Chinese e-commerce giant Alibaba shrinks metaverse unit to streamline operations: report

In line with a broader trend among major tech companies, Chinese e-commerce giant Alibaba is scaling back its metaverse operations.

The restructuring, which aims to improve efficiency, led to layoffs at Yuanjing, Alibaba’s metaverse unit, as the company recalibrates its focus on the sector.

Reduction of the metaverse unit

According to the report by the South China Morning Post, which is also owned by Alibaba, the move has affected “dozens” of employees. The layoffs reportedly affected Yuanjing’s operations in Shanghai and Hangzhou, the capital of Zhejiang province.

The unit had hundreds of employees and received significant investments of “billions of yuan”. Despite the reduced number of employees, the unit will remain active and focus on customer-facing metaverse applications, tools and services.

As part of its metaverse efforts, Alibaba led a $60 million investment round in Nreal, a Chinese company specializing in augmented reality (AR) glasses.

Industry observers believed that virtual reality, virtual reality, and mixed reality technologies would serve as the primary gateway for users to interact with metaverse platforms in the future. In addition, Yuanjing developed a cloud-based operating system that facilitated the use of the metaverse in video games and various industrial sectors.

Last year, Alibaba Cloud, a branch of the Chinese e-commerce company, teamed up with Avalanche to create a launch pad for companies looking to deploy their metaverse applications on the Layer 1 blockchain.

Focus on AI

Alibaba’s decision to reduce its metaverse workforce mirrors the trend of other leading technology companies that are reducing their investments in the once-promising sector and reallocating resources towards artificial intelligence (AI).

In October of last year, Facebook’s parent company, Meta Platforms, laid off employees from its Facebook Agile Silicon Team, part of its Reality Labs division dedicated to the development of custom semiconductors. Also, Baidu’s head of metaverse, Ma Jie, left in May as the company shifted its focus more towards AI following the launch of ChatGPT by US startup OpenAI.

Although the initial hype behind the industry appears to have died down, data from Global Markets Insights suggests that the global industrial metaverse market was valued at $22.4 billion by 2023 and is expected to expand at a growth rate of compound annual growth rate (CAGR) of 29.5% from 2024 to 2032.

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