meta zuckerberg oc 5 10 million

Quest has sold 20M units, so why isn’t VR mainstream yet?

Yesterday, a report by Alex Heath on The Verge reported that Quest has sold around 20M units. Since this is well beyond the 10M threshold we were all waiting for, does this mean that VR is getting mainstream? Well, things are not that straightforward in my opinion…

The magic 10M threshold

Speaking at Oculus Connect 5, Mark Zuckerberg expressed this opinion of his about the path to make VR mainstream (thanks Road To VR for writing this down):

The big question is what is it gonna take for it to be profitable for all developers to build these large efforts for VR? To get to that level, we think that we need about 10 million people on a given platform. That’s the threshold where the number of people using and buying VR content makes it sustainable and profitable for all kinds of developers. And once we get across this threshold, we think that the content and the ecosystem are just going to explode. Importantly, this threshold isn’t 10 million people across all different types of VR. Because if you build a game for Rift, it doesn’t necessarily work on Go or PlayStation VR. So we need 10 million people on [one] platform.

Mark Zuckerberg

After this speech, everyone in the VR community started waiting for the magical 10 M sold headsets threshold to be crossed by a single platform, because this would have meant that VR was becoming mainstream.

Quest sold 20M units

The good news is that we are already much beyond that threshold. According to a report by the reliable Alex Heath, which stems from an internal presentation at Meta, Quest has sold already more than 20 M units. This value includes all Quest headsets: Quest 1, 2, and Pro. Quest 2 is the most successful of the three, and most probably it alone is well beyond the 10 M units sold at this point.

This seems to hint at the fact that now VR is already mainstream… or not?

VR isn’t mainstream… yet

“Mainstream” may mean many different things. In this post I’m referring to widespread sales and usage across average consumers: Laptops are mainstream, 3D printers are not. So can we say that VR is mainstream?

Well, yes, and no, but mostly no. We can say “yes” because now almost everyone has awareness of what VR is: some people saw ads on the TV, others have tried a Gear VR in an exhibition, and others have a headset at home. Furthermore, VR devices are having good sales: the Quest 2 has sold more devices than the latest XBOX at a certain moment. We have continuous success stories of developers that now can sustain themselves by just doing VR games (think about BoneLab for instance).

But on the other side, we are all here now commenting that are entering an “autumn” of virtual reality: it is not a winter because the ecosystem is still alive (unlike in 2017), but for sure there is stagnation. VR headsets are selling ok, but are not entering much into the average consumer market, some VR developers are succeeding, but now projects are also being shut down (see what happened to Echo VR and Nerf Ultimate Championship), and all VR companies are doing a spending review.

But how is this possible? We are beyond Mark’s 10 M mark (pun intended), and “content and the ecosystem should just going to explode”… why aren’t we seeing explosions like in a Michael Bay movie?

Explosions, explosions everywhere

Reality is not that simple

The thing is that reality is never that simple. A magic number can be used to convey an idea, but rarely you can reduce complex economic situations to just one single value. In these years, we heard this story a lot… before Quest 2, I also read an article saying that “$299 is the magic number that makes a technology mainstream”. Then Quest 2 launched at that price, and while it sold very well, just the price wasn’t enough for it to become as popular as the PlayStation. 10 M is another simplification: it meant that it is very important to have enough people in the ecosystem to sustain itself. But it is not that at 9.9M the ecosystem is shit and at 10.1M there is an explosion of success. It’s an incremental growth, and 10M is usually the order of magnitude that can trigger that. There is not any kind of exact magic number that makes successful any kind of platform. For VR may be that that number is 15, and maybe for another technology is 8. 10 M was just an order of magnitude.

And again, reality is never that simple. It is a bit like when we read about a new headset, and on paper it is fantastic, the YouTubers start calling it “THE VALVE INDEX KILLER” and then you try it and it has such a bad user experience that is a killer, yes, but of your eyes. Specifications are just part of the story of a headset, and sales numbers are just part of the story for an ecosystem. As usual, I invite you to try to analyze a situation from different points of view, in all its complexity and never get sold on catchy headlines.

Retention is key

Sales are not even the most important number to look at. Retention is: the more people use a product every day/week, the more that product is relevant.

Quest is not even the first platform to cross the 20 M line. Do you remember what other VR headset did that? Yes, Google Cardboards. Those shitty things that people used for one day, and then burned with fire after having ruined their eyes with those cheap plastic lenses. They became very popular during the first wave of consumer VR, but they had a problem: no one was using them. People just tried them, had fun for maybe one day, then totally forgot about them. The user experience was horrible, the content was not there, so of course this was the only possible outcome. Oculus Go was killed for the same reason: not enough retention.

Quest seems to have the same problem: not at that big scale (it is much better than the previous units), but still at a relevant one. According to the report, Mark Rabkin, Meta’s VP of VR, said: “We need to be better at growth and retention and resurrection. We need to be better at social and actually make those things more reliable, more intuitive so people can count on it.”

Translated: we need more content, we need to be more user-friendly, and we need more retention. Because retention is key. It is much better to sell 4M units but have all the users every day using your product than to sell 20M and have low retention. Because with 4M loyal users you have a real market of people that keep paying on your ecosystem, with the 20M not-affectionate ones, you have just an initial sale and that’s it. Add to this equation the fact that Quest 2 is sold at loss and you understand how actually the sales of many headsets are even a problem for Meta: if it loses $100 per headset as someone hinted, 20 M sales equates to around $2B of losses across the years, which is not a good thing. Meta desperately NEEDS recurring users that buy content on its store to make its VR business sustainable.

