Alibaba, a Chinese e-commerce giant, is reducing its metaverse activities as part of its organizational restructuring to prioritize efficiency. This aligns with other tech companies shifting towards AI. Yuanjing, a metaverse division at Alibaba based in Shanghai and Hangzhou, has been part of the changes, as reported by the South China Morning Post (SCMP).
Yuanjing, established in 2021 during heightened industry interest in virtual worlds and augmented reality, reportedly received billions of yuan in investment and once employed several hundred staff. Despite the restructuring, the division remains active in developing metaverse applications, tools, and related services for Alibaba's clients.
Alibaba cutting down metaverse is similar to other companies cutting down VR instead of investing in AI, indicating an industry trend. Like other tech powerhouses, Alibaba's consumer goods division is also a sign of the increasing importance of AI, which has come to a high point of interest and investment. In 2023, companies such as Tencent and Baidu started to pull out their metaverse projects and focus on generative AI and machine learning instead. According to an internal memo, Baidu also dismissed its head of metaverse in May 2023, which could signify a shift in focus to AI.
The same trend is observed globally companies such as Meta recently fired workers who are developing the metaverse in its division, Reality Labs. Reality Labs' operating loss amounted to $4.4 billion in Q3 of 2023, and net cumulative losses since 2020 have totaled $58 billion. Similarly, Microsoft let go of the Industrial Metaverse Core team in 2023, and Disney shut down its Metaverse division, citing frequent organization restructuring for resources.
Despite the reduction in its metaverse division, Alibaba has maintained its position in virtual and augmented reality development. The company's Yuanjing unit will continue operating and delivering metaverse-related applications, tools, and services.
This move corresponds with other Alibaba funding activities in new technologies, for instance, its 2022 role in spearheading a $60m fundraising campaign for Nreal, a Chinese maker of augmented reality glasses. The capital helped Alibaba pursue its vision of offering consumers engaging and innovative experiences and allowed the company to further research new technological applications for virtual store spaces.
Alibaba Cloud, the company's cloud computing segment, has also been involved in metaverse work. Alibaba Cloud merged with Avalanche and established a blockchain metaverse to build decentralized, safe, and scalable virtual environments. The appointment of the pro-crypto executive Joseph Tsai as Alibaba's Chairman last year reinforced the group's commitment to looking for blockchain and metaverse value-add, even while it refines its efforts.
The metaverse market is still set to rise globally, with estimated additions of more than $800 billion by 2026 and a CAGR of 44.4% from 2023 to 2030. Even though there was a lot of hype around the metaverse in 2021, the technology remains a market with further expansion opportunities as companies scale it up and incorporate blockchain and AI.