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Facebook (FB), aka Meta, did a nice thing, they broke out the yearly revenue and operating income for Reality Labs, the division of Facebook that has been developing and selling the Quest line of VR headsets, along with content and associated software. The Oculus brand, starting with the Oculus Rift DK1 in 2013 and continuing through the Oculus Quest 2 released in 2020, is known as the best-selling VR headset, primarily due to its low price and reasonable specifications. There are much higher quality VR headsets that touch upon newer technology and more competitive specs, but for what comes down to ~$400 the Oculus headsets have been hard to beat.
Facebook has seen big increases in its Reality Lab sales over the last three years, with a 127.3% increase in 2020 and a 99.6% increase last year, but at the same time seeing a 47.1% increase in operating income in 2020 and a 53.9% increase in same last year. So Facebook is losing lots of money to maintain marjet share in the headset game, or is there another reason why the company continues to sell headsets at what is below cost? Given that Facebook is one if not the biggest proponent of the Metaverse, a system that will feed it tons more data about users than they already garner, they are encouraging the global population to adopt VR as the means to what they would like to be the new social platform. Rather than compete with other headset producers who must look closely at profitability, Facebook has the ability to continue to lose money while seeding the VR market and will likely continue to do so until they either find that the Metaverse is not developing at expected, or they can really sell high quality headsets at such prices, which, at best, will take a few more years.
While we expect that little will change in Facebook’s attitude toward VR headsets in the near term, given the current interest in the space, we continue to look at the VR space and the Metaverse as both fertile ground for the hyperbole that technology marketing thrives on, the ability to capitalize on that hyperbole, and a lack of overall consumer demand until the technology takes at least another leap forward. All in it is fertile ground for examination, which we continue to do, but the little glimpse into Facebook’s VR losses gives us even more fodder for taking the VR space apart. More to come.
Facebook has seen big increases in its Reality Lab sales over the last three years, with a 127.3% increase in 2020 and a 99.6% increase last year, but at the same time seeing a 47.1% increase in operating income in 2020 and a 53.9% increase in same last year. So Facebook is losing lots of money to maintain marjet share in the headset game, or is there another reason why the company continues to sell headsets at what is below cost? Given that Facebook is one if not the biggest proponent of the Metaverse, a system that will feed it tons more data about users than they already garner, they are encouraging the global population to adopt VR as the means to what they would like to be the new social platform. Rather than compete with other headset producers who must look closely at profitability, Facebook has the ability to continue to lose money while seeding the VR market and will likely continue to do so until they either find that the Metaverse is not developing at expected, or they can really sell high quality headsets at such prices, which, at best, will take a few more years.
While we expect that little will change in Facebook’s attitude toward VR headsets in the near term, given the current interest in the space, we continue to look at the VR space and the Metaverse as both fertile ground for the hyperbole that technology marketing thrives on, the ability to capitalize on that hyperbole, and a lack of overall consumer demand until the technology takes at least another leap forward. All in it is fertile ground for examination, which we continue to do, but the little glimpse into Facebook’s VR losses gives us even more fodder for taking the VR space apart. More to come.
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