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Meta Trims Reality Labs Budget As The 'Metaverse Ambitions' Face Harsh Reality

AInvestFriday, Jul 19, 2024 4:10 am ET
2min read

Zuckerberg's Metaverse Dream Has Been Jolted Awake.

According to media reports, Meta is cutting expenses for VR, AR, and the Reality Labs division, which has been considered Zuckerberg's dream island. Since it was set up, Meta has poured enormous money into the department, but relentless investment has not made his metaverse dream come true.

Meta's cumulative losses in Reality Labs have exceeded $55 billion since 2019, with annual losses soaring from $4.5 billion in 2019 to $16.1 billion in 2023.

Massive Overhaul

Meta's Chief Financial Officer, Susan Li, said at a Reality Labs employee gathering in February this year that Reality Labs should aim for the $100 billion business opportunities in the AR and VR fields. This means that Zuckerberg's favorite metaverse has fallen out of favor.

As a result, Reality Labs' hardware team has been asked to cut nearly 20% of expenses by 2026, most of which will occur this year.

Within about a year, Reality Labs has undergone several rounds of layoffs and reorganizations, most of which have been cleansing of middle and senior management. After the layoffs, the number of direct subordinates of a manager increased from two to at least six.

In the layoffs at the end of June, the company ruthlessly laid off more than a dozen managers of Reality Labs, including Caitlin Kalinowski, who was in charge of AR glasses hardware, and Steve McClure, who was in charge of smart glasses hardware. These two teams now report directly to AR hardware engineering vice president Paul Greco.

This month, Meta also transferred most of the employees of Reality Labs' AI speech team to the generative AI department.

Still Not Giving Up on AR/VR

Back in 2021, when Zuckerberg renamed Facebook to Meta, he said that Meta would become a metaverse company. At that time, he emphasized: From now on, we'll be metaverse first, not Facebook first.

In a call with analysts last year, Zuckerberg insisted that the metaverse is a very long-term bet.

I can't guarantee you that I'm gonna be right about this bet, Zuckerberg said.

However, the sales of metaverse-related devices are still weak. According to estimates by the analysis company IDC, the shipment of AR/VR headsets fell by 23.5% last year and another 67.4% in the first quarter of this year.

Apple's Vision Pro mixed reality headset was expected to be a hit, but the market response has been mixed. It is reported that Apple has suspended the development of the next generation of Vision Pro and is focusing on launching a cheaper version to attract consumers.

Despite the pressure to cut expenses, Meta has not chosen to give up on AR and VR completely. According to several insiders, Meta is still developing a series of new Quest headsets and AR glasses. The company plans to launch them within the next three years.

This includes AR glasses that will be released next year, the Quest 4 VR headset planned for release in 2026 and 2027, and a high-end Quest headset to compete with Apple's Vision Pro.

It is worth mentioning that with the continuous heating up of AI devices, Meta added Meta AI assistant to its latest version of Ray-Ban smart glasses this spring. The assistant can recognize objects and assist users in completing tasks such as translation.

$META(META)

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