Alibaba Joins Big Tech Metaverse Exodus — What’s Next for the E-Commerce Giant?
Metaverse Layoffs suggest a new direction for Alibaba. | Credit: Pexels.
Key Takeaways
- Alibaba’s metaverse arm is laying off dozens of employees.
- The layoffs highlight the industry’s shift away from the metaverse.
- Virtual reality and augmented reality headset sales are declining.
China’s Alibaba has become the latest technology giant to scale back its metaverse operations as the industry continues its sharp shift to AI development.
Interest and investment in the metaverse, once technology’s favorite buzzword, has significantly declined after Big Tech failed to find real success chasing its grand vision.
Alibaba Metaverse Layoffs
The layoffs will affect dozens of employees in the metaverse unit of the Chinese multinational tech giant, South China Morning Post reported , citing sources familiar with the matter.
Yuanjing, the company’s metaverse arm, will reportedly see layoffs in both Hangzhou and Shanghai.
The company’s metaverse arm previously employed over two hundred workers and had raised “billions of yuan” in investment.
Despite the layoffs, the unit will continue to run operations focusing on metaverse applications.
Launched in 2021, Yuanjing was built by Alibaba during the wave of metaverse hype fueled by Meta CEO Mark Zuckerberg’s public claims that it would reinvent the industry.
The subsequent rebrand of Facebook to Meta helped a further surge of global investment and interest in metaverse technologies.
What’s Next for Alibaba?
In 2023, Alibaba announced it was undergoing a significant restructuring to decentralize its business operations by splitting into six distinct business groups, each focusing on different areas of Alibaba’s diverse portfolio.
The company’s reorganization aims to channel growth in a variety of different areas, including Cloud Intelligence and Global Digital Commerce.
Alibaba’s restructuring comes amid a tough regulatory crackdown in China. In September, Jack Ma, Alibaba co-founder, called for the company’s employees to “believe in the future” and “believe in the market.”
Despite increased competition from other companies, the co-founder claimed that it was “expected, as no company can always stay on top in any field forever.”
Industry Shift to AI
Alibaba’s metaverse cuts highlight the technology industry’s shift away from its once favorite buzzword.
The initial excitement around the metaverse, which aimed to create immersive virtual worlds for social interaction, work, and entertainment, has waned due to technical hurdles and limited user adoption.
Despite significant investments from Big Tech, creating the hardware and software for a compelling metaverse experience proved more challenging and costly than anticipated.
In October, Minecraft developer Mojang Studios announced plans to discontinue support for virtual reality (VR) headsets after March 2025.
VR and Augmented Reality (XR) are key components of the metaverse but have yet to achieve major mainstream success.
According to a report from global market intelligence firm IDC, sales of VR and AR headsets declined 67.4% year over year in the first quarter of 2024.
In contrast, AI has demonstrated widespread and immediate applications across sectors, from healthcare and finance to customer service and retail.
Tech giants such as Alibaba are reallocating resources to meet the rising demand for AI, particularly in generative AI models like OpenAI’s ChatGPT.
Is a Future Metaverse Possible?
In August, Meta announced it was axing its original plans for its high-end mixed-reality headset, marking a metaverse departure from one of its fiercest defenders.
In 2021, Zuckerberg described the metaverse as the next major evolution of the internet. The CEO envisioned the technology supporting everything from virtual offices to entertainment and fitness.
However, after investing millions into VR and AR technology, the company failed to see any real returns on its vision.
Horizon Worlds, Meta’s first landmark attempt at creating a metaverse social space, was met with major criticism from users. Poor graphics, clunky controls, and an abundance of antisocial behavior plagued the platform.
Despite these challenges and a shift to AI development, Zuckerberg has remained committed to the idea that the metaverse will become an essential part of how people interact with technology in the future.
Microsoft Gives up on Metaverse Dreams, Shifts Focus to Real-World Profits
Meta Axes Mixed-Reality Headset: Is Zuckerberg’s Metaverse Dream Dead?