Well, there goes the metaverse!

Meta’s huge bet on VR came to an end last week, as the company reportedly laid off nearly 1,500 employees from its Reality Labs division — about 10% of the unit’s employees — and shuttered several VR game studios, according to the Wall Street Journal. It’s a big shift for a company that, just four years ago, staked its entire identity on this concept.

Few will miss her.

As industry observers will recall, Facebook rebranded itself as Meta in 2021, promising to usher in a new era of technology led by virtual reality devices.

In part, the decision was a bet on Gen Z’s preference for socializing in online games like Fortnite and Roblox rather than traditional social media apps. This change also helped Meta move away from the negativity surrounding its brand on Facebook. Over the years, the brand has been damaged by data privacy scandals such as Cambridge Analytica; Reports from Facebook whistleblower Frances Hogan, who shared documents suggesting Facebook was aware of its negative effects on children and teens; Congressional Hearings on Facebook’s Digital Surveillance; Its role in the spread of misinformation; its monopolistic practices, etc.

Meta’s vision at the time was that the metaverse would be the next big social platform, where users would connect in a virtual world via Meta’s Horizon Worlds app and play games on their VR headsets.

Fast forward, and the metaverse has effectively been abandoned in favor of AI.

According to CNBC, some of the victims include studios that make virtual reality titles within Meta, such as Armature Studio (“Resident Evil 4 VR”), Twisted Pixel (“Marvel’s Deadpool VR”), and Sanzaru (“Asgard’s Wrath.” Meanwhile, VR fitness app Supernatural, which Meta acquired in 2023 for $400 million, will no longer produce new content and will go into “maintenance mode.” Camouflaj, the studio behind VR game “Batman: Arkham Shadow” has laid off workers, GeekWire reported.

And last week, The Verge noted that Meta’s software to bring virtual reality to work, Workrooms, has also been shut down.

This news comes on the heels of a previous Bloomberg report from December, which said Meta was cutting the budget for its VR division by up to 30%. Around the same time, Meta announced that it was pausing its program to share its Meta Horizon operating system, which runs on Quest-branded VR headsets, with other headset makers.

Unlike the news of Meta’s rebranding, the deprioritization of the company’s shifting efforts should come as no surprise — the division lost money at an excessive rate, alarming investors, and never turned a profit.

In total, the company transferred about $73 billion to Reality Labs. To put that in context, you would have to spend $1 million every day for 200 years to match that kind of spending.

“Building in the open” fails

Besides being overrated by investors and analysts alike, the initial releases of the Metaverse were just bad products. These goofy, soulless avatars didn’t even have legs, and one of Meta CEO Mark Zuckerberg’s selfies was so bad that it became a viral meme. In short, Meta was overpromising the future while its product remained unfulfilled. It was a failure of the “build in openness” model, where early technology products are shipped to consumers in the hope of getting feedback that can be used for iteration.

This model works when customers are actively interested in technology. But in the transition, there was only moderate consumer demand. Although Meta quickly gained a majority share of the virtual reality market with its Oculus headsets, the headsets saw a decline in sales. Last spring, Counterpoint Research noted that global shipments of virtual reality headsets fell 12% year over year in 2024, the third straight year of decline. Meta accounted for 77% of 2024 headphone shipments.

Meta, which bet on an “if you build it, they will come” strategy, was more concerned with the profits that could be made from powering its platform of apps and games than with whether or not consumers even wanted so-called flip computers.

Specifically, Zuckerberg was looking for a way to bypass Apple and Google’s ability to leverage meta revenue through their app stores.

“This period has been… humbling, because as big as a company like ours is, we’ve also learned what it’s like to build for other platforms. And living under their rules has profoundly shaped my views on the tech industry,” Zuckerberg said in a keynote speech at the company’s Facebook Connect 2021 event, referring to the Apple-Google duopoly. “I’ve come to believe that lack of choice and high fees stifle innovation, prevent people from building new things, and cripple the entire Internet economy.”

He suggested this world would grow to include a billion people in the next decade, and host “hundreds of billions” of dollars in digital commerce. Analysts such as McKinsey & Company and investment bank Citi have backed up these dubious forecasts with their own strong estimates that the shift to a multi-trillion-dollar platform by 2030.

Meta may have had dollar signs in its eyes, but apps built for the metaverse weren’t adopted in huge numbers, at least for a company of Meta’s size.

