Investment at its limit? Report: Meta tightens funding for the Metaverse department
Mark Zuckerberg's "metaverse dream" is fading. With increased investment in AI, Meta continues to reduce staff in the Reality Labs department and requires its hardware team to cut nearly 20% of expenses by 2026. Meta believes it has made a huge investment in Reality Labs, but the department has accumulated losses of over $55 billion since 2019
Meta is beginning to reassess its "burning money" department, Reality Labs, and plans to cut departmental expenses. The once popular metaverse is gradually falling out of favor at Meta, being replaced by artificial intelligence.
Reality Labs Department Asked to Cut Expenses by 20%
According to the US tech media The Information's report on July 18th, as Meta's spending on artificial intelligence increases, company executives are imposing more restrictions on the Reality Labs department. This department primarily develops AR/VR products and once carried Mark Zuckerberg's "metaverse dream."
A former department manager stated that the hardware team at Reality Labs has been asked to cut nearly 20% of expenses over the next two years, with most of the cuts taking place this year. Meta's CFO told employees that given the massive investments the company has made, Meta should position AR/VR as a trillion-dollar opportunity.
Meta's substantial investment in this department has not yet translated into expected results. Since 2019, Meta's cumulative losses in Reality Labs have exceeded $55 billion, with annual losses skyrocketing from $4.5 billion in 2019 to $16.1 billion in 2023. Additionally, over the past year, the department has undergone several rounds of layoffs and restructuring, mainly targeting mid to senior-level management.
Meta Not Retreating from AR/VR
According to multiple sources involved in the project, Meta is developing a series of new Quest headsets and AR glasses, planned for release over the next three years.
These include the first augmented reality glasses set to be released next year. In 2026, Meta plans to release the Quest 4 VR headsets, codenamed Pismo Low and Pismo High. Meta also plans to release a high-end Quest headset in 2027, codenamed La Jolla, aiming to compete with Apple's Vision Pro.
However, Meta's cumulative losses in Reality Labs continue to increase, leading to growing doubts within the company about the department. With AI gaining popularity, Meta has begun to curb spending on the Reality Labs department and continuously streamline team members.
At the end of 2022, Meta began a large-scale layoff, ultimately reducing its workforce by about 20%. Layoffs in the Reality Labs department were particularly prominent.
Over the past year, the department has undergone several rounds of layoffs, with most plans aimed at reducing mid to senior-level management. At the end of June this year, Meta laid off over a dozen senior management personnel in Reality Labs, including former head of AR glasses hardware Caitlin Kalinowski and former head of smart glasses hardware Steve McClure Currently, although Meta has not given up on AR or VR, the company is imposing more restrictions on this department and gradually shifting its focus to the AI department.
Meta Shifts Focus to AI
Reports indicate that Meta has transferred a portion of AI-related employees from Reality Labs to other departments. This month, the company moved most of the 140-person AI speech team from Reality Labs to the Generative AI team, marking a strategic shift for Meta in the field of AI.
The cost reductions in Reality Labs coincide with the softness in the VR market. According to estimates from data firm IDC, shipments of AR/VR headsets dropped by 23.5% last year and further declined by 67.4% in the first quarter of this year. Additionally, Meta's upcoming AR glasses (Hypernova) set to be released next year currently weigh over 70 grams and have a thick frame, which current and former Meta employees suggest may deter consumers.
Despite the soft VR device market, interest in AI devices is growing. Meta is also placing more focus on AI technology. This spring, the company added the Meta AI assistant to the latest version of Ray-Ban smart glasses. The assistant can identify objects and assist users in tasks such as translation.
In April this year, Meta also announced the launch of its third-generation large language model (LLM) Llama 3, calling it the "most powerful open-source LLM to date," and upgraded its AI assistant Meta AI based on Llama 3, calling it "the smartest AI assistant you can now use for free." Meta revealed that Llama 3 will be enabled on cloud platforms such as Amazon, Microsoft, Google Cloud, and will receive support from chip giants like NVIDIA and hardware support from Dell