Look, I may be one of the few holdouts who still thinks that Meta’s metaverse concept isn’t dead, and that the company remains focused on bringing its VR social worlds to fruition for the next generation, even if it’s not discussing those plans publicly at the moment.
But Meta’s own cost-cutting efforts don’t support that, with the company informing staff that it’s cutting another 10% of employees from its Reality Labs division, the department that’s headed by long-time Meta executive Andrew Bosworth, and oversees development of its Quest VR headsets and AI glasses devices, among other elements.
As reported by The New York Times, Meta is making the cuts in order to enhance its focus on AI, as opposed to its metaverse project.
As per NYT:
“The cuts to Reality Labs – which has roughly 15,000 employees – could be announced as soon as Tuesday. The layoffs would be a fraction of Meta’s total workforce of 78,000, but are set to disproportionately affect those in the metaverse unit who work on virtual reality headsets and a VR-based social network, said the people, who asked not to be named since they were not authorized to discuss confidential decisions. The cuts could end up affecting more than 10 percent of the division, one of the people said.”
Business Insider reported last week that Bosworth has called an urgent staff meeting for this Tuesday, in which he’s expected to layout the company’s vision for Reality Labs moving forward, which obviously relates to this staffing re-assessment.
So what’s going on? Is Meta actually giving up on VR, and/or the metaverse more broadly?
I would say no, but with so much now being invested into AI development, Meta’s clearly re-thinking its path forward, and how it can utilize its AI systems to power the next stage.
I suspect that might be the key culprit, that Meta increasingly believes that 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 an appearance on the Joe Rogan podcast, Zuckerberg discussed the rapid development of AI systems, and noted that:
“Probably in 2025, we at Meta, as well as the other companies that are basically working on this, are going to have an AI that can effectively be a sort of midlevel engineer that you have at your company that can write code.”
This is especially relevant for VR development, with AI systems now enabling simplified VR object and environment creation based on conversational prompts.
So while this may seem like a significant staffing reduction, which points to a re-assessment of its metaverse ambitions, it could be that Meta simply believes that it can replace staff with AI in at least a portion of these roles.
But then again, Reality Labs is still running at a significant loss, and this could also be a simple rationalization based on market demand.
Reality Labs has cost Meta over $70 billion in development over the past six years, and that’s accounting for the revenue benefits of increased interest in AI glasses and cumulative sales of VR headsets.
And demand for both is increasing, slowly, but surely. Reality Labs grew its sales by 40% in 2024, with the popularity of its Ray Ban Meta glasses helping to drive adoption of its advanced products.
So, there is interest there. But when you’re talking billions, and Meta’s concurrently sinking hundreds of billions in the development of AI data centers, there’s going to be some level of cost crunch, which, in this instance at least, seems to have hit Reality Labs.
Though again, I do think that this is Meta dogfooding its own AI tools, and reinforcing its own belief in what AI models can achieve.
Zuck is all in on the potential of AI, which is still in its early stages, and I would bet that Meta’s planning to reduce staff over time, as it continues to increase its AI capacity.
This will be a strategy that helps to offset those massive development costs, and reinforce Zuckerberg’s belief that AI is the future.
Will that end up paying off? Well, at those levels of investment, it’s going to take Meta a long time to cover the costs, before it even thinks about making a profit.
But in Zuck we (or they) trust.
