- Alibaba’s metaverse division faces layoffs as its focus switches to AI.
- Major technology companies are reallocating resources away from the metaverse.
Alibaba, the Chinese e-commerce titan, is apparently pulling back its metaverse efforts, following a broader trend among digital giants reallocating resources in response to altering market demands. According to the South China Morning Post, Alibaba’s Yuanjing metaverse subsidiary has laid off dozens of staff as part of a company-wide restructure aimed at improving efficiency.
The company established the Yuanjing unit in 2021, during the peak of interest in virtual reality platforms, and operates it in both Shanghai and Hangzhou. Despite receiving billions of yuan in investments and initially employing several hundred individuals, the division will continue to function, but with a smaller staff. It will concentrate on developing metaverse apps, tooling, and services, however, its future is suspicious as the once-thriving sector shrinks.
The shift away from metaverse efforts occurs as artificial intelligence (AI) has risen to the forefront of technological innovation, gaining major investment and attention. As firms struggle to remain competitive, many are shifting their resources to AI development.
Shifting Industry Dynamics
Alibaba isn’t alone in its strategy turn. Other large Chinese technology companies, such as Tencent, ByteDance, and Baidu, were also interested in exploring the metaverse’s potential and had already engaged in a trademark registration frenzy. However, the swift advancement of AI has forced many to reconsider their goals. Baidu’s chief of metaverse operations left in May 2023 to focus on generative AI. Similarly, Facebook’s parent company Meta announced layoffs inside its Reality Labs sector, which is in charge of metaverse-related technology, following massive operating losses of $4.4 billion in just the third quarter.
Microsoft also made headlines in February 2023 when it terminated the Industrial Metaverse Core team, firing off approximately 100 employees. Disney took a similar route, closing its metaverse section as part of a bigger reorganization effort in March 2023.
Adding to the company’s pro-crypto position, Joseph Tsai became chairman of Alibaba, following long-time CEO Daniel Zhang Tsai’s leadership is expected to drive the company’s future activities in blockchain and metaverse, bringing in a new age for Alibaba as it navigates the difficult environment of digital technology.
As interest in the metaverse shrinks, Alibaba’s move to reduce its activities follows a broader industry trend of choosing AI development over virtual world projects. While the Yuanjing division continues to work, it faces the problem of remaining relevant in a shifting technology market dominated by AI advancements.
