Meta Platforms burned billions of dollars in a quarter, while the VR market is still shrinking. Can Quest 3 save the market?
According to industry estimates, as of the end of November, the sales of VR headsets and AR glasses in the United States have decreased by nearly 40% YoY this year, compared to only a 2% decrease last year. However, the strong sales of Quest 3 have helped boost the market, at least during the holiday season. In the eight weeks leading up to November, VR headset sales in the United States increased by 42% YoY.
Meta Platforms, the parent company of Facebook, is under pressure from the continuous losses in its metaverse business. Burning billions of dollars in just one quarter, it seems that it has not been able to save the declining virtual reality (VR) market.
According to data from research firm Circana, as of November 25th, the sales of VR headsets and augmented reality (AR) glasses in the United States this year have decreased by nearly 40% compared to last year, reaching $664 million. This performance is far worse than last year. Previously, other institutions predicted that the sales of VR and AR devices in the United States would decrease by about 2% to $1.1 billion last year.
Media comments have pointed out that the decline in VR market sales over the past two years highlights the ongoing challenges that Meta Platforms faces in promoting VR technology related to the metaverse business. When Meta Platforms announced at the end of 2021 that it would change its company name from Facebook to Meta Platforms to reflect its strong commitment to the metaverse, Meta Platforms CEO Mark Zuckerberg stated that it may take ten years for the metaverse to reach one billion users. Now, he may need to present more optimistic data to appease the shareholders who criticize Meta Platforms' high-risk and massive investment.
Starting from the fourth quarter of 2020, Meta Platforms has separately reported the revenue and profit of its metaverse-related business, including hardware, software, and content related to AR and VR, under the "Reality Labs" division. The financial report shows that Reality Labs incurred a total loss of $13.7 billion last year. In the first to third quarters of this year, the business incurred a total loss of approximately $11.4 billion, with a quarterly loss of at least $3.7 billion. If this pace continues, the annual loss for this year will exceed that of last year.
The third-quarter financial report released by Meta Platforms at the end of October this year once again reflects the huge losses in its metaverse business.Meta Platforms' Reality Labs reported a YoY loss of 19% to $3.74 billion this quarter, which is about 5% lower than analysts' expectations. However, Meta Platforms had already warned of a significant increase in Reality Labs' losses next year due to the company's continued development of VR/XR products and investment in expanding the related ecosystem.
Meta Platforms did not comment on the data related to Circana. However, it is worth noting that Andrew Bosworth, Meta Platforms' Chief Technology Officer and head of Reality Labs, published a blog post earlier this week, stating that artificial intelligence (AI) and the metaverse are Meta Platforms' "two long-term bets on future technology" and that they are beginning to take the form of products available to a large number of people.
Bosworth wrote in the article that making long-term bets on emerging technologies is not easy. It is not guaranteed to be effective and certainly comes at a high cost. However, he pointed out that this is the most valuable thing that tech companies can do and the only way for them to maintain influence in the long run.
Earlier this month, Meta Platforms also released a series of new products, including the highly anticipated Quest 3, which marks Meta Platforms' transition from VR to MR. Priced at $499, it is 67% more expensive than its predecessor, Quest 2, but 40% thinner and equipped with the faster Qualcomm Snapdragon XR2 chipset. The graphics performance is twice that of Quest 2, and it features Meta Platforms' best display to date with a 30% higher resolution than Quest 2.In a blog post on Monday, Bosworth mentioned Quest 3, stating that within a few months of its release, seven out of the top 20 apps were XR-related apps. He also said that Meta Platforms Platforms Platforms Platforms Platforms Platforms "saw a strong signal that people truly value these experiences."
Some comments suggest that although the overall performance of the VR market has been poor this year, the strong sales of Quest 3 have helped boost the market during the holiday season. According to Circana data, the sales of VR headsets in the United States reached $271 million in the eight weeks from October to November, a 42% increase from the same period last year, which was $191 million.
Ben Arnold, a consumer technology analyst at Circana, said that Meta Platforms Platforms Platforms Platforms Platforms Platforms is currently the leader in the VR market, with Quest headsets accounting for a large portion of the US market. He attributed the market's downturn this year to the lack of new VR headsets that can stimulate user interest and the continued lack of breakthrough apps that have broad appeal to mainstream consumers.
Arnold commented that the design and appeal of VR headsets have greatly improved in recent years, and these products are progressing. The challenge now is how to obtain high-quality content for this hardware and how to enable developers to invest more resources in creating games or certain experiences. This is related to economics and also to how many people are attracted to this platform or this specific device.