What's happened
Meta is considering reducing its Reality Labs division's budget by up to 30%, potentially leading to layoffs. The move follows years of heavy losses and a strategic shift towards AI, with the company focusing less on its metaverse ambitions amid investor scrutiny and internal restructuring. The news comes after a series of meetings at Zuckerberg's Hawaii compound.
What's behind the headline?
Meta's strategic shift signals a recognition that the metaverse may not deliver the expected returns. The planned budget cuts and potential layoffs reflect a reassessment of the division's viability. The company's focus on AI, exemplified by recent hires and investments, indicates a belief that AI will be the primary driver of future growth. This pivot aligns with investor sentiment, which has shown little appetite for continued metaverse spending, especially after Reality Labs' losses surpassed $70 billion. The decision to scale back metaverse efforts suggests Meta will prioritize AI development and hardware like Ray-Ban smart glasses, which have seen sales tripling. This move could reshape Meta's long-term strategy, emphasizing profitability over visionary but costly projects. The internal restructuring and leadership changes underscore a broader effort to streamline operations and focus on more promising technological avenues, likely impacting thousands of employees and the company's innovation trajectory.
What the papers say
Business Insider UK reports that Meta is considering up to 30% cuts in Reality Labs, following a meeting at Zuckerberg's Hawaii compound where strategy was discussed. The division has accumulated over $60 billion in losses since 2020, and the company is shifting focus towards AI, with recent hires like Alan Dye leading new initiatives. The NY Post highlights that Meta's shares rose over 4% after the announcement, reflecting investor confidence in the pivot away from metaverse spending. Both sources note that the cuts could include layoffs as early as January, and that the company's recent surge in stock value is driven by AI developments like Ray-Ban smart glasses, which have tripled in sales. The coverage underscores a significant strategic realignment, moving away from the costly metaverse projects that have failed to generate expected returns, towards AI as the future of Meta's growth.
How we got here
Meta initially rebranded from Facebook in 2021, emphasizing the metaverse as its future. Despite heavy investments, Reality Labs has accumulated over $60 billion in losses since 2020. The company has recently pivoted towards AI, launching new initiatives like the Superintelligence Lab and hiring AI leaders, amid declining enthusiasm for the metaverse and mounting financial losses.
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