Apple Is Stepping Into the Metaverse. Will Anyone Care?

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

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

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

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

Enter Apple. At its Worldwide Developers Conference starting on Monday, the tech giant is expected to debut its virtual reality hardware product: high-tech goggles that blend together the digital and physical worlds.

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

Apple has done this before. Eventual hits like the iPod, iPhone and Apple Watch started in niche markets that grew into big businesses. But even Apple executives have been skeptical about the company’s prospects in virtual reality, which, they say, may still 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 weren’t leaving their homes during the height of the pandemic. Metaverse-related start-ups 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 PitchBook. That drop-off cuts recent metaverse start-up investment to about a quarter of its peak in the first half of 2022, PitchBook said.

“The metaverse investment fad — it came and went, and now people are focused on A.I.,” said Doug Creutz, an analyst at Cowen & Company. “The people who were hopping on it because it was a sexy thing to talk about have hopped back off.”

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

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

Disney also laid off about 50 employees who had been working on metaverse projects, according to a person familiar with the cuts. News about Microsoft’s and Disney’s cuts was reported earlier 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 part of Meta’s recent big increase in spending. That division lost about $4 billion in the first three months of this year.

Mr. Zuckerberg cautioned that building the metaverse would be a money-losing proposition with little promise of early returns. Still, it has taken much longer than he anticipated. In recent months, Mr. Zuckerberg and his lieutenants have spent more time talking up Meta’s expertise in A.I., though he has bristled at the notion that the metaverse is no longer his focus.

“A narrative has developed that we’re somehow moving away from focusing on the metaverse vision,” he said in a call with investors in April. “So I just want to say upfront that that’s not accurate. We’ve been focusing on both A.I. and the metaverse for years now, and we will continue to focus on both.”

A Meta spokeswoman, Ashley Zandy, said: “We’ve always been clear that our metaverse vision is a long-term one, and nothing about that has changed. We are committed to our metaverse vision, and we’re seeing good momentum.”

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

For Apple, its new headset could be the beginning of a long-term plan that eventually leads to a more popular virtual reality product, like a lightweight pair of glasses.

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

Despite the decline in interest, many argue it’s far too soon to write off the idea of the metaverse. Companies that had been preaching the metaverse well before Meta popularized it, like 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 the mainstream attention to the concept after Facebook changed its name had spurred outlandish predictions about how soon people would be spending their time in immersive online worlds.

“This was more about timeline mismanagement,” Mr. Ball said. “The intense focus on the metaverse within a short period of time, with some arguing it was here now or was about to be, was bound to disappoint many.”

With their tens of millions of participants, user-generated content and digital economies, Roblox and Epic Games, which produces the battle royale game Fortnite, could provide 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, a 22 percent jump from a year earlier. Craig Donato, the company’s chief business officer, said that Roblox was working on expanding into other immersive online experiences, but that a full-fledged metaverse was still far away.

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

In March, Epic Games released new tools designed to help Fortnite players create and make money from their own games on the company’s platform, spurring the creation of an online economy in Fortnite — a cornerstone of the vision of the metaverse preached by Tim Sweeney, the company’s chief executive. Mr. Sweeney said mainstream interest for the metaverse attracted people who weren’t really invested in the space.

“Unfortunately, a lot of people tried to attach themselves to that trend without really delivering the goods,” he said. “But if you look at the trend, it’s continuing to grow, and it continues to look like exponential growth.”

Brian X. Chen and Karen Weise contributed reporting.

Kellen Browning is a technology reporter in San Francisco, where he covers the gig economy, the video game industry and general tech news. @kellen_browning

Mike Isaac is a technology correspondent and the author of “Super Pumped: The Battle for Uber,” a best-selling book on the dramatic rise and fall of the ride-hailing company. He regularly covers Facebook and Silicon Valley, and is based in San Francisco. @MikeIsaac Facebook

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