Chinese tech giant Alibaba has reportedly laid off dozens of employees at its metaverse unit, Yuanjing, as part of a restructuring exercise. The layoffs primarily impacted employees at Yuanjing’s operations in Shanghai and Hangzhou.

According to the South China Morning Post, Alibaba is the latest tech giant to resort to layoffs. The cuts at Yuanjing, which previously employed hundreds of employees and received significant investments, signal waning interest in the metaverse among traditional corporations.

However, a source told the South China Morning Post that Yuanjing will continue to exist but with a greater focus on metaverse applications and tools. With this decision, Alibaba appears to be following the lead of U.S. tech giant Meta, which has continued to invest in its loss-making Reality Labs division.

As has been widely reported, Reality Labs’ losses accelerated in the third quarter, reaching $4.4 billion. The latest loss brings the metaverse unit’s total losses since 2019 to over $50 billion. Despite the steep losses, Meta founder Mark Zuckerberg has continued to tout the potential of Reality Labs. However, like Alibaba’s metaverse unit, Reality Labs reportedly laid off some of its employees in October 2023.

In addition to facing cooling user interest, Chinese tech giants that invested in the metaverse have encountered regulatory challenges and declining economic conditions, forcing them to reconsider their strategies. For example, Tencent, which embraced the metaverse frenzy in 2021, has faced challenges related to user data and content regulation.

However, other Chinese tech firms, such as search engine Baidu, have scaled back metaverse-related activities to focus on artificial intelligence (AI), which is currently the subject of much hype.

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