Tencent Deserts it Metaverse Business Amid Economic Clampdown

Chinese multinational technology company Tencent is pulling back its metaverse plans to roll out its virtual reality (VR) hardware citing unfavorable economic conditions. 

In effect, there will be major cutbacks in its metaverse unit staff strength as well as its operational cost. This will be a crucial game changer for the internet juggernaut which increased its workforce by almost 300 employees last year.

Tencent was so enthusiastic about developing both virtual reality software and hardware at an “extended reality” XR unit which it launched in June. The technology conglomerate had gone ahead with the metaverse investment last year as a way of making its foray into the nascent industry which had spurred the interest of many at the time. 

A few months after the official launch of the XR unit, Tencent signed a memorandum of understanding (MoU) with Web3.0 firm Strange Universe Technology to create and host virtual enterprise experiences for businesses. The cloud computing company was responsible for providing VR-related products and cloud services, including its real-time cloud rendering service to Strange Universe Technology.

One of Tencent’s prominent projects was to build a cloud gaming hand-held controller but according to people familiar with the matter, the problem of attaining quick profitability as well as the capital-intensive nature of the enterprise caused a shift from that initial focus. Based on an internet forecast, the earliest time for profitability in the XR business to become feasible is around 2027. 

Ultimately, one of the sources confirmed that “Under the company’s new strategy as a whole, it no longer quite fit in,” this is in addition to the fact that the company’s metaverse arm does not have a list of promising games and non-gaming applications. 

Metaverse Ecosystem Suffers Loss in 2022

Noteworthy, last year was a challenging time for the crypto industry which was also evident in the metaverse ecosystem. 

By Q3, Facebook’s parent company Meta had reported up to $3.7 billion in losses from its metaverse arm. The firm also had to undergo a massive layoff exercise to reduce operational costs and stabilize its business. 

However, unlike Tencent, Meta’s Chief Executive Officer (CEO) Mark Zuckerberg remains bullish about the metaverse ecosystem and has budgeted $19 billion for its operations this year.