While the Quest 2 has been a great step forward for VR in general (including for retention numbers), it is still not ready for the average Joe: the user interface is too confusing, the ecosystem is still too much gaming-oriented, the content is not enough and not for everyone, the social experiences are mostly uncanny, and so on. Let’s say that now VR is good for people that have at least a bit of technical skills, but still not for everyone.

There is another problem, also. The more Metea goes on, the more it attracts average people, and the less affectionate people will be. We VR enthusiasts are so passionate about VR that we would buy also the VR Potato 9000 headset if see a review of it made by Road To VR. But the average player maybe gets bored after a few days if he doesn’t see on the headsets the games he likes the most like FIFA or COD. Also while we VR passionate have time every week for VR, the average consumer has not a special place in the heart for VR, so the headset competes with other forms of entertainment like the PS5, or the mobile phone. And these are other platforms with more users, and where especially the player has already lots of friends in. In fact, Rabking also said, “the newer cohorts that are coming in—the people who bought it this last Christmas—they’re just not as into it [or engaged as] the ones who bought it early“.

People are key

oculus quest 2 happy price
Me and my Quest 2

When I published a Tweet about the 10 M threshold a few days ago, someone made me notice in the comment that Zuck never talked about headsets, he talked about people. Let me copy-paste it for you so that you don’t have to scroll this post up (I’m lazy, too, and I would hate to do that): “[…] we think that we need about 10 million people on a given platform […]”. I guess that Zuck is referring to having 10 M recurring users of VR, of real active users of a certain platform.

Cardboard had 20 million units but never 10 million people. Quest most probably hasn’t 10 million recurring customers yet. This is why the internal complaint about increasing engagement… the sales numbers are quite ok, but the real number of users not. Remember that Quest 2 may have sold more than the latest XBOX in a certain period, but XBOX is an established platform with users playing with it constantly, so its number of real users is much bigger (also because the previous versions of Xboxes sold better than the previous versions of Quest). According to a fast research I did on Google, Xbox One sold more than 50M units, and the total number of monthly ACTIVE Xbox users, including the ones on Game Pass, is around 120 million. So the Xbox platform as a whole is like 10x the one of the Quest if we look at the active users.

So more than looking at the actual sales of devices, we should be able to know how many are the actual active users on a given platform.

Plus, it is notable to add that 20M is the compound sales of all the Quest headsets. Someone like me that has bought all three the devices is counted three times. People that bought a Quest for business purposes, and so are not useful for the consumers’ count, are inside that number, too. So the actual number of consumers that bought the Quest is less than that.

Market distribution is key

There are also other factors to take into count: the VR market is unevenly distributed. The idea of “if there are enough users, you surely have a friend with VR” is right, but is true only where the headsets have been successfully sold.

I don’t know the situation now, but until one year ago, when I asked a few devs for their stats, the VR market was still US-centric. This meant that like 50-70% of revenues for game developers came from a single country: the United States. This is because Meta is an American company, and it pushed its products at home, for instance showing a lot of TV ads. So this effect of having “a friend with VR” may hold true for the US, but it is not the same in many other countries. This uneven distribution also hurts the organic growth of the ecosystem.

The VR market is also very game-centric, so many people not into games are not enticed by these systems yet. It is a lot that we speak about having more different content on headsets, but after many years, gaming is still the main use: in fact, VR magazines’ reviews are still 90% about games. This way it is hard to enter the mainstream like laptops or mobile phones.

The trends are key

Current economic conditions are also just bad. The Quest has raised its price to $399 and this hurt its sales. While inflation is slowly getting better (at least in Italy), the current economic situation is not positive, and this means that fewer people are interested in buying a headset now, because they prefer to save money for something more useful.

To have a working ecosystem, you need all parts of it working. But, trust me on this, now some parts of it are not working as well as one year ago. With the metaverse hype deflating, the economy going down, and all the rest, investors are more cautious with their money, for instance. This means that fewer startups are proliferating in our field, because they don’t have access to funds. In parallel, the economy is causing other bad effects: some VR companies are shutting down, and some big projects are being closed because major tech companies have to be more attentive about their money (see what happened to Altspace, for instance).

So this is not the best moment for an “explosion” of the ecosystem, even if it features a good number of people inside.

So if not now… when?

Oculus Connect 4 virtual reality roundup all
To be totally honest, Mark has been used to say random numbers in its presentations… (Image by Upload VR)

If you are asking me when VR is going to become mainstream… well, I don’t know. I’m a big believer in immersive technologies in general, and I think that XR as a whole will succeed at a certain point. It is just too big to fail now, with all the major companies involved. And we all that used it can see its value for everyone, both as AR to help us with our everyday tasks and with VR for exiting from our reality and entering into a new one.

But this growth is going to be messy, with lots of pauses in the middle (like the one in 2017-2018 and the one happening now), and some moments of unexpected growth (like with the launch of Quest 2), until at a certain point the ecosystem will be ready enough to enter the mainstream for real. Lots of things will also depend on technology advancements: for instance, AR glasses require technologies not available today yet to be usable every day, every time.

I don’t know when it is going to happen, but do not expect explosions this year for sure. If you want to stay in this field, you have to stay for the long run. Which may mean the usual “5 to 10 years” of the Vitillo’s Law of technology...

(Header image by Meta)


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