The Metaverse and its ghost towns: Why social VR apps are struggling
With the demise of "Rec Room" and Meta's cutback in "Horizon Worlds," two prominent chapters of VR history are ending. What caused their failure?
After a decade of social VR, the end of "Rec Room" is now imminent.
(Image: Rec Room)
On June 1, 2026, at 9 p.m., the social VR platform “Rec Room” will pull the plug after ten years. A few weeks earlier, in March 2026, Meta had announced the end of “Horizon Worlds” in its current form. The company had sunk a significant portion of its double-digit billion-dollar budget into this platform to build a metaverse, including the necessary hardware. What was marketed a few years ago as the inevitable future of the internet has shrunk to a few functioning niches by 2026. A look at two decades of social online worlds shows why VR-driven platforms in particular are having the hardest time.
A brief history of digital parallel worlds
The term “Metaverse” was coined by Neal Stephenson in 1992 in his novel “Snow Crash.” He used it to describe a persistent digital space where people live together as avatars. Long before tech giants like Meta discovered this idea, Linden Lab had already built a surprisingly comprehensive early model with “Second Life” in 2003. The open 3D platform had its currency with an exchange rate to real money, user-generated content, and thriving trade in virtual goods. Between 2006 and 2008, there was a veritable gold rush atmosphere on the platform, and many dreamed of wealth through virtual businesses.
(Image:Â Linden Lab)
“Second Life” reported 4.3 million residents in 2007. Although the boom gradually subsided, a stable niche has remained. Current community analyses show that “Second Life” in 2025 no longer cracks the mark of 50,000 simultaneously logged-in avatars. Including bots, the value settles around 35,000. Measured against the forecasts at the time that “Second Life” would become the next World Wide Web, this is sobering. Measured against what most successors have achieved, it is remarkable.
Other concepts pursued similar ideas with different means. “Habbo Hotel” attracted millions of teenagers with its isometric pixel graphics but struggled with scams, bullying, and a delayed mobile adaptation. “IMVU” established a 3D avatar chat with a creator marketplace, and “PlayStation Home” (2008 to 2015) was supposed to become the console metaverse. Sony's attempt failed primarily due to its bugs and an out-of-control budget. Revenue from microtransactions and advertising never covered development costs.
The VR wave and its failed social pioneers
With the return of consumer VR from the mid-2010s onwards, a new generation of social worlds followed. “High Fidelity,” founded by “Second Life” creator Philip Rosedale, raised $22 million in venture capital in 2015, only to discontinue its social VR activities in 2019. Linden Lab tried a restart with “Sansar” on Steam and gave up the project after moderate success. Microsoft also acquired a metaverse startup in 2017. “AltspaceVR” launched as a functional VR space with various rooms for stand-up comedy, seminars, roundtables, or company parties. Six years later, however, the Windows giant scrapped the platform. And so, platform after platform disappeared or shrank, long before the Facebook company scribbled “Metaverse” into its name.
(Image:Â Rec Room)
“Rec Room” seemed to be an exception for a long time. Launched in 2016, the platform consistently focused on crossplay between VR headsets, consoles, and smartphones, reaching 150 million users according to its statements. It integrated minigames, creative building tools, in-app purchases, and optional paid memberships. It was accessible, and it had a vibrant community. Nevertheless, it wasn't enough. The focus on user-generated content brought growth but only low margins. Paid content from “Rec Room” itself never went beyond a supporting role, and investments in new features like AI tools incurred more costs than they generated revenue. After an initial wave of layoffs in 2025, the announcement came that the service would be discontinued in 2026 after ten years.
Meta's billion-dollar bet
However, Meta has sunk the biggest chunk into the ground. With the renaming of Facebook to Meta in 2021, Mark Zuckerberg declared the metaverse the company's strategic lighthouse. In the following years, the Reality Labs division accumulated investments in the range of 100 billion dollars. “Horizon Worlds,” the heart of this strategy, was supposed to reach at least 500,000 monthly active users by the end of 2022. In reality, however, there were only around 300,000 in February 2022, and the target was adjusted for the first time.
Internal documents, which the Wall Street Journal was able to access, showed an even bleaker picture. Most user-generated worlds were empty or received fewer than 50 visits. Even Meta employees reportedly avoided the platform, and numbers of a decline to around 900 daily users recently circulated in forums. These figures are not officially verified, but they fit the “ghost town” narrative that has solidified around the project. The consequences were drastic. Meta laid off around 1,500 employees in Reality Labs and closed internal VR studios like Sanzaru and Twisted Pixel. In March 2026, the shutdown of the VR version of “Horizon Worlds” was announced, only to bring it back on life support shortly thereafter following a community outcry. However, Meta will no longer invest significantly in this area.
Not every metaverse sinks
While many social VR worlds are collapsing, other platforms are delivering exactly the experiences that Zuckerberg and co. had promised. They do so without a headset and don't even use the now negatively connoted term “Metaverse.” “Roblox,” for example, generates stable revenue through the internal currency Robux, distributes substantial shares to developers, and runs on practically every device – including VR headsets. Epic Games has developed “Fortnite” from a battle royale into a social stage. Concerts by Travis Scott or Ariana Grande attracted millions of people simultaneously. Fans have long described the game as a “Digital Third Space,” a place to meet friends even when no one wants to play.
