Facebook's Metaverse fortune is tied to Oculus

The $2 billion Oculus acquisition is the arrow in Zuckerberg’s quiver that can hit his holographic future target

Published - October 29, 2021 06:59 pm IST

Facebook debuts its new company brand, Meta.

Facebook debuts its new company brand, Meta.

Facebook’s CEO Mark Zuckerberg has pressed the proverbial reboot button and rebranded the controversial social media giant . The new entity will be an umbrella organisation which will nest Facebook, Instagram, Messenger and other apps.

The California-based company divides its businesses largely under the Family of Apps that drives its social media engine and attracts advertisers, and the Reality Labs, which deals with augmented and virtual reality products.

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The FoA segment is Facebook’s cash cow, which sells ad space to marketers. The company’s overall revenue stood at $85.97 billion for 2020, up 22% from a year earlier, of which advertising revenue alone accounted to $84.17 billion. The company’s average revenue per user that same year was $10.14.

iOS 15 and whistle-blower revelations

This category has been hit after Apple rolled out its new software update. The Cupertino-based company’s update made it so that iPhone and iPad users would have to choose to opt in to being tracked when first launching an app.

“Our estimate is that in aggregate we are underreporting iOS web conversions by approximately 15%; however, there is a broad range for individual advertisers,” said Graham Mudd, VP of Product Marketing at Facebook.

The company was also hit by a series of whistle-blower revelations that accused it of causing harm to teen mental health. A growing chorus of voices, including from a few dozen attorneys general in U.S., made Instagram pause its version of an app for kids. The ex-Facebook employee turned whistle-blower Fances Huagen also criticised the company for running a VIP programme that exempted some accounts from its normal enforcement rules.

Also read |Meta Platforms shares rise as Facebook rebrands to focus on metaverse

The backlash from regulators and activists has significantly dented the social media firm’s reputation. And while all this played out in public view, Zuckerberg was at work focusing on his company’s next chapter.

Zuckerberg is betting on the Metaverse idea. He envisions a not-too-distant future where people can “teleport instantly as a hologram to be at the office without a commute, at a concert with friends, or in your parents’ living room to catch up”.

Betting on VR

To make the vision a reality, the billionaire has thrown in $150 million in investment in immersive learning to train the next of creators. He has also launched a talent hunt in Europe to build a pool of 10,000 engineers, about a fifth of all its employees, in the next 4-5 years to start the development of metaverse.

The critical tool that will make Zuckerberg’s holographic future a reality is the Virtual Reality (VR) investment he made in 2014. He bought Oculus for $2 billion and said it will be developed as a platform for games initially.

“After games, we're going to make Oculus a platform for many other experiences,” Zuckerberg said in Facebook post. “Imagine enjoying a court side seat at a game, studying in a classroom of students and teachers all over the world or consulting with a doctor face-to-face -- just by putting on goggles in your home.”

Holographic future

Seven years later, and after testing ads on Oculus in June, Facebook is getting a new avatar in its Metaverse that will “be built by creators and developers making new experiences and digital items that are interoperable and unlock a massively larger creative economy than the one constrained by today’s platforms and their policies”.

Facebook is betting a product line that is growing fast. Global shipments of VR headsets grew 52.4% year over year in the first quarter of 2021, according to data intelligence firm IDC.

Standalone headsets, which feature an all-encompassing design such as the Oculus Quest 2 or the HTC Vive Focus, accounted for the vast majority of shipments, capturing 82.7% share during the quarter, up from 50.5% in the first quarter of 2020. The device’s long-term outlook remains quite strong as global shipments are forecast to grow to 28.6 million in 2025 with an annual growth rate of 41.4%.

"The commercial use cases for virtual reality continue to proliferate," said Tom Mainelli, group VP, Device & Consumer Research at IDC. "As companies continue to plan for a future that encompasses a combination of both in-person and remote work, we see VR playing an increasingly important role in driving next-generation collaboration, training, and digital events."

Facebook is setting its sights on this new market that is free from regulation and activist backlash. And the 2014 Oculus acquisition is the arrow in Zuckerberg’s quiver that can hit the holographic future target.

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