Eddie-Griffin
Banned
https://skarredghost.com/2023/03/03/quest-20-million-mainstream/
There's more in the link I was focusing on key highlights, but the article actually touches on many good points. Although one thing they are missing is consolidation though their segment on market distribution lightly sort of touches on that but not really because they are focusing on users over hardware. Pretty much there's no growth despite the sales (and lack of active users) because no one else was/is selling. PSVR2 we will have to wait for the numbers, some sources claim we will know tomorrow we'll see about that. But this during an era where Quest 2 is declining, that won't mean much even of it was over 500k in feb.
A key point made was about retention in regards to the Quest, and this goes for other headsets as well. The users are not engaging, that's why we rarely see software reports (even from Sony/Samsung during PSVR1/Gear when they were still given unit sales a lot of the time). People are buying the units, then returning them or letting them sit in a closet.
An example the article used was Google Cardboard, many outlets don't consider that real VR and usually place Gear VR at the top (or ignore mobilevr for some reason and put PSVR1 at the top) but technically overall, yes Google Cardboard was a massive hit. But it was flimsy even in rea-time, and people stopped using it's almost not even bare minimal VR after a week or so if that.
With Quest 2 you have a better product but what are people using it for? This is where you can see Zuckers biggest failure, all his social apps failed, including ones with gaming involved. Horizon Worlds being the biggest money sink, that was supposed to be one of the core ways to keep players coming back and improving retention of VR. It didn't work.
Beat Saber is the best selling game in VR, which officially hasn't sold 1/4th of the close to 20 million (Quest 1 and 2) headsets sold. Estimates place it over 5, which would put it at 1/4th, and as the article says, games are the primary driver of VR headset sales still. That's a pretty big difference, especially when Beat Saber is far and away from other software and it's that low.
The article brings up the second part to the puzzle, audiences. Something I've brought up that many people are very resistant to admitting is a problem,
These demographics will are not going to run and grab a headset for Horizon Worlds, R8, or Pistol Whip. These need games that have more pull, AND they need software on TOP of games to also pull them in. Without both those parts there, it's going to be hard to have these users come back, or to even buy a headset as the wom spread against adoption.
China recently domestically sold 1 million VR headsets across numerous brands, with a higher social segment, and even some having connection to phone through apps for social, buying software, and other goodies (recent YVR2 thread touched on this) with several competitive players competing for marketshare with growth in nearly every category.
Now, Chinas market globally is miniscule still even with over 1 million headsets sold there at the consumer level, however, how it's being executed over there SHOULD be how it's done over here, Instead, there's not real growth, retention is bad, there's one main player in the VR space, and they basically control the market, we are seeing quest games and software helping other platforms. We don't see 5 headsets selling good numbers with their own good software attracting more serious investment into the VR market.
Another thing to consider is sustainability.
VR in many cases is a market with a lot of losses, some players like Tencent tried looking into entering and then noped out and canceled to avoid the lack of roi and the high risk for going all-in and being competitive. When the losses are occurring you have to make up for it somewhere. Usually software and accessories, perhaps other things like music or movie sales etc.
But when you sell hypothetically 7 million headsets and only 1 million are engaged and actively using it, you aren't getting enough profits from elsewhere to reduce or remove the red ink. 5 million Beat Saber, across 20 million Quest 1 and Quest 2 headsets, with estimated ~8 million Quest 2 sold in 2022, means nothing at all if Quest has always had only 10% of their sales be active in such a scenario.
We don't know how bad the actual retention problems are for Facebook, Pico, PSVR1, or Gear previously, but what we do know is that it doesn't take much to see the money emptying and reports of cutbacks and layoffs.
VR needs to solve the problem of retention plus getting users to spend more in the ecosystem for longer than a month or two. VR needs some amazing software to finally get it to take off. So far we haven't seen it yet. Will it happen from one of the 50,000 headsets releasing this year? Who knows, but VR won't go very far without that change.
