Alibaba Lays Off Dozens from its Metaverse Unit Amid Sector Slowdown

Alibaba Group has laid off dozens of employees from its metaverse division, Yuanjing, in light of a decline in the buzz about the metaverse. By restructuring the teams in the Shanghai and Hangzhou offices, the Chinese multinational technology company aims to enhance organizational efficiency. However, despite these cutbacks, the company reassures that its metaverse efforts will continue, focusing on metaverse tools and services for its customers.

Founded in 2021 during a period of intense enthusiasm for the metaverse, Yuanjing had been part of Alibaba Group Holding Ltd. (NYSE: BABA)‘s wider effort into virtual and augmented reality technologies. At its most successful point, the unit received investment running up to billions and employed a team of about 300 members. However, with the metaverse technologies market not meeting expectations, many companies, including Alibaba, are reassessing their investments in this space.

The move by Alibaba is not unique. Other major Chinese tech firms, such as Tencent and ByteDance, have also decided to scale back their metaverse projects, citing waning interest in the sector. These companies, along with Alibaba, are shifting their focus from the metaverse to more practical and widely adopted technologies like artificial intelligence (AI), which has seen rapid growth since the success of OpenAI’s ChatGPT.

Alibaba remains optimistic about the metaverse’s potential, with its cloud computing arm, Alibaba Cloud, continuing to position it as the “next generation of the internet.” The company highlights the metaverse’s ability to bridge the digital and physical worlds, integrating virtual experiences with real-world applications like e-commerce, remote services, and online education. Despite the layoffs, the company is committed to exploring the long-term possibilities of the metaverse.

The trend of rethinking metaverse investments is not limited to Chinese companies. Global giants, including Apple, have also scaled back their focus on augmented and virtual reality technologies. Devices like the Ray-Ban Stories and Meta’s mixed-reality headsets have not seen the consumer adoption many expected. As a result, companies are diverting their resources away from metaverse-related projects toward AI, now the new focal point of innovation.

While Alibaba’s layoffs reflect a shift away from the metaverse as a core area of investment, the company is not abandoning the sector entirely. Instead, it is realigning its resources to better match current market realities, with AI now taking center stage in the company’s growth strategy. This mirrors a broader trend across the tech industry, where enthusiasm for the metaverse has tempered in favor of more immediately impactful technologies like AI.

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