Apple steps into the metaverse. Does anyone care?

Mark Zuckerberg embraced a digital world known as the metaverse when he said in November 2021 that he would change his company’s name from Facebook to Meta.

A month later, Bill Gates, a founder of Microsoft, wrote that he believed most virtual meetings would transition from two-dimensional video grids “to the metaverse, a 3D space of digital avatars, within two or three years.”

Shortly after, Microsoft announced it would spend $70 billion to buy video game giant Activision Blizzard, saying the deal would provide “building blocks for the metaverse”.

But since then, interest in the metaverse has stalled. Technology investors have turned to new trends like artificial intelligence. And some metaverse projects have been shut down at companies like Disney and Microsoft, despite that burst of enthusiasm.

Enter Apple. At the Worldwide Developers Conference starting Monday, the technology giant is expected to showcase its virtual reality hardware product: high-tech glasses that unite the digital and physical worlds.

The company is betting it can entice consumers with mixed reality products better than Meta, whose high-end Quest Pro headsets haven’t sold well, and spark public interest in virtual reality in a way that other companies have not done. The Apple headset is expected to cost about $3,000 and look like ski goggles, according to current and former employees familiar with its development.

Apple has done this before. Ultimate hits like the iPod, iPhone, and Apple Watch started in niche markets that grew into major corporations. But even Apple executives have been skeptical of the company’s prospects in virtual reality, which, they say, may not be ready for its mainstream moment.

Apple declined to comment.

The idea of ​​an immersive, all-encompassing online universe made more sense to many investors when people didn’t leave their homes during the height of the pandemic. Metaverse-related startups raised about $664 million in venture capital in the first five months of 2023, a drastic drop from the more than $2.93 billion they raised in the same period in 2022, according to data compiled by pitch book. That pullback reduces recent metaverse startup investment to about a quarter of its peak in the first half of 2022, PitchBook said.

“The reverse investment craze — it came and went, and now people are turning to AI,” said Doug Creutz, an analyst at Cowen & Company. “The people who jumped on it because it was sexy to talk about have jumped off again.”

This year, Microsoft shut down a virtual reality world called AltspaceVR, which it acquired in 2017. The company also laid off some employees who worked on its HoloLens mixed reality headset and eliminated or reassigned teams who had worked on metaverse projects, according to a person familiar with the changes.

In a statement, Microsoft said it is still committed to the metaverse and pointed to the news that it was rolling out 3D avatars for Microsoft Teams meetings.

Disney also laid off about 50 employees who had worked on metaverse projects, according to a person familiar with the cuts. News about The cutbacks of Microsoft and Disney was previously reported by The Wall Street Journal.

At Meta, Mr. Zuckerberg’s plan to restructure the company around metaverse-centric technologies has been costly. Meta’s hardware unit, Reality Labs, which includes its Oculus headsets, is responsible for a significant portion of Meta’s recent big increase in spending. That division lost about $4 billion in the first three months of this year.

Mr. Zuckerberg warned that building the metaverse would be a money-losing proposition with little promise of early returns. Still, it cost a lot longer than he expected. In recent months, Mr. Zuckerberg and his lieutenants spent more time discussing Meta’s expertise in AI, though he grew angry at the idea that the metaverse is no longer his focus.

“There’s been a narrative that we’re somehow moving away from the focus on the metaverse view,” he said in an April interview with investors. “So I just want to say upfront that that’s not right. We have focused on both AI and the metaverse for years, and we will continue to focus on both.”

A spokeswoman for Meta, Ashley Zandy, said: “It has always been clear to us that our metaverse vision is a long-term vision, and that has not changed. We are committed to our inverted view and we see good momentum.

On Thursday, Mr. Zuckerberg bullied a version of the Meta Quest 3, the company’s latest VR headset, which will cost $499 and possibly release this year. Consumers have spent more than $1.5 billion on apps and games in Meta’s Quest app store to date.

For Apple, the new headset could be the start of a long-term plan that will eventually lead to a more popular virtual reality product, such as lightweight glasses.

Some analysts have suggested the company could take an experimental approach, measuring how early adopters use it and then making changes before marketing a future version to a wider audience. That would be similar to what it did with the Apple Watch. It was initially marketed as a general companion to the iPhone, but later transformed into a fitness gadget.

Despite dwindling interest, many feel it’s much too soon to write off the idea of ​​the metaverse. Companies that preached the metaverse long before Meta popularized it, such as Roblox and Epic Games, are still committed to their long-term visions.

Matthew Ball, a venture capitalist who has written a book about the metaverse, said mainstream attention to the concept after Facebook changed its name led to bizarre predictions about how quickly people would spend their time in immersive online worlds.

“This was more about mismanagement of the timeline,” Mr. Ball said. “The intense focus on the metaverse within a short period of time, with some claiming it was or was coming, would no doubt disappoint many.”

With their tens of millions of participants, user-generated content, and digital economies, Roblox and Epic Games, who produce the battle royale game Fortnite, could offer a more compelling vision of a metaverse.

Roblox, a platform with millions of games often aimed at children, had 66.1 million daily users in the first quarter of 2023, up 22 percent from a year earlier. Craig Donato, the company’s chief business officer, said Roblox was working on expanding into other immersive online experiences, but a full-fledged metaverse was still a long way off.

“We’re very into the first or second inning,” Mr. Donato said.

In March, Epic Games has released new tools designed to help Fortnite players create and earn their own games on the company’s platform, fueling the creation of an online economy in Fortnite – a cornerstone of the metaverse vision preached by Tim Sweeney, the CEO of the company. Mr. Sweeney said the mainstream interest in the metaverse attracted people who weren’t really invested in the space.

“Unfortunately, a lot of people tried to get attached to that trend without actually delivering the goods,” he said. “But if you look at the trend, it continues to grow and it continues to look like exponential growth.”

Brian X Chen And Karen Weise reporting contributed.