An attendee wears a Meta Platforms Inc. Oculus Quest 2 virtual reality (VR) headset on the Telefonica SA stand on day two of the Mobile World Congress on the Fira de Barcelona venue in Barcelona, Spain, on Tuesday, Feb. 28, 2023.
Angel Garcia | Bloomberg | Getty Images
Meta is spending billions of dollars 1 / 4 to meet CEO Mark Zuckerberg’s dream of a futuristic virtual world that he calls the metaverse.
Despite the corporate’s commitment to creating its founder’s dream come true, the virtual reality market is contracting.
Sales of VR headsets and augmented reality glasses within the U.S. plummeted nearly 40% to $664 million in 2023, as of Nov. 25, in line with data shared with CNBC by research firm Circana. That is a much steeper drop than last yr, when sales of AR and VR devices slid 2% to $1.1 billion.
The 2-year decline underscores Meta’s continuing challenge in bringing the immersive technology out of a distinct segment gaming corner and into the mainstream. While Zuckerberg said, in announcing Facebook’s pivot to Meta in late 2021, that it could likely take a decade to achieve a billion users, he might have to start out showing more optimistic data to appease a shareholder base that is been critical of the corporate’s hefty and dangerous investments.
Up to now, there hasn’t been a breakout success — or killer app — to validate Zuckerberg’s vision. Meta’s Reality Labs unit, which is developing VR and AR technologies, lost $3.7 billion within the third quarter on sales of $210 million. In total, the division has lost about $25 billion because the starting of 2022, shortly after Zuckerberg renamed his company.
Meta declined to supply a comment for this story but pointed to a blog post on Monday from Chief Technology Officer Andrew Bosworth, who runs Reality Labs. Bosworth called artificial intelligence and the metaverse Meta’s “two long-term bets on technologies of the long run,” and said they’re starting to “intersect in the shape of products accessible to very large numbers of individuals.”
“Making long-term bets on emerging technologies is not easy,” Bosworth wrote. “It is not guaranteed to work, and it’s actually not low cost. It is also one in all the most beneficial things a technology company can do — and the one strategy to remain relevant over the long term.”
Meta is currently the leader within the VR market, with sales of its Quest-branded headsets representing the majority of the U.S. market by a big margin, said Ben Arnold, Circana’s consumer technology analyst. Sony released its second-generation PlayStation VR2 headset earlier this yr but hasn’t picked up much market share due partially to the device’s reliance on the PlayStation 5 video game console, Arnold said.
Sony didn’t reply to a request for comment.
Arnold attributed the market’s rough yr to a dearth of recent stand-alone VR headsets that would excite users and a continued lack of a breakout app that has wide appeal amongst mainstream consumers.
Meta debuted the Quest 3 VR in October, starting at $499, or $200 greater than where the predecessor Quest 2’s base model was initially priced in 2020. Sales have not less than been strong enough to assist lift the VR market in the course of the pivotal holiday period, even when the yr overall has been week.
Andrew Bosworth, Chief Technology Officer of Facebook, speaks during Meta Connect event at Meta headquarters in Menlo Park, California on September 27, 2023.
Josh Edelson | AFP | Getty Images
During an eight-week period spanning October and November, sales of VR headsets within the U.S. were $271 million, a 42% jump from the $191 million generated in the course of the same period last yr, Circana data showed.
Arnold said that the design and appeal of VR headsets has significantly improved over time, and that “the products are progressing along a timeline that is smart.”
“If there is a challenge there, it’s how do you get great content for this hardware, how do pull a few of those levers that enable a developer to place more resources into constructing a game or some type of experience,” Arnold said. “That is slightly bit in regards to the economics, and it’s about what number of persons are gravitating towards this platform or this particular device, and if I’m a developer, is that price my while.”
Meta is hoping the Quest 3 will encourage developers to create compelling apps and games that utilize the device’s so-called passthrough feature, which allows for augmented reality experiences that blend digital graphics with real-world experiences. Quite a few developers who attended Meta’s Connect conference in September said the passthrough technology represented an upgrade from the Quest 2.
