Alibaba cuts 'dozens of employees' at metaverse unit as hype in sector drops

Alibaba Group Holding is reducing its metaverse operations, according to a source familiar with the matter. This makes it the latest Big Tech company to pull resources from the once-popular sector, as detailed in a South China Morning Post report.

Employees removed as a part of ‘restructuring’

Dozens of employees at Yuanjing, the metaverse unit of e-commerce giant Alibaba, have been laid off, as part of a restructuring that aims to optimise and improve efficiency in the organisation, the source said, the South China Morning Post report detailed further.

Further, Alibaba, owner of the South China Morning Post, did not immediately reply to a request for comment. Chinese companies often refer to job cuts as business "optimisation" to avoid drawing speculative attention from the public.

The lay-offs, which were first reported by Chinese media on November 1, affected Yuanjing's operations in both Shanghai and Hangzhou, capital of eastern Zhejiang province. Yuanjing, which had received "billions of yuan" in investment, previously employed a few hundred workers, according to a report by online news outlet AI Jingxuanshe.

Alibaba’s unit will remain focused on Metaverse

The source, however, stated to the South China Morning Post that the Alibaba unit will continue to exist, with a focus on metaverse applications and tools, as well as providing metaverse-based services to customers.

Further, Yuanjing was set up by Alibaba in 2021 amid the intense hype surrounding the concept of the metaverse. That year, several major Chinese companies - including Alibaba, Tencent Holdings, ByteDance, Kuaishou Technology and carmaker Li Auto - scrambled to register their metaverse-themed trademarks with the National Intellectual Property Administration, as they rushed to explore potential opportunities in a virtual world referred to as the next evolution of the internet.

Alibaba's move to downsize its metaverse workforce reflects how other major tech companies are cutting back on their investments in the much-hyped sector while pouring more resources to artificial intelligence (AI).

Last year Facebook also removed employees at its Metaverse unit

In October last year, Facebook parent Meta Platforms was reported to be laying off employees at Facebook Agile Silicon Team, a unit of its metaverse-based Reality Labs division focused on creating custom semiconductors, according to a Reuters report based on sources.

Baidu executive Ma Jie, who headed the firm's metaverse operations, left the company in May last year, as the Chinese internet search giant put greater focus on AI, several months after US start-up OpenAI introduced ChatGPT to the world.

Alibaba's metaverse-related initiatives included leading a US$60 million funding round in Chinese augmented-reality (AR) glasses maker Nreal. Many considered AR, virtual reality and mixed reality technologies to be the primary means for people to access metaverse platforms in the future.

Meanwhile, Yuanjing developed a cloud-based operating system for using the metaverse in video gaming and various industrial applications. Several Chinese local governments had also rolled out a slew of work plans for metaverse-related projects, despite repeated warnings by state media outlets about engaging in the market frenzy.

In December 2022, Zhejiang province where Alibaba is headquartered launched a metaverse development plan that sought to create metaverse-related industries valued at more than 200 billion yuan (US$28 billion) by 2025.

Market participants and investors are going to follow these developments and reports carefully and take informed investment decisions depending on how the metaverse unit evolves going ahead.