Meta’s VR Albatross
Facebook parent company Meta notched $23 billion in profit in 2022 despite one glaring problem in its 2022 financials: a loss of $13.7 billion on its virtual reality division.
CEO Mark Zuckerberg has long wanted virtual reality to be the new crown jewel of his tech empire, but big-ticket investments in the division coupled with low usership and user retention raise the question of whether Zuckerberg’s hope is a miscalculation of the marker.
The multibillion-dollar loss isn’t anything new nor is it expected to stop anytime soon—Meta’s virtual reality division, Reality Labs, lost $10.2 billion in 2021, and Meta’s 2022 third quarter report said the company expects “Reality Labs operating losses in 2023 will grow significantly year-over-year.”
Zuckerberg signaled his interest in the virtual reality world back in 2014, when Meta—then Facebook—purchased Oculus, a virtual reality headset and software company. His growing interest in the metaverse—an expansive interactive virtual world in which users can essentially carry out their lives online—became apparent with the launch of Reality Labs in August 2020 and with the October 2021 announcement that the company was changing its name from Facebook to Meta. “Over time, I hope we’re seen as a metaverse company,” Zuckerberg said at the time.
Meta’s first foray into the metaverse, Horizon Worlds, launched to American and Canadian consumers in December 2021 to a lackluster response, and public reception has not improved over time: $1,500 headsets, virtual groping, poor graphics, persistent bugs, and a lack of legs for avatars have prompted criticism and mockery.
Avatars’ lack of legs provoked particular derision—and market reactions. In October 2022 Zuckerberg announced that legs would be introduced to the metaverse soon, showcasing his avatar jumping around with legs. “So, the greatest development of burning $10 billion of cash flow on this endeavor is legs?” one analyst said after the announcement, and Meta’s stock prices immediately dropped to their lowest point since 2018.
Meta does get praise for some of its VR efforts. “It’s less that they’ve made something cartoonish compared to others and more that the expectations are higher for them,” said Jeremy Bailenson, the founding director of Stanford University’s Virtual Human Interaction Lab. He also praised Meta’s VR hardware, calling the Meta Quest 2 headset a “stunningly fantastic device.”
But he’s critical of how companies like Meta evaluate what users’ want. “There’s a fundamental disconnect between the way that Big Tech operates with its other products, and in my opinion, the things that make VR succeed as a medium,” he said.
Bailenson argues that VR as a medium makes most sense for users to experience things that are dangerous, impossible, counterproductive, or expensive (DICE), and anything that couldn’t be done in the real world but is either fun or educational. (“Counterproductive” refers to having VR users engage in actions that wouldn’t make sense in the real world but can serve to teach them behavioral lessons, like experiencing homelessness or engaging in deforestation.)
Meta, on the other hand, is trying to maximize daily usage that resembles social media usage: Zuckerberg has envisioned his metaverse as a place where users can do everything from play games to shop to have work meetings.
“VR is not for that,” said Bailenson of Meta’s approach. “VR is for these small doses, limited amounts of time for these special experiences that may DICE.”
Users seem to agree. Meta lowered its initial objective of 500,000 monthly users by the end of 2022 to 280,000, according to documents obtained by the Wall Street Journal. By October 2022, active users numbered only 200,000, a fraction of a fraction of Meta’s 3.5 billion average monthly active users across other platforms.
The documents also revealed that most users try Horizon Worlds only once, the number of users decreased over the course of 2022, and that most of the online rooms—“worlds” in Meta parlance—are never visited by a single user. “According to internal statistics, only 9% of worlds built by creators are ever visited by at least 50 people,” the Journal reported.
Meta’s VR missteps come at a time in which the company is struggling in general. Like many other tech companies, Meta laid off thousands of its employees in the past few months. After an initial round of 11,000 firings in November, Meta is reportedly considering more layoffs in the near future. The company is also now trying to play catchup with generative artificial intelligence, after ChatGPT and other AI chatbots became viral phenomena not long after Meta’s attempts at chatbots crashed and burned. Anonymous employees and executives at Meta have told reporters Zuckerberg is running the company according to his whims rather than with any foresight—and big outlays funding risky projects.
Meta has the resources necessary to make a long bet on Zuckerberg’s vision for VR, even if it means burning billions of dollars a year, Bailenson said. But the fundamental disconnect from the strengths of VR as a medium remains.
“If people are using VR to check their email in a year, then I’ve done something horribly wrong as a thought leader in this area, because the medium’s just not for that,” Bailenson said. “Your phone works fine for checking your email. You don’t need to stick on goggles to do that. Use goggles for what they’re good for: these experiences that are spatial and high presence and really leverage the fact that you’ve done mental transportation into another place.”