While there’s no outside view of Meta’s VR app store, you can take a look at Meta’s apps along with their iOS and Android counterparts as an alternative for adoption. According to typical estimates from app intelligence provider Apptopia, the Meta Horizon app has been downloaded 60.4 million times globally and 39.8 million times in the US since May 2018. However, a better estimate of adoption is app activity.

From a US panel, Apptopia has figures for average sessions per daily active user in the US, which rose from 3.49 in January 2023 to 4.93 in January 2026. Although this is still a high mark for the app, it may not have been enough for the meta.

For comparison, outside of VR, Meta now has more than 3.5 billion daily active users across its social apps Facebook, Instagram, WhatsApp, and Messenger.

Of course, if all of this had worked, Meta would have created a new social empire, built on the back of virtual reality gaming — unlike Facebook’s early days as a social network, when partners like Zynga — whose games included Farmville and Words with Friends — were generating double-digit revenue streams for Facebook. (Eventually, a 30% cut in virtual goods sales on Facebook, coupled with the platform’s restrictive policies, prompted Zynga to launch its own gaming portal and shift to mobile.)

But this time, Zuckerberg telegraphed his desire to cash in on developers’ revenues very early. Meta might have had a better chance of attracting developers to VR design if it promised to undercut the standard 30% fees charged by Apple or Google, or those of other gaming platforms. Instead, Meta did the opposite: it charged higher fees.

Even before VR became a big platform worth investing in, Meta announced its plans to take 47.5% of digital asset sales within Horizon Worlds, consisting of 30% hardware platform fees and another 17.5% fees for Horizon Worlds itself. Unsurprisingly, the creators were not happy.

Just as bad, Meta wasn’t building the Metaverse with user safety as the top priority. As with its push to expand its social network, the company has tended to be reactive rather than proactive when it comes to safety features. For example, the company only rolled out its “Personal Boundaries” feature, which places a barrier between avatars, after reports that users were experiencing sexual harassment in the metaverse. In some cases, users have engaged in virtual rape and gang rape in the Meta game Horizon Worlds. Meta later dialed back the security feature a bit by setting Personal Boundaries to only default to “on” when the user interacts with “non-friends” in the metaverse and allowing users to turn it off completely.

In May 2022, TechCrunch asked a Meta representative to provide details on its support procedures for Horizon Worlds. The company described several tools, including blocking and reporting features, a “Safe Zone” button for users to instantly block and mute others, and a feature to temporarily remove annoying people from Places created in response to user feedback. Despite identifying these tools, Meta declined to specify what kind of actions it would take to address bad behavior by individuals.

At the time, users told TechCrunch that those who encountered abuse in the Metaverse would often react with an apparent gesture: Instead of recording the abuse, they would take off their headsets and take a break from VR. But when they returned, the harasser still appeared in the list of recent encounters, and it was too late to file an abuse report with the video and audio attached.

It appears that these types of scenarios were not thought through from the beginning, and there were no detailed policies about what constitutes abuse. When the Metaverse Code of Conduct was later published, it did not detail any consequences other than saying that Meta would “take action toward users.”

Also at this time, Meta declined to share the makeup of its team building the metaverse with TechCrunch. (But if we had to bet, we’d think there weren’t as many women on the project as men. This would reflect the makeup of the meta overall, so it’s not a bad bet!)

Augmented reality, mixed reality, and artificial intelligence are proving to be more popular

Another nail in the coffin of the shift has been the success of Meta’s Ray-Ban AR glasses, which have seen increased interest from consumers in recent months. With features like the ability to record hands-free, stream music, and chat using Meta AI, the glasses are starting to outperform traditional Ray-Ban glasses in some retail stores in 2024. The company is now considering doubling production of the glasses to meet consumer demand, Bloomberg reported this week.

With a focus on AI, the company most recently introduced Ray-Ban Display last year, similar smart glasses that also include a display for apps, alerts, and trends on the right lens. The company has since paused its international plans for the product, citing “unprecedented demand.” (Or rather, over-forecasting inventory).

With other companies, including OpenAI, Amazon, and many startups, eyeing AI hardware as the next potential computing platform, virtual reality appears to be little more than an ancient relic of a vision for the web that never materialized.

Combined, these factors, especially the adoption of AI as a potential application platform, make it difficult for Meta to continue to justify spending on VR. Instead, Meta will focus on products that have potential, such as Ray Ban and AI glasses, the growth of AI applications, and large language models.