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?
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“.
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.
There's more in the link I was focusing on key highlights, but the article actually touches on many good points. Although one thing they are missing is consolidation though their segment on market distribution lightly sort of touches on that but not really because they are focusing on users over hardware. Pretty much there's no growth despite the sales (and lack of active users) because no one else was/is selling. PSVR2 we will have to wait for the numbers, some sources claim we will know tomorrow we'll see about that. But this during an era where Quest 2 is declining, that won't mean much even of it was over 500k in feb.
A key point made was about retention in regards to the Quest, and this goes for other headsets as well. The users are not engaging, that's why we rarely see software reports (even from Sony/Samsung during PSVR1/Gear when they were still given unit sales a lot of the time). People are buying the units, then returning them or letting them sit in a closet.
An example the article used was Google Cardboard, many outlets don't consider that real VR and usually place Gear VR at the top (or ignore mobilevr for some reason and put PSVR1 at the top) but technically overall, yes Google Cardboard was a massive hit. But it was flimsy even in rea-time, and people stopped using it's almost not even bare minimal VR after a week or so if that.
With Quest 2 you have a better product but what are people using it for? This is where you can see Zuckers biggest failure, all his social apps failed, including ones with gaming involved. Horizon Worlds being the biggest money sink, that was supposed to be one of the core ways to keep players coming back and improving retention of VR. It didn't work.
Beat Saber is the best selling game in VR, which officially hasn't sold 1/4th of the close to 20 million (Quest 1 and 2) headsets sold. Estimates place it over 5, which would put it at 1/4th, and as the article says, games are the primary driver of VR headset sales still. That's a pretty big difference, especially when Beat Saber is far and away from other software and it's that low.
The article brings up the second part to the puzzle, audiences. Something I've brought up that many people are very resistant to admitting is a problem,
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“.
These demographics will are not going to run and grab a headset for Horizon Worlds, R8, or Pistol Whip. These need games that have more pull, AND they need software on TOP of games to also pull them in. Without both those parts there, it's going to be hard to have these users come back, or to even buy a headset as the wom spread against adoption.
China recently domestically sold 1 million VR headsets across numerous brands, with a higher social segment, and even some having connection to phone through apps for social, buying software, and other goodies (recent YVR2 thread touched on this) with several competitive players competing for marketshare with growth in nearly every category.
Now, Chinas market globally is miniscule still even with over 1 million headsets sold there at the consumer level, however, how it's being executed over there SHOULD be how it's done over here, Instead, there's not real growth, retention is bad, there's one main player in the VR space, and they basically control the market, we are seeing quest games and software helping other platforms. We don't see 5 headsets selling good numbers with their own good software attracting more serious investment into the VR market.
Another thing to consider is sustainability.
VR in many cases is a market with a lot of losses, some players like Tencent tried looking into entering and then noped out and canceled to avoid the lack of roi and the high risk for going all-in and being competitive. When the losses are occurring you have to make up for it somewhere. Usually software and accessories, perhaps other things like music or movie sales etc.
But when you sell hypothetically 7 million headsets and only 1 million are engaged and actively using it, you aren't getting enough profits from elsewhere to reduce or remove the red ink. 5 million Beat Saber, across 20 million Quest 1 and Quest 2 headsets, with estimated ~8 million Quest 2 sold in 2022, means nothing at all if Quest has always had only 10% of their sales be active in such a scenario.
We don't know how bad the actual retention problems are for Facebook, Pico, PSVR1, or Gear previously, but what we do know is that it doesn't take much to see the money emptying and reports of cutbacks and layoffs.
VR needs to solve the problem of retention plus getting users to spend more in the ecosystem for longer than a month or two. VR needs some amazing software to finally get it to take off. So far we haven't seen it yet. Will it happen from one of the 50,000 headsets releasing this year? Who knows, but VR won't go very far without that change.
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