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Meta has set out plans to meaningfully cut back its metaverse efforts next year, as chief executive Mark Zuckerberg narrows his focus on winning the artificial intelligence race.
Executives at the $1.7tn social media company have discussed potential budget cuts as high as 30 per cent for its metaverse group, which includes teams working on Horizon Worlds, its avatar-filled social virtual reality experience, and its Quest virtual reality headsets, according to a person familiar with the discussions and first reported by Bloomberg.
The plans for the potential lay-offs could yet change.
The news was welcomed by investors, who have questioned Zuckerberg’s spending on a long-term initiative that failed to gain traction with consumers and promised no immediate returns. Shares rose as much as 7 per cent on opening in New York before trimming gains to 4 per cent, adding about $60bn to the company’s market value.
Meta declined to comment.
It comes a day after Zuckerberg announced that the company was building a new design studio within its virtual and augmented reality department Reality Labs, focused on wearable AI-powered devices, such as smart glasses. The company poached top Apple design executive Alan Dye to head the new studio.
Zuckerberg in 2021 announced a push to build an avatar-filled “metaverse” where users globally could socialise, game and shop in virtual spaces, going as far as to rebrand the company from Facebook to Meta.
However, that effort has been hampered by technical difficulties, safety concerns and a lack of consumer appetite, prompting some investors to pressure Zuckerberg to curb spending. The Reality Labs division has lost more than $70bn since 2021.
A bright spot at Reality Labs has been the emerging success of wearables such as Meta’s Ray-Ban smart glasses. Zuckerberg has recently doubled down on his commitment to developing AI-powered wearables, arguing that they are vital to his bet on “superintelligence”.
The social media titan is now pouring billions of dollars into hiring top AI researcher talent and building costly infrastructure to support plans to develop “personal superintelligence”, which Zuckerberg hopes will be smarter than humans. This includes developing open-source AI models, chatbots within Meta’s suite of apps and the AI glasses that he believes will replace smartphones as the ubiquitous computing platform.
The shake-up in strategy has led to a series of executive reshuffles and rounds of lay-offs at the company over the past year.
Investors remain cautious about the AI push, however. In October, Meta’s shares dropped more than 10 per cent, wiping more than $208bn from its valuation — its second-biggest one-day loss — after Zuckerberg announced plans for even more aggressive spending on AI next year.