I'm Calling It: The Metaverse Is Over

Quick Summary

This Tech Brew Ride Home episode covers significant developments in AI industry drama at Thinking Machines, Meta's decisive pivot away from VR/metaverse investments, YouTube's policy changes on sensitive content monetization, and Cloudflare's acquisition to protect creators from AI data exploitation. The host declares the metaverse "over" at Meta as the company systematically dismantles its VR business divisions.

Key Topics

• Thinking Machines Exodus: Multiple senior researchers leaving the AI startup for OpenAI, signaling deeper issues with product strategy and funding challenges
• Meta's Metaverse Retreat: Discontinuation of VR business products including Workrooms, Quest headset sales to businesses, and multiple VR game studios
• YouTube Monetization Expansion: Policy shift allowing full monetization of videos discussing sensitive topics like abortion, self-harm, and abuse
• Cloudflare's Creator Protection: Acquisition of Human Native to build a system where AI developers pay creators for training data
• Vibe Coding Boom: AI-powered no-code app development gaining momentum with Replit launching iOS app creation tools

Main Points

• Thinking Machines Imploding: The startup that raised a $2 billion seed round is experiencing a mass exodus of talent to OpenAI and Meta. Sources reveal the company lacks clear product strategy, hasn't trained a foundation model, and struggled to raise new funding while seeking a $50 billion valuation (up from $10 billion). The situation mirrors OpenAI's 2023 "Blip" when Sam Altman was briefly ousted. Researchers across the AI industry report exhaustion from constant drama and executive departures, despite the sector's critical importance to GDP growth and potential AGI breakthroughs.
• Meta's Definitive Metaverse Abandonment: Meta is discontinuing Workrooms (February 16, 2026) and ceasing Quest headset sales to businesses (February 20, 2026). The company has also shuttered three VR game studios, abandoned the Supernatural fitness app, and gutted the Batman Arkham Shadow studio. CEO Mark Zuckerberg has clearly redefined "metaverse" to mean mobile and smart glasses rather than VR. This follows a 10% layoff of the Reality Labs division (1,000+ jobs). The primary remaining audience appears to be young teens and children, making B2B VR an inefficient use of resources.
• YouTube's Sensitive Content Monetization Shift: YouTube is reversing strict 2017 "adpocalypse" restrictions by allowing full monetization of non-graphic videos about abortion, self-harm, suicide, domestic/sexual abuse, LGBTQ+ rights, and guns. The policy shift reflects advertiser comfort with broader content and represents a responsibility transfer from YouTube to parents through enhanced parental controls. This change eases automated demonetization decisions while maintaining content guidelines, though it may benefit controversial brands like MyPillow.
• Cloudflare's Pro-Creator AI Strategy: Cloudflare acquired Human Native (UK startup) to build infrastructure where AI developers pay creators for training data. This complements the company's August 2025 AI Crawl Control product that lets sites restrict or monetize AI scraping bots. CEO Matthew Prince frames this as protecting "the longevity of the open internet" and represents Cloudflare's "fourth act" focused on content creator monetization. The company's stock is up 60% in the last year due to its cybersecurity + AI positioning.
• Vibe Coding Acceleration: Replit launched mobile apps enabling users to build iOS applications using natural language prompts, with integrated Stripe monetization. The startup is nearing a $9 billion valuation (up from $3 billion in September 2024). Claude Code from Anthropic reached $1 billion annualized revenue in six months; Cursor raised $2.3 billion at $29.3 billion valuation. This trend threatens traditional software stocks (iShares expanded tech ETF down 11% in three months) as AI agents automate coding work.

Speaker Insights

Brian McCullough delivers the analysis with measured skepticism about industry hype. Key observations:

• On AI industry drama: "Tell me about it" acknowledges researcher exhaustion is justified given nascent industry importance
• On the metaverse: His declaration "I'm officially calling it" is definitive—Meta's actions speak louder than rhetoric
• On YouTube changes: Notes the shift is "not really about slackening the rules, it's about shifting responsibility for sensitive content"
• On TSMC-Apple relationship: Highlights codependence where "Apple could no longer leave" due to switching costs of $2-5 billion
• On AI as research tool: Emphasizes human expertise remains essential—"You have to have a very deep expertise to appreciate what it's doing"

Referenced Links

• Wired: Thinking Machines staff departures and AI industry drama reporting
• The Verge: Meta's Workrooms discontinuation and VR business retreat
• TubeFilter: YouTube sensitive content monetization policy changes
• CNBC: Cloudflare's Human Native acquisition and AI data marketplace strategy
• CNBC: Replit mobile app launch and vibe coding market valuations
• Semi Analysis: Apple-TSMC relationship and manufacturing dependency analysis
• New York Times: AI as research tool and human-AI collaboration in scientific research
• The Verge: Sony Bravia 8 II television review (9/10 rating)

Takeaways

• Metaverse is Dead (at Meta): Don't expect VR-focused products from Meta going forward. The company's pivot to mobile and smart glasses signals the end of Zuckerberg's metaverse vision. Reality Labs is now a cost center, not a growth driver.
• AI Talent Wars Continue: Thinking Machines' collapse shows that even well-funded AI startups can't retain talent without clear product strategy. The industry's constant drama and executive departures will continue to reshape company leadership through 2026.
• Creator Protection Becomes Infrastructure: Cloudflare's acquisition signals a business opportunity in protecting creators from AI data exploitation. Expect more companies to build monetization layers between AI developers and content creators.
• No-Code AI Development Will Disrupt Software: Vibe coding tools are accelerating faster than expected (Claude Code hit $1B revenue in 6 months). Traditional software companies should prepare for margin compression as AI agents commoditize coding work.
• YouTube's Responsibility Shift: The platform is moving from gatekeeper to neutral infrastructure. Brands are becoming more comfortable with "advertiser-unfriendly" content, meaning creator monetization depends less on platform approval and more on audience demand.