fast forward, and the metaverse has effectively been abandoned to AI.
According to CNBC, some of the victims including studios that create VR titles on Meta, such as Armature Studio (“Resident Evil 4 VR“), Pixel Twisted (“Marvel Deadpool VR“), and Sanku (“Wrath of Asgard). Meanwhile, the VR fitness app Supernatural, which Meta acquired at 2023 for $400 millionit will not generate new content and will go into “maintenance mode.” Camouflaj, the studio behind the VR game “Batman: Arkham Shadow”, was also affected by the layoffs, as reported by GeekWire.
And this week, The Verge noted that the Meta program to bring VR to work, Workspace, they are killingalso.
The news follows an earlier Bloomberg report from December, which stated that Meta this is slashing budget of the virtual reality department which is up to 30%. At the same time, Meta announced that it exists pause its program to share the Meta Horizon operating system, which runs Quest brand VR headsets, with other third-party headset device manufacturers.
Unlike news of the Meta rebrand, the deprioritization of the company’s metaverse efforts isn’t a surprise — the division is lost money at an excessive rate, apprehensive investorsand has never turned a profit.
In total, the company has made several $73 billion to Reality Labs. To put that into context, you would have to spend $1 million a day for 200 years to match that spending.
“Building in the open” failed
Besides that become overhyped by investors and analyst similarly, the early version of metaverse was just a bad product. Goofy, soulless avatars don’t even have legs, and one selfie metaverse from Meta CEO Mark Zuckerberg so bad it even became a viral meme. In short, Meta is overpromising the future while the product is still under-delivered. This is a failure of the “build in the open” model, where early technology products are shipped to consumers in hopes of getting feedback that can be used to iterate.
The model works when customers are actively interested in the technology. But in the case of the metaverse, there is only middling consumer demand. Although Meta quickly gained a majority share of the VR market with Oculus headsets, the headsets have reduced sales. last spring, Counterpoint Research noted that global VR headset shipments will decline by 12% annually through 2024, which is the third consecutive decline. Meta already accounted for 77% of those 2024 headset shipments.
Meta, betting on the “if you build it, they will come” strategy, is more interested in the profit that can be made from opening its own platform for apps and games than whether or not consumers even wanted this so-called face computer.
Specifically, Zuckerberg is looking for ways to bypass Apple and Google’s ability to tap into Meta’s revenue through app stores.
“This time has been … humbling, because as a large company like us, we have also learned what it’s like to build for other platforms. And living by these rules has shaped my view of the technology industry,” Zuckerberg said in the keynote speech at the company’s Facebook Connect 2021 event, with reference to the Apple-Google duopoly. “I believe that lack of choice and high costs stifle innovation, prevent people from inventing new things, and hold back the entire internet economy.”
He suggested that the metaverse could grow to a billion people in the next decade, hosting “hundreds of billions” of dollars in digital commerce. Analyst like McKinsey & Co. and investment banks Citi backs up this questionable prediction with an important prediction of the metaverse becoming a multi-trillion dollar platform by 2030.
Meta may have dollar signs in its eyes, but apps built for the metaverse aren’t widely adopted, at least not for companies the size of Meta.
Although there is no external visibility VR Meta’s own app store, you can see in the Meta app with iOS and Android partners as a proxy for adoption. According to the assessment model of the app intelligence provider Apptopiathe Meta Horizon app has been downloaded 60.4 million times globally and 39.8 million times in the US as of May 2018. However, a better estimate of adoption is app activity.
From the US panel, Apptopia has figures for the average session per daily active user in the US, which increased from 3.49 in January 2023 to 4.93 in January 2026. While still a high water mark for the app, it may not be enough for Meta.
For comparison, outside of VR, Meta now has it over 3.5 billion active users every day on social applications Facebook, Instagram, WhatsApp, and Messenger.
Of course, if this all succeeds, Meta will create a new social empire, built on the back of VR games – not unlike the early days of Facebook as a social network, when partners like Zynga – which games include Farmville, and Words with Friends – drove double digit revenue stream for Facebook. (Ultimately, Facebook’s 30% cut in sales of virtual goods, combined with restrictive platform policies, pushed Zynga to open its own game portal and play to mobile.)
But this time, Zuckerberg telegraphed his desire to tap into developer revenue far too quickly. Meta may have a better chance of attracting developers to build VR if it promises to undercut the standard 30% cost of Apple or Google, or other gaming platforms. However, Meta does the opposite: it charges more.
Even before VR became a big enough platform for investment, Meta announced plans to do so 47.5% of digital asset sales in Horizon Worlds, consisting of 30% hardware platform fee and another 17.5% fee for Horizon Worlds itself. Creators, not surprisingly, they don’t like it.
As bad as it is, Meta didn’t build a metaverse with user safety as their top priority. As with the rush to expand social networks, these companies tend to be reactive rather than proactive when it comes to safety features. For example, only companies roll out the “Private Restrictions” feature.which put a buffer between the avatars, after the report that the user is the same experience sexual harassment in the metaverse. In some cases, users have even participated virtual rape and gang rape in Meta’s Horizon Worlds. Meta later call back the safety feature a bit by setting Personal Restrictions to only be “on” when the user engages with “non-friends” in the metaverse and allowing the user to turn them off entirely.
In May 2022, TechCrunch asked Meta representatives to detail the support measures for Horizon Worlds. The company described a number of tools, including blocking and reporting features, a “safe zone” button for users to instantly block and mute others, and a feature to temporarily remove harassers from the board built in response to user feedback. Despite describing the tool, Meta declined to say what actions it would take to address the behavior of individual bad actors.
At the time, a user told TechCrunch that people who faced abuse in the metaverse would often respond with an obvious gesture: instead of recording the abuse, they would take off their headsets and take a break from VR. But when they return, the harassment will still appear in the list of new encounters, and it is too late to send an abuse report with attached video and audio.
This type of scenario doesn’t seem to have been thought through from the start, and a detailed policy on what constitutes abuse does not exist. when metaverse code of ethics then published, it still didn’t explain any consequences beyond saying Meta would “take action against users.”
Also around this time, Meta declined to share the makeup of the metaverse build team with TechCrunch. (But if we had to bet, we would guess that there are not as many women in the project as men. This will be reflects the overall makeup of the Metaso not a bad bet!)
AR, mixed reality, and AI are proving to be more popular
Another tip in the proverbial coffin for the metaverse is the success of the Ray-Ban AR Meta glasses, which have increased consumer interest in recent months. with features like the ability to record hands-freestream music, and talk to Meta AIthe glasses began sell traditional Ray-Ban in some retail stores in 2024. The company is now considering double the output of the glasses to meet consumer demand, Bloomberg reported this week.
With an eye on AI, the company is newer introduced Ray-Ban Display last yearare the same smart glasses that also include a display for apps, alerts, and directions on the right lens. The company has since paused international plans for this product, citing “unprecedented demand.” (Or, very conservative inventory estimates.)
With other companies, including OpenAI, Amazon, and various startups, looking for hardware AI devices as the next potential computing platform, VR looks even more than a relic of a vision date for the web that never happened.
Combined, these factors, and especially the adoption of AI as app platform canmaking it difficult for Meta to continue to justify spending in VR. However, Meta will focus on products with potential, such as Ray Ban sunglasses and AI, AI applications growthand large language model.