As Microsoft embraces AI, it says sayonara to the metaverse

Remember the metaverse?

Before the recent explosion of hype around artificial intelligence (AI), the metaverse was anointed the Next Big Thing, ready to transform the world, technology, and work in ways never before imagined. Soon we would all live and work together in a virtual world far more interesting, vital, and productive than the drab reality in which we’re stuck.

It wasn’t just Mark Zuckerberg who led the metaverse charge by changing Facebook’s name to Meta. Microsoft hyped it as well, notably when CEO Satya Nadella said, “I can’t overstate how much of a breakthrough this is,” in his keynote speech at Microsoft Ignite two years ago.

That was then, in the long-ago, unenlightened days of early 2021. Now, tech companies are much wiser, they tell us. It’s AI at heart of the coming transformation. The metaverse is yesterday’s news.

Microsoft officially denies it, but the company has practically shut down work on the metaverse. The speed with which it happened is stunning — and it’s a cautionary tale for businesses tempted to invest in the technologies currently on their hype lists.

When the metaverse was the future

Nadella, in that 2021 keynote, made big promises: “When we talk about the metaverse, we’re describing both a new platform and a new application type, similar to how we talked about the web and websites in the early ’90s…. In a sense, the metaverse enables us to embed computing into the real world and to embed the real world into computing, bringing real presence to any digital space. For years, we’ve talked about creating this digital representation of the world, but now, we actually have the opportunity to go into that world and participate in it.”

Nadella envisioned big benefits for both consumers and businesses. “It’s no longer just looking at a camera view of a factory floor; you can be on the floor,” he said. “It’s no longer just videoconferencing with colleagues; you can be with them in the same room. It’s no longer just playing a game with friends; you can be in the game with them.”

The company backed up what it said with money, beefing up development in projects such as its Mixed Reality Tool Kit MRTK, the virtual reality workspace project AltspaceVR (which it had bought back in 2017), its HoloLens virtual reality headset, and its industrial metaverse unit, among others.

How the metaverse became the past

That investment didn’t last long. Microsoft recently announced plans to lay off 10,000 people, and the ax has already begun to fall. Let’s be clear — layoffs are when the rubber hits the road; they make it very clear what’s important to a business and what isn’t, what’s in a company’s future and what’s about to be history.

The message couldn’t be any clearer: the metaverse isn’t a significant part of  Microsoft’s future. The entire Altspace VR team was let go. So was the MRTK team. Given that a new version of MRTK is slated to be released this coming month, that’s especially telling about what Microsoft thinks of a metaverse future.

Even more telling is that Microsoft is laying off all 100 members of its Industrial Metaverse Core team, which it founded only in October. There have been other metaverse-related cuts as well, including to HoloLens.

Despite these moves, the company maintains it’s still all in, saying it “remains committed to the industrial metaverse.”

Words are one thing, actions do indeed speak louder. To look for the truth, follow the money. While Microsoft has invested more than $10 billion in AI, it’s been beating a hasty retreat from anything to do with the metaverse with the recent spate of layoffs. Clearly, the company believes AI, not the metaverse, is the future.

What this means

So, what does this mean for you and your company? First, if you’ve got big metaverse plans involving Microsoft-related technologies, it’s time to re-examine what you’re doing. Microsoft will support its metaverse only around the edges, meaning to a certain extent, you’re on your own. Take that into account in deciding your next steps.

It also means you should be careful about buying too much or too quickly into Microsoft’s AI promises. Yes, the company appears to be going all in on the technology, with billions of dollars in investments and high-profile pronouncements about its use in Bing. It claims AI will essentially be built into everything it does from now on.

There’s no doubt AI will affect much of what the company does in the years ahead. But remember, it was just two years ago that Nadella could not “overstate how much of a breakthrough” the metaverse was. And now Microsoft has all but abandoned it.

Be cautious when it comes to AI. You need to invest in it, but don’t go all in until it’s clear Microsoft will itself be all in for many years to come.