Meta's VR layoffs, studio closures underscore Zuckerberg's massive pivot to AI

In a significant shift, Meta, the tech giant formerly known as Facebook, has begun laying off employees from its virtual reality (VR) division, Reality Labs, as it pivots towards artificial intelligence (AI) and mobile gaming. This decision comes just over four years after Mark Zuckerberg rebranded the company to emphasize a future rooted in virtual interactions. According to insider reports, the layoffs affect over 1,000 workers, approximately 10% of the hardware division that produces Quest VR headsets and oversees the Horizon Worlds social platform. Meta's chief technology officer, Andrew Bosworth, is scheduled to address Reality Labs staff during an all-hands meeting, signaling the gravity of this restructuring. The company, once heavily invested in the metaverse, is now reallocating resources to focus on AI advancements. Zuckerberg has shown a keen interest in AI, investing significantly in top talent, including a hefty $14.3 billion to recruit Scale AI founder Alexandr Wang to spearhead the company’s AI strategy. Additionally, Vishal Shah, who previously led Meta’s metaverse initiatives, has transitioned into the role of vice president of AI products. The latest studio closures include Armature Studio, Twisted Pixel, and Sanzaru, along with the technical unit Oculus Studios Central Technology. Jobs are also being cut at Ouro Interactive, a new studio launched in 2023 to create exclusive content for Horizon Worlds. Meanwhile, Supernatural, a VR fitness app acquired for $400 million, has entered maintenance mode, no longer receiving new updates. This strategic shift was hinted at in December, when Meta announced it would redirect its Reality Labs budget away from VR projects in favor of developing AI-driven wearables. A spokesperson indicated that the savings from these layoffs would support growth in wearable technology this year. Despite the downsizing, Meta remains committed to VR. The company continues to engage developers from Roblox, a popular virtual gaming platform, to create experiences for Horizon Worlds. While Roblox boasts over 150 million daily users, Horizon has struggled to attract a comparable audience, peaking at a few hundred thousand active users per month. To enhance its appeal, Meta is exploring a mobile version of Horizon Worlds, responding to the rising popularity of mobile gaming. Analysts suggest this pivot is a logical response to the underwhelming performance of VR headsets and the booming mobile gaming market. Meta's journey into the VR space began with the $2 billion acquisition of Oculus VR twelve years ago. However, Reality Labs has reported over $70 billion in cumulative losses since late 2020, with a recent quarterly loss of $4.4 billion against $470 million in sales. As Meta navigates its complex AI strategy, the company is set to unveil its next AI model, codenamed Avocado, in the first quarter of this year. With its stock performance trailing behind competitors like Alphabet, Meta faces pressure to realign its business strategies effectively. The underwhelming reception of Horizon Worlds has raised concerns among developers, many of whom feel frustrated due to the lack of clear performance metrics. In an effort to rejuvenate the platform, Meta is encouraging developers to create engaging, kid-friendly games, inspired by the likes of Roblox and Minecraft. In February, the company launched a $50 million Creator Fund aimed at incentivizing developers to enhance in-game experiences within Horizon Worlds, particularly through mobile accessibility. As Meta continues to evolve, the focus on AI and mobile gaming may offer new opportunities for growth and user engagement.