Meta’s enormous bet on virtual reality ended last week, with the company reportedly laying off roughly 1,500 employees from its Reality Labs division — about 10% of the unit’s staff — and shutting down several VR game studios, according to The Wall Street Journal. It’s a huge reversal for a company that, just four years ago, staked its entire identity on the concept. Few are going to miss it. As industry watchers might remember, Facebook rebranded itself as Meta in 2021, promising to usher in a new era of technology led by VR devices. In part, the decision was a bet on Gen Z’s preference to socialize in online games like Fortnite and Roblox as opposed to traditional social media apps. The change also helped Meta distance itself from the negativity surrounding its Facebook brand. Over the years, the brand had been damaged by data privacy scandals like Cambridge Analytica; reports from Facebook whistleblower Frances Haugen, who shared documents indicating Facebook knew of its negative impacts on children and teens; Congressional hearings over Facebook’s digital surveillance; its role in the spread of misinformation; its monopolistic practices, and more. Meta’s vision at the time was that the metaverse would be the next big social platform, where users connected in a virtual world via Meta’s Horizon Worlds app and played games on their VR headsets. Fast-forward, and the metaverse has effectively been abandoned in favor of AI. According to CNBC, some of the casualties include studios making VR titles inside Meta, like Armature Studio (“Resident Evil 4 VR“), Twisted Pixel (“Marvel’s Deadpool VR“), and Sanzaru (“Asgard’s Wrath). Meanwhile, the VR fitness app Supernatural, which Meta acquired in 2023 for $400 million, will no longer produce new content and will move into “maintenance mode.” Camouflaj, the studio behind the “Batman: Arkham Shadow” VR game, has also been impacted by layoffs, as reported by GeekWire. And last week, The Verge noted that Meta’s program to bring VR to work, Workrooms, is shutting down, as well. The news follows an earlier Bloomberg report from December, which said that Meta was slashing the virtual reality department’s budget 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 its Quest-branded VR headsets, with other third-party headset device makers. Unlike the news of Meta’s rebrand, the deprioritization of the company’s metaverse efforts should come as no surprise — the division lost money at an excessive rate, worrying investors, and had never turned a profit. In total, the company had funneled some $73 billion into Reality Labs. To put that into context, you’d have to spend <head> million per day for 200 years to match that kind of spending. “Building in the open” fails Besides being overhyped by investors and analysts alike, initial versions of the metaverse were just bad products. The goofy, soulless avatars didn’t even have legs, and one metaverse selfie of Meta CEO Mark Zuckerberg was so bad it even became a viral meme. In short, Meta was overpromising a future while its product still under-delivered. It was a failure of the “build in the open” model, where early tech products are shipped to consumers in hopes of getting feedback that can be used to iterate. Image Credits:Facebook That model works when customers are actively interested in a technology. But in the case of the metaverse, there was only middling consumer demand. Though Meta quickly gained a majority share of the VR market with its Oculus headsets, the headsets saw declining sales. Last spring, Counterpoint Research noted that global VR headset shipments had fallen by 12% year-over-year in 2024, which was their third consecutive year of declines. Meta had accounted for 77% of those 2024 headset shipments. Image Credits:Meta Meta, betting on the “if you build it, they will come” strategy, was more interested in the profits that could be made from running its own platform for apps and games than whether or not consumers even wanted these so-called face computers. Specifically, Zuckerberg was looking for a way to bypass the ability of Apple and Google to tap into Meta’s revenue through their app stores. “This period has…been humbling, because as big of a company as we are, we’ve also learned what it is 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, referencing the Apple-Google duopoly. “I’ve come to believe that the lack of choice and high fees are stifling innovation, stopping people from building new things, and holding back the entire internet economy.” He proposed that the metaverse could grow to a billion people in the next decade, hosting “hundreds of billions” of dollars in digital commerce. Analysts like McKinsey & Co. and investm