Alibaba Group Holding has scaled back its metaverse ambitions, laying off dozens of employees as part of a strategic shift within its Yuanjing division. South China Morning Post reported layoffs, citing sources close to the restructuring.
The move positions Alibaba among other big tech companies that are scaling back their investments in the metaverse, as attention turns to artificial intelligence (AI).
The layoffs affected Yuanjing’s offices in Shanghai and Hangzhou, the capital of Zhejiang province, where Alibaba is headquartered. Originally launched in 2021, Yuanjing was Alibaba’s dedicated metaverse unit, designed to explore virtual worlds with substantial support.
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Alibaba’s Metaverse division had hundreds of employees
At its peak, Alibaba’s Metaverse division employed several hundred people, focusing on Metaverse applications, tools, and customer services. However, as part of an “optimization” initiative, the company has reevaluated and reduced its engagement in the metaverse.
Chinese companies, particularly tech giants, often label workforce reductions as “business optimization” to deflect possible criticism.
In the case of Alibaba, no official statement has been released to confirm the exact nature of the restructuring or future plans for the Yuanjing unit.
Yuanjing’s creation in 2021 was part of a broader trend in Chinese tech, where companies like Tencent, ByteDance, and Kuaishou, with Automaker Li Auto has been working to obtain metaverse-related trademarks from the National Intellectual Property Administration of China.
At that time, the Metaverse was touted as the Internet’s next frontier, an immersive digital realm that captured the imagination of investors and technology leaders around the world.
ALIBABA REMOVES METAVERSE TEAM AS AI TAKES CENTER STAGE
Looks like Chinese e-commerce giant Alibaba is downsizing its Metaverse team, dropping dozens to focus more on AI – a classic move, right?
Their Yuanjing unit, which appeared in 2021 when the Metaverse was the next big… pic.twitter.com/76JUtZzjkh
– IBC Group Manager (@ibcgroupio) November 4, 2024
In addition to Yuanjing, Alibaba has already invested in augmented reality (AR) and virtual reality (VR) projects as pathways to the metaverse.
Alibaba notably invested $60 million in Nreal, a Chinese manufacturer of AR glasses.
AR and VR technologies have been seen as fundamental to accessing metaverse platforms, promising applications ranging from gaming to industrial operations. Yuanjing himself has developed a cloud-based system to support the use of the Metaverse in video games and other applications.
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Businesses are turning to AI
However, Alibaba’s recent reduction reflects a global recalibration within the technology industry. Companies that once led the charge in the metaverse are diverting their resources to AI, which is being hailed as the next revolutionary technology.
Other major players, including Meta (formerly Facebook) and Baidu, have also reduced their investments in the metaverse.
Last October, Meta reportedly laid off staff within its Reality Labs division, which focused on developing Metaverse-related chips.
Similarly, Baidu saw a major shift in focus towards AI following the release of OpenAI’s ChatGPT, with the own the head of the metaverse, Ma Jie, will leave the company in May 2023.
Despite waning corporate enthusiasm, local Chinese governments continue to support metaverse-related projects. Zhejiang province, for example, announced a plan in December 2022 to develop a metaverse industry valued at 200 billion yuan ($28 billion) by 2025.
Still, Alibaba’s pivot suggests that tech giants may find more immediate potential in advances in AI rather than In develop vast virtual worlds.
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