Meta's AI Strategy Dissected

Summary of Meta's AI Strategy Dissected

by The Jaeden Schafer Podcast

13m•January 20, 2026
Listen to Episode

Overview of Meta's AI Strategy Dissected (The Jaeden Schafer Podcast)

This episode reviews Meta’s multi‑year bet on the metaverse, why that strategy is now sharply scaling back, and why Meta is pivoting to AI and wearable hardware. Jaeden Schafer covers recent Reality Labs layoffs and studio closures, the economics and adoption failures of Horizon Worlds/VR, and the surprising consumer success of Meta’s Ray‑Ban smart glasses — arguing that Meta’s future strength will be in AI delivered through wearable hardware rather than immersive VR worlds.

What happened to Meta’s metaverse push

  • Reality Labs cuts and studio closures

    • Roughly 1,500 Reality Labs employees laid off; multiple VR game studios shuttered or scaled back (Armature Studios — Resident Evil 4 VR; Twisted Pixel; Sanzaru Games — Asgard’s Wrath; Camouflaj; Supernatural fitness app moved to maintenance).
    • Workrooms (Meta’s VR workspace product) reportedly being shut down.

  • Big spending with little payoff

    • Meta has invested roughly $73 billion into Reality Labs — a colossal sum (host compares it to $1 million/day for 200 years).
    • Bloomberg reported plans to cut the VR division budget by up to 30% and pause licensing of the Horizon OS to third‑party headsets.

  • Weak adoption and falling hardware demand

    • Global VR headset shipments fell ~12% year‑over‑year in 2024 (third consecutive annual decline); Meta held ~77% share of shipments.
    • Horizon Worlds downloads estimated at ~60 million globally since 2018 (≈40 million in the U.S.); engagement small relative to Meta’s main properties.
    • Early metaverse UX problems (lifeless avatars, awkward experiences) hurt consumer uptake.

Why the metaverse approach struggled

  • Low consumer demand: novelty use cases, discomfort (headset fatigue/headaches), and limited daily utility.
  • Poor product-market fit: Horizon and many early VR experiences were immature and not compelling enough to drive mass adoption.
  • Misaligned economics: Meta planned to take 47.5% of digital sales on Horizon Worlds (combining a 30% platform fee plus an additional 17% cut), which disincentivized creators and developers.
  • Strategic overreach: the rebrand to “Meta” aimed to reset reputation and pursue a big new platform, but the timeline and expectations (e.g., predictions of a trillion‑dollar metaverse economy) didn’t match real consumer behavior.

What Meta kept and why AI + wearables matter

  • Success: Ray‑Ban smart glasses

    • Meta’s Ray‑Ban smart glasses (camera, audio, AI features) have been well received; Bloomberg suggested Meta considered doubling production in 2024 to meet demand.
    • This category leverages familiar form factors (glasses), voice/mic integration, and always‑available sensors — a strong hardware vector for on‑device and ambient AI experiences.

  • Strategic pivot to AI

    • AI is already core to Meta’s product mix and is the company’s likely main focus going forward.
    • Wearables (glasses) provide a practical hardware platform to deliver AI services (hands‑free capture, ambient assistance, AR overlays) at consumer scale.

  • Competitive advantages

    • Meta’s massive prior R&D and hardware investments (from Reality Labs) left the company better positioned than many competitors to ship consumer wearables.
    • Scale, device experience, and integration across Meta’s ecosystem give it meaningful leverage in AI-enabled hardware.

Key takeaways

  • The metaverse experiment largely failed to reach mass adoption; high spending produced limited consumer traction and poor developer economics.
  • Meta is cutting back VR bets (headset apps, studio support, licensing) while redirecting resources to AI and wearable hardware.
  • Ray‑Ban smart glasses are a bright spot and illustrate a more realistic, incremental path for AR/AI adoption vs. immersive VR worlds.
  • Meta’s core advantage now: combining large AI models and services with successful consumer hardware form factors (glasses) and huge user/data scale.

Actionable insights (for different audiences)

  • Investors: watch Reality Labs budget moves and Meta’s AI product rollouts; wearable hardware adoption metrics will be an important leading indicator.
  • Developers/creators: be cautious about platform economics — prioritize platforms with sustainable revenue shares; explore AR/wearables where user growth is emerging.
  • Consumers/early adopters: expect more AI features in everyday wearables (hands‑free capture, assistant features) rather than full VR social worlds in the near term.
  • Product builders: incremental, well‑integrated experiences (wearables + AI) are likely to succeed sooner than ambitious, fully immersive metaverse platforms.

Notable figures and quotes from the episode

  • Meta Reality Labs investment: ~$73 billion.
  • Reported layoffs: ~1,500 Reality Labs employees.
  • Horizon Worlds downloads: ~60 million global since 2018 (estimates).
  • Platform cut for Horizon sales: 47.5% (30% platform fee + 17% extra).
  • VR headset shipments fell ~12% in 2024; Meta has ~77% market share of shipments.

Conclusion: The metaverse dream as originally sold is being pared back. Meta appears to be refocusing on AI and wearables — areas where its prior investments can translate into tangible consumer products and economics.