Tag: Horizon Worlds

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 $1 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.

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.

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 investment bank Citi backed up this questionable forecast with their own heady estimates of the metaverse becoming a multi-trillion-dollar platform by 2030.

Meta may have had dollar signs in its eyes, but the apps built for the metaverse weren’t being adopted in massive numbers, at least for a company of Meta’s size.

Though there’s no external visibility into Meta’s own VR app store, you can look at Meta’s apps with iOS and Android counterparts as a proxy for adoption. According to modeled estimates from app intelligence provider Apptopia, the Meta Horizon app has been downloaded 60.4 million times globally and 39.8 million times in the U.S. since May 2018. A better estimate for adoption, however, is its app activity.

From a U.S. panel, Apptopia has figures for the average sessions per daily active user in the U.S., which grew from 3.49 in January 2023 to 4.93 in January 2026. While that’s still a high-water mark for the app, it may not have been enough for Meta.

For comparison, outside of VR, Meta now has over 3.5 billion daily active users across its social apps Facebook, Instagram, WhatsApp, and Messenger.

Of course, had this all succeeded, Meta would have created a new social empire, built on the back of VR gaming — not unlike Facebook’s early days as a social network, when partners like Zynga — whose games included Farmville, and Words with Friends — drove double-digit revenue streams for Facebook. (Ultimately, Facebook’s 30% cut of virtual goods sales, combined with restrictive platform policies, drove Zynga to launch its own gaming portal and pivot to mobile.)

But this time, Zuckerberg telegraphed his desire to tap into developer revenue far too soon. Meta might have had a better shot at attracting developers to build for VR if it promised to undercut Apple or Google’s standard 30% fees, or those of other gaming platforms. Instead, Meta did the opposite: it charged more.

Even before VR became a sizable platform worth investing in, Meta announced its plans to take a whopping 47.5% of the sales of digital assets within Horizon Worlds, consisting of a 30% hardware platform fee and another 17.5% fee for Horizon Worlds itself. Creators, unsurprisingly, were not happy.

As bad, Meta wasn’t building the metaverse with user safety as a top priority. As with its rush to scale its social network, the company tended to be reactive rather than proactive about safety features. For instance, the company only rolled out its “Personal Boundary” feature, which put a buffer between avatars, after reports that users were experiencing sexual harassment in the metaverse. In some cases, users had even engaged in virtual rape and gang rape in Meta’s Horizon Worlds. Meta later dialed back the safety feature a bit by adjusting the Personal Boundary to only default to “on” when a user is engaging with “non-friends” in the metaverse and allowing users to switch it off entirely.

In May 2022, TechCrunch asked a Meta rep to detail its support measures for Horizon Worlds. The company described several tools, including blocking and reporting features, a “safe zone” button for users to instantly block and mute others, and a feature to temporarily remove disruptive people from venues that was built in response to user feedback. Despite outlining these tools, Meta declined to say what sort of actions it would take to address individual bad actors’ behavior.

At the time, users told TechCrunch that those who faced abuse in the metaverse would often react with an obvious move: instead of recording the abuse, they would take off their headset and take a break from VR. But when they returned, their harasser would still appear in their list of recent encounters, and it was too late to submit a report of the abuse with the video and audio attached.

These types of scenarios were seemingly not thought through from the start, and detailed policies around what constitutes abuse didn’t exist. When a metaverse code of conduct was later published, it still didn’t detail any consequences beyond saying Meta would “take action on users.”

Also around this time, Meta declined to share the makeup of its team building the metaverse with TechCrunch. (But if we had to bet, we’d guess there weren’t as many women on the project as men. This would reflect the makeup of Meta overall, so it’s not a bad bet!)

AR, mixed reality, and AI proved more popular

Another nail in the proverbial coffin for the metaverse was the success of Meta’s Ray-Ban AR glasses, which have seen increased consumer interest in recent months. With features like the ability to record hands-free, stream music, and chat with Meta AI, the glasses began to outsell traditional Ray-Bans in some retail stores in 2024. The company is now considering doubling the output of the glasses to meet consumer demand, Bloomberg reported this week.

With an eye on AI, the company more recently introduced Ray-Ban Display last year, which are similar smart glasses that also include a display for apps, alerts, and directions on the right lens. The company has since paused its international plans for this product, citing “unprecedented demand.” (Or rather, overly conservative inventory forecasting.)

With other companies, including OpenAI, Amazon, and various startups, looking to hardware AI devices as the next potential computing platform, VR seems even more of a dated relic of a vision for the web that never came to pass.

Combined, these factors, and particularly the adoption of AI as a possible app platform, make it hard for Meta to continue to justify spending on VR. Instead, Meta will focus on the products that have potential, like its Ray Ban and AI glasses, AI app’s growth, and large language models.