How Did the Metaverse Fail So Badly?

Executive summary

Meta’s metaverse push is presented as a costly strategy built around a compelling vision but without a clear definition of the product, convincing evidence of demand, or a usable experience. The company rebranded around the idea in 2021 and invested heavily, while Horizon Worlds struggled to attract and retain users. Meta later cut spending, shifted attention toward AI and smart glasses, and scaled back the role of VR in Horizon Worlds.

The central business lesson: a large market forecast and an ambitious story cannot substitute for product-market fit, internal product use, and evidence that customers want the experience. Meanwhile, Meta’s established advertising platforms remained highly profitable but faced separate reputational and legal risks tied to their impact on young users.

Strategy, product, and execution

• Rebrand and strategic bet: In October 2021, Mark Zuckerberg renamed Facebook’s parent company Meta and framed the metaverse as the future of interaction, work, entertainment, and commerce. He projected that it could reach one billion people within a decade.
• Vision outpaced the product: The launch presentation used animated scenarios, such as photorealistic holograms and instant virtual travel, that were not demonstrations of working products. The actual Horizon Worlds experience was described as graphically primitive, with sparse worlds and avatars initially missing legs.
• The product concept remained unclear: Reports said Meta staff disagreed about whether the metaverse should be a social platform, a game, a virtual-world platform, or something else. The video treats this lack of a shared product definition as a major strategic weakness.
• Internal adoption was a warning sign: An internal Horizon Worlds leader asked why employees did not spend more time in the product and whether users could be expected to love something employees themselves did not. According to the video, the response emphasized getting staff to “fall in love” with it rather than first resolving the product’s shortcomings.
• Execution and organization: John Carmack, a prominent engineer who joined Meta through its Oculus acquisition, reportedly described the VR effort as ineffective and bloated before leaving in 2022.
• Strategic retrenchment: Meta reportedly planned a 30% reduction in its metaverse budget, laid off more than 1,000 Reality Labs employees, and closed several VR game studios. Horizon Worlds’ VR access was briefly announced for removal, then retained. The company said it would focus worlds more on mobile while continuing support for VR developers.
• Shift toward products with clearer demand: At Meta’s September 2025 Connect conference, the video says “metaverse” was mentioned twice and AI 23 times. Meta’s AI-powered smart glasses were presented as a more tangible product direction.
• The wider industry also pulled back: Disney closed its metaverse division in 2023; Walmart shut down Roblox metaverse experiences; and Microsoft disabled a mixed-reality feature in Teams. Apple launched the $3,500 Vision Pro in 2024, but the video says many buyers returned it within the 14-day period.

Market hype versus customer evidence

• In late 2021, metaverse discussion surged: Bernstein counted 449 mentions of “metaverse” during third-quarter earnings reports, up from 100 in the prior quarter.
• McKinsey estimated the metaverse could create up to $5 trillion in value by 2030 and predicted 15% of corporate revenue could come from it by 2027.
• Citi forecast 5 billion users, while Jefferies said the technology could change almost every aspect of people’s lives.
• A survey cited in the video found three-quarters of CEOs planned to hire metaverse specialists in 2022.
• The video argues that many companies could pursue the trend cheaply, such as by assigning an intern or a small team. Corporate experimentation therefore did not necessarily demonstrate deep commitment or validated demand.
• It links the boom in forecasts and investment to the late-2021 environment of near-zero interest rates, abundant capital, NFTs, and rising cryptocurrency prices. As rates rose, investors became more skeptical.

Adoption, monetization, and examples

• Horizon Worlds reportedly reached a few hundred thousand monthly active users at its peak, while later estimates put daily active users at around 900—far below Zuckerberg’s billion-user ambition.
• For comparison, the video says Second Life still attracted about 200,000 daily users. Decentraland disputed a report of only 38 active users and said its figure was closer to 8,000.
• Virtual real estate illustrated the risk of treating speculative assets as evidence of durable demand:
  • A buyer reportedly paid $450,000 to be Snoop Dogg’s virtual neighbor in The Sandbox; its value was later rumored to be about $100.
  • A Metaverse Group purchase of 116 Decentraland plots for approximately $2.4 million was said to be worth about $9,000 later.
  • CoinGecko research cited average virtual-land price declines of 95% in The Sandbox and more in Decentraland.
• Some virtual goods did sell at high prices: a Gucci bag on Roblox reportedly sold for more than $4,000, exceeding the price of a physical bag. This shows that digital goods can attract buyers, but does not establish broad demand for headset-based virtual worlds.
• Product quality also affected trust and safety. A psychotherapist reportedly experienced verbal and sexual harassment shortly after joining Horizon Worlds, suggesting that existing social-platform problems carried into the virtual environment.

