Version 11: They Can't Be Wrong
The Good, The Bad, and The Ugly from Meta's 2022 Connect event
Welcome back to Threshold, your weekly guide to understanding "metaverse" ambitions from Big Tech and the path to commercial viability of AR/VR hardware for mainstream consumers. This week, I take the time to deep dive into Meta’s Connect event last week and take stock of their ambitious vision.
New Coke Problem
Does Meta, like investor Michael Burry asked on Twitter last week, have a New Coke problem?
Coca-Cola famously tried to regain Pepsi's growing market share in 1985, only to meet a backlash from consumers who just wanted the original tasting one. I'm not sure anybody loves Facebook enough to miss the old one (although it was kinda fun in 2006 when I was a college freshman), but Meta's VR formula needs to meet consumers where they are now, not where they will be in a decade.
Zuckerberg has a vision for the future of the internet, nobody is doubting that. Business Insider reminded us last week of another company that had a similar swan song: Yahoo. They wrote, "Facebook has the courage, the capital, and the capability to make it work and to become a major player...But they can't be wrong.”
Last week was Meta's big chance to convince investors, skeptics, and the general public that their vision for a "metaverse" was on track. It was an opportunity to announce something spectacular, to perhaps showcase "cool" celebrities using their futuristic products that could sway them into the mainstream. It was Meta's chance to show Apple that they too could deploy world-class marketing with a much needed cultural moment for VR. Perhaps like those Oculus Go commercials almost did:
Instead, Meta did what Facebook always does: gave the public more Zuckerberg meme fodder. This time, those memes reduced Meta's headset owners to…tadpoles.
When the addition of virtual legs are a major product announcement, at a major event, for a major corporation, it's hard not to think that Meta has lost their way. To make things worse, the legs shown were pre-rendered footage, not even working, real-time legs!
Let's take stock of Meta's version of Instagram vs. Reality, and break down The Good, The Bad, and The Ugly when it comes to Meta vision after this year’s Connect event.
The Good = Industrial Metaverse
The biggest announcement at Connect last week was one I didn't see coming: a formal partnership with Microsoft. Whereas I thought the emphasis would be on elite fitness performance at home, positioning the device for a consumer that would pay for a Peloton, Meta pitched what they called an "Industrial Metaverse" by working with enterprise expert Microsoft.
It's a smart move for Microsoft, who has struggled to find large success for the HoloLens and would probably love for someone else to foot the bill of hardware R&D. TechCrunch wrote that it was, "a move reminiscent of when Steve Jobs welcomed Bill Gates via satellite link during the Macworld Boston keynote in 1997.”
As Steven Levy pointed out in his great WIRED article," Joining Mark Zuckerberg’s risky bet isn’t risky at all for Nadella. So what if it takes years for the collaboration to justify the effort, if it ever does—Microsoft can afford to wait. After all, it already has over 100 million customers in the metaverse, through Minecraft, which Microsoft bought in 2014 for $2.5 billion. While VR versions of Minecraft are available, the vast majority of users access it sans headsets. And they seem pretty happy."
Microsoft owns one of the strongest tech stacks when it comes to utilitarian enterprise software. Workplace productivity tools like Outlook, Teams, Azure Cloud, and whatever Dynamics 365 is (I'm never quite sure). With native support of all those apps, Meta's new hardware would certainly be more useful for someone at a desk doing knowledge-based work. But those apps use text and keyboard as the main input. How exactly their productivity gains will port to spatial computing and VR is still unclear.
The most useful announcement here from Microsoft was probably the least exciting: that IT administrators can now provision many Quest devices while staying security compliant (something badly needed that Meta never really seemed to want to build).
Meta's narrative here is: more immersive meetings! It argues that the "social presence" offered by VR allows for unparalleled collaboration experiences for an "industrial metaverse," where workers can do things like product design reviews, whiteboard sessions, and chit chat in full 3D. Hybrid solutions offer the ability for some employees to be in VR, while others aren't. Although as TechCrunch pointed out, “it was hard to describe the funny things happening to my work pals, who were not in VR with me, which drove a wedge between us, in my opinion.”
Bloomberg had the best scoop here, one that recalled my past work where many VR users (especially women and people of color) don't like wearing a headset at all. Their reporter wrote after covering Connect in VR, “After writing this, I pulled out my cosmetics bag for a touch-up, and wondered how many people working on virtual reality at Meta wear makeup every day.” Probably not enough.
The Bad = More Hardware
Meta announced its upcoming Quest Pro headset, and early early press reviews were…mixed.
The Verge wrote that the headset was "a very sophisticated development kit, more geared toward testing next-gen technology than filling specific needs." Casey Newton from Platformer pointed out that it is a small step forward, writing "I don’t imagine the company will sell all that many of these things at $1,499, but I do think it has moved the industry forward, and the benefits it sees from being first may compound over time."
