Alibaba lays off dozens from metaverse department: report

Getting your Trinity Audio player ready...

Chinese tech giant Alibaba (NASDAQ: BABAF) has reportedly laid off dozens from its metaverse division, joining other global tech titans like Baidu (NASDAQ: BAIDF) and Meta (NASDAQ: META) who have scaled down their metaverse ambitions.

The Hangzhou-based company has laid off employees in Yuanjing, its metaverse subsidiary, reports local daily South China Morning Post (SCMP). Citing a source familiar with the matter, the SCMP stated that the move is part of the company’s restructuring to optimize efficiency.

Alibaba established Yuanjing in 2021 to focus on the metaverse, developing software solutions and hardware components for the e-commerce giant and other third parties. According to one local outlet, Alibaba has since then invested “billions of yuan” in the unit, which reportedly employed “a few hundred workers.”

One of the unit’s most significant products was a cloud operating system that allowed clients to use the metaverse in video gaming. Later, it expanded to include other industrial applications. However, it has failed to garner the interest Alibaba projected.

When Alibaba launched Yuanjing, it was locked in a race to dominate the budding metaverse with its local rivals, including Tencent (NASDAQ: TCTZF), Baidu and TikTok owner ByteDance. That year, they all registered dozens of metaverse trademarks; Tencent, in particular, registered nearly 100 metaverse trademarks relating to its messaging, music and game apps.

The source revealed that despite the layoffs, Yuanjing will continue to operate and develop metaverse tools and applications and focus on providing metaverse-based services.

Alibaba joins Baidu in scaling down metaverse ambitions and pivoting the investment to newer tech like artificial intelligence (AI). The search engine giant’s ambitions to dominate the technology led to the hiring of Ma Jie in 2015 as the head of the metaverse and the launch of the XiRang metaverse app where users could interact and engage. However, Jie left the company last year, and since then, a lot of the investment has pivoted to AI.

It’s a similar story in the West. Meta, one of the key global giants that popularized the metaverse, laid off employees in Reality Labs last year. The cuts were concentrated on the Facebook Agile Silicon Team, a 600-member unit of the metaverse division focused on creating custom silicon.

Reality Labs has continued to bleed, with CEO Mark Zuckerberg still insisting that it will turn its fortunes around in the future. In Q3, the division posted $4.4 billion in losses. Overall, it has lost $58 billion since 2020.

Despite falling out of favor, the metaverse could be a $3 trillion market by 2031, said the United States Financial Industry Regulatory Authority (FINRA).

Watch: The Web3 trifecta—AI, metaverse & blockchain