Financial and organizational metrics

• Reality Labs operating losses cited in the video:
  • 2019: $4.5 billion
  • 2020: $6.6 billion
  • 2021: $10.2 billion
  • 2022: $13.7 billion
  • 2023: $16.1 billion
  • 2024: $17.7 billion
  • Most recent year cited: $19.2 billion
• The video puts cumulative Reality Labs operating losses at approximately $88 billion over seven years.
• Meta’s share price fell 64% in 2022 as investors worried about metaverse spending, then rebounded in 2023 and 2024. The video attributes that recovery to Meta’s core business rather than the metaverse.
• Meta’s family of apps—Facebook, Instagram, WhatsApp, and Messenger—generated more than $200 billion in total revenue in 2025, according to the video.
• When Bloomberg reported a planned 30% metaverse-budget cut, Meta shares rose and added about $60 billion in market value in one day. The video interprets this as a sign that investors welcomed reduced spending.
• Zuckerberg reportedly told investors that Reality Labs’ losses in 2026 would remain at the prior year’s level, but would likely be near a peak.
• The video also cites a projected 83% decline in Meta free cash flow for the year, alongside continued revenue growth and job cuts to fund AI ambitions.

Risks beyond the metaverse

The video contrasts the failure to attract users to VR with concerns about the platforms that already have enormous reach:

• It reports that a Los Angeles jury found Meta’s platforms, including Instagram, and YouTube were designed to be addictive to children and that users were not adequately warned. The jury awarded $6 million in damages, with 70% assigned to Meta.
• It also reports that a New Mexico jury ordered Meta to pay $375 million in civil penalties over child-protection failures.
• Internal documents shown in court reportedly discussed increasing time spent on the platform, especially among teenagers. Zuckerberg testified that Meta no longer set such goals, according to the video.
• The video says Meta stock lost $280 billion in market capitalization in March 2026 amid these issues—more than three times the amount it says Meta lost in the metaverse over seven years.

Implied business playbook and takeaways

• Validate demand before making a company-wide strategic commitment. Treat forecasts and industry enthusiasm as hypotheses, not proof that customers will adopt a product.
• Define the product and target use case. If teams cannot agree whether a product is a platform, social space, or game, customers are unlikely to understand its value either.
• Use real product demonstrations and customer behavior as evidence. Promotional animation cannot establish technical feasibility or user demand.
• Track internal usage as a diagnostic, not a substitute for customer research. Low employee use can reveal usability and value problems that need fixing.
• Prioritize product quality and safety. Poor usability, harassment, and weak user protection can undermine adoption and create legal and reputational costs.
• Use staged investment and explicit milestones. The video’s account implies that a large, prolonged commitment without sufficient traction can turn a strategic experiment into a major capital-allocation failure.
• Separate market growth from company value creation. A forecast of a multitrillion-dollar market does not show that a particular company can capture it profitably.
• Protect the core business while exploring new markets. Meta’s established advertising business generated substantial revenue, but the metaverse losses and separate platform liabilities exposed the risks of allocating capital and management attention poorly.

Presenters and sources mentioned

Presenter: Patrick Boyle.

People, organizations, and publications cited or featured in the video: Mark Zuckerberg; Samantha Ryan; John Carmack; Adam Mosseri; Jack Dorsey; Theo Von; Rolling Stone; The Economist; Bernstein; McKinsey; Citi; Jefferies; Improbable; CoinGecko; The Verge; Bloomberg; the Financial Times; Disney; Walmart; Microsoft; Apple; and the juries in the Los Angeles and New Mexico cases.

Sponsor mentioned: Odoo.