In line with a broader trend among major tech firms, Chinese e-commerce behemoth Alibaba is downsizing its metaverse operations.

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

Downsizing Metaverse Unit

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

The unit once had hundreds of employees and received significant investments in the “billions of yuan.” Despite the reduction in the employee count, the unit will still remain active and will shift its focus to metaverse applications, tools, and customer-oriented metaverse services.

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

Industry observers believed that AR, virtual reality, and mixed reality technologies would serve as the primary gateways for users to engage with metaverse platforms in the future. Furthermore, 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 build a launchpad 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 among other leading tech firms that are scaling back their investments in the once-promising sector and reallocating resources toward 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 Rea