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Facebook’s acquisition of Oculus turns 10 years old

every year, time The magazine publishes a list of the 200 best inventions of the past 12 months. To be honest, I don’t know how the editors do it. The dirty secret of the job is that real, game-changing inventions rarely cross your desk. In fact, if you average once a year, you’re very lucky.

When Oculus’ Rift prototype first came into my sight more than a decade ago, I felt like it was just such a device. Most importantly, the system resembles a hastily taped-on ski mask. In hindsight, it was a remarkable speech—a rare opportunity to glimpse the brave spirit of tech entrepreneurship. It conjures up romantic images of Homebrew Computer Club nerds soldering circuit boards in South Bay garages.

Ten years have passed since Meta (formerly known as Facebook) announced plans to acquire the startup for $2 billion. Ten years after the deal was announced, it’s safe to say that VR headsets haven’t changed the world we live in. But between changing the human condition and being a tragic dumpster fire of failure, there’s always a middle ground that’s rarely discussed. So, where does the Facebook-Oculus deal rank as of April 2024?

“Immersive gaming will be a top priority, Oculus has big plans that won’t change, and we want to move faster,” Mark Zuckerberg wrote at the time. “Beyond gaming, we will make Oculus the platform for many other experiences. Imagine sitting in a courtside seat at a game, learning in a classroom of students and teachers from around the world, or consulting with a doctor face-to-face— — Just wear goggles at home.”

May 22, 2019; Palmer Luckey's Oculus VR takes center stage on day two of Collision 2019 at the Enercare Center in Toronto, Canada.

Image Source: David Fitzgerald/Sportsfile/Getty Images

Facebook’s founder calls Oculus Rift a “new communications platform” and compares it to computers, the internet and smartphones before it. He said the “science fiction dream” was now a reality – and Facebook had suddenly cornered it. It’s hard to overstate how transformative Zuckerberg believes this technology is. After all, it is the gateway to the virtual universe.

If there was any doubt about the company’s commitment to the concept, it rebranded itself as “Meta” and dropped the Oculus brand that afternoon. Of course, social media platforms won’t dominate online discussions forever. They will eventually give way to something entirely new. Despite spending $500 billion on a rebrand, Zuckerberg and his colleagues are persisting. Never did a particularly good job of defining the Metaverse. They just insist that it’s an exciting thing and you should be excited.

Mark Zuckerberg avatar

Image Source: Facebook

I suspect that – if you did a blind audition – most people familiar with the term would describe something like Second Life (which is now on its fifth or sixth life). Mark Zuckerberg is probably as guilty as anyone of perpetuating this perception, happily doing his best to make the company’s Horizon Worlds platform synonymous with the Metaverse concept. Remember how important it was when it finally had legs?

So where are we now? Obviously, this is complicated. From a purely financial perspective (the only language shareholders speak), the picture is bleak. The company’s Metaverse unit lost $42 billion between the end of 2020 and the first quarter of 2024. That’s roughly 21 times the price of an Oculus (not adjusted for inflation). That’s a little more than a quarter of Zuckerberg’s (not adjusted for inflation — that’s BJJ-related bloat).

Why is Meta losing so much money? The simple and cynical answer is, because it can. The company had revenue of $134 billion last year and net profit of $39.1 billion. Of course, that’s not to say the unit’s $42 billion loss over four years won’t impact its bottom line. But Facebook believes it’s playing a long game.

Meta Quest 3 and Apple Vision Pro headphones

Image Source: Brian Hitt

Meta is widely believed to have sold the Quest headset at a loss. This is despite the fact that the company has some of the best manufacturing scale in the industry. It doesn’t take an MBA to understand that this is a poor short-term strategy, but Meta believes it is a long-term one. The ultimate goal is to get enough of these devices into people’s hands to achieve sufficient adoption, word-of-mouth, and developer content. If you can’t do that while making a profit, then you have to spend money to make it, right?

It’s still a huge bet. However, how long the company is willing to play the long game here depends largely on how patient Meta shareholders are. If Facebook can truly saturate the market and monopolize content, it will be better able to capitalize on the supposed exponential growth of mixed reality.

It has had the effect of squeezing competitors out of the market and generally sucking the air out of the room. As one HTC Vive executive told me at MWC in February, “I think Meta has adjusted the market’s perception of the cost of this technology.” Other companies can’t compete on price and content in the customer space, so most Savvy companies have turned to enterprise because customers have much deeper pockets.

If you judge the company’s journey by market share, it’s been a wild and unprecedented success. As of the second quarter of 2023, Meta’s share was 50.2%, according to IDC. Of course, we’re not talking about smartphone data here. As of early 2023, Meta estimates that it has sold 20 million headphones. By the end of the year, Quest 2 still outsold Quest 3. Part of Meta’s argument has been fully realized: people are looking for a cheap way to get started in technology.

Image Source: Brian Hitt

When Apple announced the Vision Pro at WWDC 2024, I received a ton of unsolicited comments from VR headset makers, all of whom said they believed the iPhone maker’s headset was validation for the field. You can cynically (and rightly) point out that when Apple enters their vertical market, everyone says some different version of it, and many of them don’t come out the other side holistically.

But I agree that Apple getting on board again after decades of failed VR attempts does constitute validation. This is definitely the case for Meta. Zuckerberg happily used the opportunity to point out that his headphones are 1. much cheaper and 2. require no external batteries. Meta also has a big lead in VR-specific content. Of course, he also insists that his product is far superior, despite being much cheaper.

“A lot of people seem to think the Vision Pro will be of higher quality because it’s an Apple product and costs $3,000 more, but honestly I’m surprised how much better the Quest is,” he noted in February. “There’s this price difference for the vast majority of things people use these headphones for. “

Sorry Zach, Vision Pro is the more impressive technology. Whether $3,000 is more impressive is another matter. What I can tell you right now is that there is a pricing divide that divides these products into different categories. Apple is targeting business customers at this price point, while Meta is more focused on democratizing access by losing money on a per-unit basis.

It’s still early days for Vision Pro – and indeed, it’s still early days for mixed reality in general. If it does become ubiquitous, it will be the result of countless hard battles. As we mark the tenth anniversary of the Oculus acquisition, I find myself returning to Zuckerberg’s comments above: “Imagine sitting in a courtside seat at a game, learning in classrooms with students and teachers around the world, Or see a doctor for a face-to-face consultation. – Face – just wear goggles at home.”

Re-reading the article from the perspective of 2024, I see that he is right about the content, but not necessarily about the delivery mechanism. The past four years have dramatically impacted the way we interact with each other, the world, and our daily activities. The pandemic has removed the stigma from many virtual events. But no headphones are needed at this time.

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