The most interesting positioning for the Quest Pro came from Meta CTO Andrew Bosworth, who said during Connect “Eventually we think your Quest could be the only monitor that you’ll actually need.” But later in an interview with Casey Newton said "We know (VR) is good enough." So, which is it?
I wrote about this belief before, that the hardware is “good enough” and instead of marginal hardware gains Meta should instead be laser-focused on figuring out what mainstream consumers actually want out of a headset beyond gaming.
Especially because as Barron's pointed out, the battery lasts between 1-2 hours. Any productivity gained from will be reduced by the need to charge it often. Savvy users might plug it in for longer life, but at that point, I'm essentially wearing a tethered PCVR headset. Infinite screens might not be practical, as cool as the YouTuber Marques Brownlee made them seem!
When it comes to VR hardware, I trust the expert: John Carmack. His unscripted talks are a corporate PR nightmare, and he was saltier than usual this year. During his talk, he criticized Meta's direction, saying that it made him “sick to my stomach thinking about that much money being spent. But that's how they demonstrate commitment to this ... Google goes and cancels all these projects, while Meta is really sticking with the funding of VR and AR even further out with it."
His takeaway was that hardware gains for Quest Pro were minor, but improvements are most needed in software. He said, “Our app startup times are slow, our transitions are glitchy...We need to make it a whole lot better... much, much faster to get into."
Bloomberg wrote, “Zuckerberg has badly misunderstood what drives people to new platforms, which is unique experiences and incentives, not incrementally better graphics. Some of Meta’s developments in VR are neat, but Tuesday’s presentation underlined how much they should have been a skunkworks project and not the company’s whole focus.”
In sum from CNBC, “That was the biggest takeaway from Meta's event Tuesday — not the hardware and what it can do, but the lack of compelling software and use cases to make you feel like you need to run out and buy one. If this was supposed to be Meta's "iPhone moment," it failed to deliver.”
The Ugly = Sad Empty Worlds
Meta's 3D social app Horizon Worlds has much left to prove. The New York Time's recent deep dive into its early community reminded me of my extensive time spent in Second Life in the early 2000's. They both similarly invited users to create infinitely possible worlds, and socialize or spend monies as they do. But without a clear unifying purpose, social worlds can easily feel listless and superficial.
The Wall Street Journal had a massive scoop last week, giving a rare glimpse into Meta VR usage data. They wrote, "Quest retention rates, meaning continued use by owners, have dropped in each of the past three years, the documents show. More than half of Quest headsets—the entry model costs about $400—aren’t in use six months after they are purchased, according to people familiar with the data."
In addition to the headset retention rates, WSJ revealed that Horizon monthly average users (MAU) missed initial targets and have actually decreased to around 200k MAU. Of those users, only 1% are creating their own worlds, and less than 9% of created worlds are visited by more than 50 users. The most popular world brought in around $10k worth of in-app purchases and total creator tip payouts are a measly $470.
In the words of an internal Meta document, “An empty world is a sad world.”
Meta currently has 3.65 billion users (an insane chunk of the globe) using its existing services, and the fact that it can only usher in a small percentage of those users into their vision of the future is troubling. While it's easy to be a cynic on all things "metaverse," remember that Disney was able to hit 1M users within a week of launching its Dreamlite Valley title.
I’ll say it again, virtual reality is a cognitive threshold, not hardware. Even though Meta needs to sell hardware, it more importantly needs to scaffold existing platforms that can convince users to transition into its "metaverse." To make Horizon Worlds stickier, it needs to be less intimidating. Of Meta's existing 3.65B users, there should be easier ways to usher their users into pseudo 3D experiences using mobile devices that give a small taste of what a headset can offer.
Best Days Ahead?
Meta needs to go back to its roots and respect that many users don't want immersive computing experiences in order to socialize over the internet. One of its early market strategies was converting AOL Instant Messenger users to its service by offering the benefits of convenient asynchronous socialization (a wall post instead of an instant message).
Remember how important Zynga and Farmville were for Facebook's early future? It defined a new era of asynchronous mobile games that gave users something else to do after logging into Facebook.
As The Street pointed out last week, Meta is already sitting on "gold" in the form of WhatsApp, which accounts for more than 2 billion users across 180 countries. Why not make WhatsApp a Horizons-adjacent conversation hub? Give users of any group chat a simple 2D/3D toggle so they can experiment with what 3D chat looks like. Then slowly funnel them through the proper Quest sales channels.
After all things Connect, my favorite highlight of last week was a survey Meta sent out after its conclusion. They asked, "would you say Meta's best days are ahead of it or behind it?" Poor and misleading survey design aside, it's a valid question.
Only one thing is certain for Meta. They can't be wrong.
Quote of the Week
"If I'm young, hot, and/or rich, why would I spend time in a metaverse where everyone else can be that more easily?" - Sam Carter (farcaster)
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