Discord, in turn, forms the invisible social infrastructure behind it. The company claims over 200 million daily users, financed primarily through the Nitro subscription, without advertising. Twitch and YouTube complement the picture with live streaming, short videos, and creator economies. All of this happens in 2D, on mobile, with a low barrier to entry. But even within the VR world, there is a remarkable exception: “VRChat.”
(Image:Â VRChat)
According to its statements, the platform reached a new peak of almost 150,000 simultaneously active users on New Year's Eve 2025 – an increase of nine percent compared to the previous year. VRChat is developing particularly dynamically in Japan. The share of web accesses by Japanese users has more than doubled in two years, from 12.9 percent to over 27 percent. The “Economy in Metaverse Report,” conducted by vTubers Nem and Mila in collaboration with Japanese researchers, found that around 40 percent of respondents spend at least $350 per year on cosmetic content. 901 social VR users were surveyed, 82 percent of whom are regularly active in “VRChat.” Japanese creators reportedly earn $20 to $55 for in-game content such as base models via the creative marketplace “Booth.”
The overwhelming competition
The biggest hurdle for social VR platforms is, of course, the hardware requirement. VR headsets, with a few exceptions, are expensive, comparatively heavy, and physically remove people from their surroundings. They are often uncomfortable for longer sessions. A truth that even Apple denied but is now experiencing itself with the expensive and heavy Vision Pro. Powerful and high-priced VR and mixed reality headsets find serious users primarily in professional niches such as design or engineering, who could finance their development. Demand in the consumer market remains modest and is primarily driven by tech enthusiasts. The market for social VR experiences is therefore naturally limited, which is why most platforms also offer their apps outside virtual reality. But the competition there is gigantic.
Smartphones are in every pocket and offer an all the more interesting user base for countless providers of various content. Even if it is repeatedly declared dead, Facebook still reaches over three billion monthly active users worldwide. TikTok alone is said to have generated around $23.6 billion in advertising revenue in 2023. In addition, there are Instagram, WhatsApp, Snapchat, X, Bluesky, YouTube, Netflix, Spotify, and many more. Each platform competes for the same limited time of its users. Those who fill their day with reels, shorts, video games, movies, series, and Discord chats rarely feel the urge to put on a headset afterward. This battle for attention is also no longer leaving monoliths like “Fortnite” unscathed, which is also complaining about a dip in its otherwise impeccable player numbers. For a few years now, a new, emerging competitor has also been vying for emotional connection: AI companions.
(Image:Â Character.AI)
In 2024, Character.ai users spent an average of 93 minutes per day with chatbots. Xiaoice, originally developed by Microsoft, has been acting as a moderator, songwriter, and emotional companion in China since 2018. The company of the same name, now spun off from the corporation, also relies on deepfake livestreams for product promotion, reaching millions of viewers. In addition, there are the new possibilities offered by generative AI around ChatGPT, Google's Gemini, and the like to fill the day with. Of course, beloved venture capital follows this shift. According to analysts, around $226 billion flowed to AI companies in 2025, 48 percent of the total global venture capital volume. Metaverse startups can only dream of these figures.
The enemy within
However, many social VR offerings failed not only due to hardware, costs, or too strong competition. Most people simply see no compelling reason to use them. Meta's heavily promoted “Horizon Worlds,” with its lack of strategic clarity, has contributed to a negative image for the entire industry. Through questionable PR maneuvers like Mark Zuckerberg's Eiffel Tower selfie and the still-unresolved question of how to make virtual reality comprehensible to outsiders, the platforms are often perceived as graphically immature collections of mini-games and are not even tried. Without a critical mass, however, a social space quickly collapses. Those who enter an empty world have no motivation to return.
(Image:Â Meta)
In addition, there are structural problems and a lack of trust. Moderation in three-dimensional real-time spaces is significantly more difficult than in text forums, and harassment in social VR apps remains an issue. Some Web3 metaverses, with their security vulnerabilities and “rug pulls,” where developers suddenly abandon a crypto project after collecting investor funds and disappear with the capital, have not exactly contributed to the popularity of these worlds. With such shortcomings, an industry quickly loses trust and loses users, investors, and advertisers alike.
The metaverse must find itself
Above all, those who aimed for the grand slam have lost. Meta with its misguided VR strategy, Sony with the unrefined PlayStation Home, Linden Lab with the premature “Sansar,” “Rec Room” with its flawed business model, and a whole host of ill-conceived Web3 projects. However, niches with a clear identity such as “Second Life,” “IMVU,” or “VRChat” have survived. The real winners, however, are platforms that never claimed to be a metaverse. “Roblox,” “Fortnite,” Discord, and TikTok deliver many of the promised functions – persistent avatars, live events, creator economies – without hiding behind a buzzword.
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Even if “Rec Room” and “Horizon Worlds” close their doors or cease further development, social VR will not disappear. “VRChat” is growing, and for certain communities, immersive spaces are irreplaceable. However, the already daring idea that VR headsets will replace smartphones as the central social online interface is definitively buried. A functioning metaverse does not necessarily have to be spatial or immersive. It must primarily take place where people already are, grow organically, offer them something they want to experience regularly, and not be limited to a closed platform.
(joe)
