Mar 17, 2023 - Technology

Meta's metaverse is on the back burner

Global <span style='color:#ff942f;'>Metaverse</span> vs <span style='color:#835bff;'>generative AI</span> funding
Data: PitchBook; Chart: Alice Feng/Axios

A year and a half after renaming itself after its metaverse initiative, Meta has noticeably de-emphasized that vision for the future.

The big picture: Meta is fully in sync with a moment that has many large companies cutting headcounts, shuttering side projects and chasing the promise of generative AI.

  • This week the firm announced a massive second round of layoffs. It recently killed off its Portal platform. And CEO Mark Zuckerberg, while not disavowing his metaverse dream, sounds more eager to talk about AI.

By the numbers: Meta is moving in tandem with the wider industry.

  • According to PitchBook data compiled by Axios Media Deals' Tim Baysinger, through March 16, 2022, companies that played in the metaverse or web3 space had raised nearly $2 billion in funding. So far this year, metaverse and web3 companies have raised $586.7 million, a bit more than a quarter of last year's total.
  • The totals for generative AI companies are the inverse: Through March 16, 2022, the generative AI space saw $612.8 million in funding. This year, it's up to $2.3 billion.

Driving the news: In a note Tuesday announcing Meta would lay off 10,000 more employees, Zuckerberg spotlighted AI work and reduced the metaverse to an "also."

  • “Our single largest investment is in advancing AI and building it into every one of our products,” Zuckerberg wrote. “Our leading work building the metaverse and shaping the next generation of computing platforms also remains central to defining the future of social connection.”
  • Last month, Zuckerberg shared that the company is “creating a new top-level product group at Meta focused on generative AI to turbocharge our work in this area.”

One of Meta’s most touted metaverse products, Horizon Workrooms, was designed to facilitate a collaborative, virtual working environment. In Tuesday’s note, however, Zuckerberg stressed the importance of employees working together in an office.

  • “Our early analysis of performance data suggests that engineers who either joined Meta in-person and then transferred to remote or remained in-person performed better on average than people who joined remotely,” he wrote. “I encourage all of you to find more opportunities to work with your colleagues in person.”

Flashback: In October of 2021, then-Facebook changed its corporate name to Meta.

  • The move was seen as an attempt to shift attention away from intensifying scrutiny and criticism of Facebook and Instagram, as well as a way to capitalized on the metaverse buzz that had enchanted investors and developers.
  • Since then, Meta faced user declines and an ad market slowdown, with experts questioning whether the social behemoth was facing an identity crisis.

State of play: Over the past few months, generative AI platforms like ChatGPT have dominated tech conversations. Meanwhile, Meta has reportedly had a difficult time keeping users on its virtual reality products.

  • According to an internal presentation shared with The Verge last month, Meta’s vice president for VR Mark Rabkin told employees that the three-year-old Quest 2 is struggling with new users.
  • “Sadly, the newer cohorts that are coming in, the people who bought it this last Christmas, they’re just not as into it," Rabkin said, comparing recent purchases with early adopters. "We need to be better at growth and retention and resurrection.”
  • Further reporting from The Verge found that users weren’t coming back to Meta’s flagship Horizon Worlds social space, with only one in 10 users returning to the app within a month.

What they’re saying: “Our priorities haven’t changed since last year,” Zuckerberg said in last month’s fourth quarter earnings call. “The two major technological waves driving our roadmap are AI today and over the longer term the metaverse.”

  • Meta did not respond to a request for comment.

Yes, but: For all its talk of AI, Meta still has big metaverse plans in the works for both hardware and software.

  • The internal presentation reported by The Verge showed that Meta is dedicated to a robust hardware roadmap over the next few years, with new VR headsets, AR glasses and a “neural interfaces watch.”
  • Additionally, much of its messaging around AI positions new generative AI capabilities as tools to help build experiences within the metaverse.

What to watch: A hardware war is still brewing as companies continue to iterate on, or introduce new, metaverse-adjacent products.

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