Bosworth wrote in his blog post that, “Inside months of the Meta Quest 3 launch, seven of the highest 20 apps are mixed reality apps.” He added that Meta is “seeing strong signals that folks really value these experiences.”
Bosworth said Meta is testing generative AI technologies in its newest Ray-Ban smart glasses to assist people translate foreign languages “or provide you with a funny caption for a photograph you’ve got taken.”
“Ray-Ban Meta smart glasses will let AI see the world from our perspective for the primary time,” he wrote.
The corporate’s second-generation Ray-Ban glasses were released in October with a starting price of $299. Meta is hoping the devices offer one other path for Zuckerberg to understand his metaverse vision, which has to this point been tethered to Quest headsets.
Here comes Apple
Heading into 2024, the massive wild card for the VR market is Apple.
In June, Apple unveiled its Vision Pro mixed-reality headset, which is slated to hit the market next yr at a starting price of $3,499.
The premium price suggests Apple is targeting early adopters, developers and firms as potential customers, VR developers told CNBC at Meta’s Connect event. VR enthusiasts are enthusiastic about Apple’s first headset, considering the corporate’s smashing success with consumer devices, and Vision Pro’s potential to integrate with products just like the iPhone and iPad.
Apple didn’t reply to a request for comment.
The Vision Pro’s debut could also play a pivotal role in bolstering the fledging VR and AR market in 2024, in line with research from IDC. In a September news release in regards to the state of the market, Ramon Llamas, IDC research director, said, “Apple’s entry next yr will bring much needed attention to a small market, but it’ll also force other corporations to compete in other ways.”
Andrew Boone, an analyst at JMP Securities, said he was initially so impressed by Apple’s Vision Pro demos that he began to fret about Meta’s future out there.
His thought at first was, “Apple was to this point ahead that perhaps Meta would just throw within the towel,” Boone said.
“I feel my tone on that has modified,” he said. “I feel the worth was too high to truly get mass demand, so Zuck goes after a special version of this. Clearly, the Quest is more game focused.”
Boone says there’s “enough differentiation” between the Quest and Vision Pro devices that they will cater to different crowds, though he expects to learn so much more in regards to the VR market over the subsequent 12 months.
Rolf Illenberger, CEO of German VR startup VRdirect, said corporations are excited in regards to the Vision Pro “since it’s Apple,” but there is a perception that it’s more of a “lifestyle” device. Apple’s demos highlighted more entertainment-friendly uses like the power to look at movies on an enormous virtual display. Apple describes the Vision Pro as a “spatial computer,” able to mixing the physical world with digital content and visuals.
“That product is premium, so it also got people enthusiastic about what does an ultra-premium experience seem like and what are the use cases that arise from that,” said Circana’s Arnold.
High hopes for the enterprise
Illenberger sees the potential for Meta’s Quest 3 to make a splash within the enterprise for tasks like workforce training, onboarding and marketing. He noted that the device is $500 cheaper than the Quest Pro, which was released in 2022 as more of a business-focused device, and has lots of the same features.
The patron is tougher. Apart from “early adopters and hardcore gaming kids,” Illenberger says, “there’s not enough convincing arguments to spend even $500 on VR.”
In the company VR market, Meta and Taiwan’s HTC are the leading suppliers of devices. Pico-branded headsets from TikTok parent ByteDance “are losing increasingly more ground,” Illenberger said. ByteDance has reportedly canceled the subsequent version of its Pico headset and is as an alternative shifting resources to a different device more much like Apple’s Vision Pro.
ByteDance didn’t reply to a request for comment.
In terms of selling to businesses, Illenberger says Meta is starting to learn from its name change in late 2021. He said that Zuckerberg’s rebranding has had a “psychological” impact on some corporations who feel more more comfortable purchasing the devices without the tarnish of Facebook’s brand and the many associated data privacy scandals
“Rebranding the corporate to Meta was a genius move,” Illenberger said. “Not because he’s claiming the marketplace for his company, but people increasingly more forget that Meta is actually Facebook.”
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