Mark Zuckerberg of Meta Platforms Inc. Is anticipated to significantly reduce funding for the development of the so-called metaverse, an initiative he formerly described as the company's future and the justification for rebranding from Facebook Inc.
TL;DR
- Meta Platforms Inc. plans significant metaverse funding cuts, potentially 30%, impacting Reality Labs and Horizon Worlds.
- Job terminations are likely in the metaverse division starting January, as Meta seeks universal 10% reductions.
- Investors question metaverse spending, while regulators raise privacy concerns within digital environments.
- Mark Zuckerberg is shifting focus from metaverse to AI models and related hardware products.
Company leaders are contemplating possible reductions in funding for the metaverse division, potentially reaching 30% for the upcoming year. This division encompasses the virtual environments product Meta Horizon Worlds and its Quest virtual reality segment, as indicated by individuals privy to the discussions who requested anonymity when discussing confidential corporate strategies. Such substantial cutbacks would very likely involve job terminations beginning as soon as January, according to these sources, although a definitive resolution remains pending.
The suggested metaverse reductions are included in the company's yearly financial strategy for 2026, which involved several discussions at Zuckerberg’s estate in Hawaii during the previous month, according to the sources. Zuckerberg has instructed Meta's leadership to identify 10% reductions universally, a typical demand during comparable budget periods in recent years, they further stated.
The metaverse division was instructed to implement more substantial reductions this year, as Meta hasn't encountered the anticipated level of widespread industry rivalry concerning the technology, according to sources. The bulk of the planned workforce reductions will probably affect Meta's virtual reality unit, which accounts for the largest portion of metaverse expenditures, these individuals indicated. Reductions would also impact Horizon Worlds.
Investors have questioned the whole metaverse initiative, viewing it as a drain on funds, while regulators have asserted that children's privacy and security have been jeopardized within these digital environments. Meta's stock surged by as much as 5.7% following the opening of trading in New York, marking its most significant daily increase since July 31.
A spokesperson for Meta declined to comment.
Despite Mark Zuckerberg's enduring belief that individuals will eventually inhabit virtual realms for both work and leisure, Meta's aspirations for the metaverse have yet to materialize. In 2021, amidst scrutiny concerning user safety and data privacy, Zuckerberg initiated a company-wide rebranding centered on the metaverse concept, subsequently allocating substantial resources to this endeavor.
The metaverse division operates under Reality Labs, Meta's segment dedicated to ambitious, long-term ventures such as VR headsets and AR glasses. This division has incurred losses exceeding $70 billion since early 2021. Zuckerberg has significantly reduced his public discussions and mentions of the metaverse during company financial reports, now prioritizing the creation of advanced AI models that power AI chatbots and other generative AI offerings. He is also concentrating on hardware products more closely associated with these AI-driven experiences, including Meta's Ray-Ban smart display eyewear.Play Video
Some analysts and investors have long advocated that Zuckerberg rid himself of Reality Labs products that continue to drain resources without providing much revenue in return. In April, Mike Proulx, a vice president at research and advisory firm Forrester, predicted that Meta would “shutter its metaverse projects, like Horizon Worlds” before the end of the year.
Meta’s “Reality Labs division continues to be a leaky bucket,” he stated in an email then, highlighting the division's deficits. Ceasing metaverse initiatives, Proulx remarked, “would allow the company to give more focus to its AI projects including Llama, Meta AI, and AI glasses.”
Meta is still committed to building consumer hardware, and recently hired Apple Inc.’s top design executive to help.
