Alibaba cuts ‘dozens of employees’ at metaverse unit as hype in sector cools down

The metaverse was promoted as a world of interconnected virtual communities, where people can meet, work and play, using virtual-reality headsets, augmented-reality glasses, smartphone apps or other devices. It was also touted as incorporating other aspects of online life, such as shopping and social media. Photo: Shutterstock

Alibaba Group Holding is scaling down its metaverse operations, according to a source familiar with the matter, making it the latest Big Tech company to pull back resources from the once-popular sector.

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.

Alibaba, owner of the South China Morning Post, did not immediately reply to a request for comment on Friday.

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Chinese companies often refer to job cuts as business "optimisation" to avoid drawing unwanted attention from the public.

The lay-offs, which were first reported by Chinese media on Friday, 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.

The source, however, said the Alibaba unit will continue to exist, with a focus on metaverse applications and tools, as well as providing metaverse-based services to customers.

Yuanjing was set up by Alibaba in 2021 amid the intense hype surrounding the concept of the metaverse. That year, a number of 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 opportunities in a virtual world referred to as the next iteration 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).

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 at the time, citing two 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 founding 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.

A number of 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.

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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.

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