Chinese E-commerce Giant Alibaba Downsizing Metaverse Unit to Streamline Operations

In a move reflecting a broader trend among major tech companies, Alibaba, the Chinese e-commerce giant, is downsizing its metaverse operations. This restructuring aims to enhance operational efficiency and has resulted in layoffs within Yuanjing, Alibaba's dedicated metaverse unit.

According to a report from the South China Morning Post, which is owned by Alibaba, this downsizing has impacted "dozens" of employees, particularly in the unit's offices located in Shanghai and Hangzhou, the capital of Zhejiang province.

Shift in Focus

Despite the reduction in workforce, Yuanjing will continue its operations, shifting its focus towards metaverse applications, tools, and customer-centric metaverse services. Previously, the unit had employed hundreds and received significant investments amounting to billions of yuan.

As part of its metaverse initiatives, Alibaba led a $60 million investment round in Nreal, a Chinese firm specializing in augmented reality (AR) glasses. Industry analysts believe that AR, virtual reality, and mixed reality technologies will serve as key gateways for user engagement with metaverse platforms in the future.

Technological Developments

Yuanjing has also developed a cloud-based operating system to facilitate metaverse applications in video games and various industrial sectors. Last year, Alibaba Cloud collaborated with Avalanche to create a launchpad for companies aiming to deploy their metaverse applications on the Layer 1 blockchain.

Focus on AI

Alibaba's decision to downsize its metaverse workforce aligns with trends among other leading tech firms, which are reallocating resources towards artificial intelligence (AI).

For instance, in October, Meta Platforms, the parent company of Facebook, laid off employees from its Reality Labs division, which focuses on developing custom semiconductors. Similarly, Baidu’s metaverse head, Ma Jie, departed in May as the company intensified its focus on AI following the launch of ChatGPT by OpenAI.

Market Outlook

While the initial excitement surrounding the metaverse sector seems to be diminishing, data from Global Markets Insights indicates that the global industrial metaverse market was valued at $22.4 billion in 2023 and is projected to grow at a compound annual growth rate (CAGR) of 29.5% from 2024 to 2032.