Alibaba Scales Back Metaverse Operations Amid Shift Toward AI Focus

Alibaba Scales Back Metaverse Operations Amid Shift Toward AI Focus

Chinese e-commerce giant Alibaba is reportedly scaling back its metaverse operations, joining a wave of tech companies that have pulled resources from this once high-profile sector. According to the South China Morning Post, a publication owned by Alibaba, dozens of staff members in the company’s metaverse division have been laid off as part of a restructuring aimed at boosting efficiency.

Established in 2021 amid soaring interest in virtual worlds, Alibaba’s Yuanjing metaverse unit has locations in Shanghai and Hangzhou. However, the sector’s initial momentum has slowed significantly, largely overshadowed by a growing industry pivot toward artificial intelligence, which now demands the majority of tech companies’ resources and investment.

Although the division reportedly received an investment in the “billions of yuan” and previously employed several hundred staff, it will continue to operate, providing essential tools and services for metaverse applications. Alibaba also previously led a $60 million funding round in Chinese augmented reality company Nreal in early 2022, underscoring its metaverse ambitions at the time.

At the height of the metaverse trend, several other Chinese tech giants, including Tencent, ByteDance, and Baidu, were in fierce competition, registering trademarks and staking claims in the emerging virtual space. However, the latest downsizing at Alibaba reflects a broader trend: tech firms across the industry are reallocating resources to AI.

Other major players have made similar moves. In May 2023, Baidu’s head of metaverse operations left the company as Baidu refocused its efforts on generative AI. Facebook parent company Meta also scaled back its metaverse ambitions in October 2023, laying off employees from its Reality Labs unit, which has posted an operating loss of $4.4 billion in the third quarter alone, with cumulative losses exceeding $58 billion since 2020.

Earlier in 2023, other tech giants scaled back their metaverse plans as well. Microsoft shut down its Industrial Metaverse Core team in February, reportedly cutting 100 jobs, while Disney dissolved its metaverse division in March as part of its own restructuring efforts.