Meta's AR/VR division is hemorrhaging money

The "Reality Labs" responsible for Meta's Oculus VR headgear, Portal smart screens and Ray-Ban Stories smart glasses lost $2.8 billion last quarter.

From Scharon Harding's "Meta’s flailing Portal repurposed as a wireless portable monitor" posted Thursday on Ars Technica:

In June, The Information reported that Meta would stop making Portals for consumers and start pushing them as business tech as part of a hardware strategy restructuring to appease investors. At the time, the site reported that Meta sold 600,000 Portals in 2020 and 800,000 the following year, according to market analysis firm IDC.

Meta's track record in hardware hasn't been great. The Quest 2 is one of the most-used virtual reality headsets, but Meta's Reality Labs AR/VR division, which also accounts for its Portal and Ray-Ban Stories smart glasses, is an expensive endeavor that lost $2.8 billion in Q2 2022. In June, Bloomberg reported that the division's plans for a Meta smartwatch were scrapped about a month after Meta said it would be canceling and delaying projects to save money.

My take: This is the competition for Apple's unannounced AR/VR goggles?

See also: How Apple will show Mr. Market that augmented reality is real

9 Comments

  1. Bart Yee said:
    After initial pandemic related growth and boom of Oculus sales, presumably to isolation bound folks itching to try “anything”, including VR video gaming, the reopening of the economy, back to work, and just less time for gaming, let alone the novelty of it all, shows Oculus sales rising cumulatively to 14.8M total by Q2 2022, yet losing almost $3B, interest waning, and no new “killer apps” or hardware to be seen from Facebook, er, Meta, and multiple hardware initiatives being sidelined or cancelled.

    As I said a few days ago, Zuckerberg has no freaking idea where to go with the “metaverse” and no experience whatsoever with building hardware platforms. What could go wrong?

    3
    August 12, 2022
    • Bart Yee said:
      The Quest 2 launched in October 2020. So that’s 14.8M units sold through end of Q1 2022, or about 5 quarter so roughly less than 3M units per quarter. Not bad for a niche product, but apparently not much of a revenue or profit driver. Of course, one can guess (or maybe not) how does Meta monetize any data they get from Oculus users that they can profitably sell?

      Reminds me of the business model of selling cheap, razor thin margin smartphones. Is the Oculus part of some well thought out Meta ecosystem? Beats me!?!

      2
      August 12, 2022
      • Neal Guttenberg said:
        Bart,

        The question that I have is how did they lose so much money in 1 quarter in that division? Which leads to many other questions. Did they manufacture too many devices and they are writing down inventory? Or was this partly related to expenses for downsizing personnel? If they lost that money with sales of 3 million units in the quarter, then did they get caught with supply chain issues or did they not price their devices accurately? Did sales start to drop as the rumor mill of an Apple device being debuted in first quarter of ’23?

        Meta has proven that hardware is a hard business. Their transition from solely software/advertising to hardware has not gone well. Did Zuckerberg take on too much and or is it beyond his level of expertise? It will be interesting to see if we find out.

        2
        August 12, 2022
        • Bart Yee said:
          Good questions Neal. My sense is that even though previous quarters through end of Q1 2022 showed a nice pandemic related bump, there could be a rapidly dwindling group of users and buyers who don’t already have an Oculus. Indeed, one group ARInsider, feels the number bandied about are actually too high.

          ARInsider estimate <10M total Oculus 1 and 2 units sold entirely, and based on revenue for MRL and breakdown of software and hardware, they feel the total Oculus units sold in Q2 to be <1M (973K), so that’s a slowing number and not sure how Meta will reverse that trend, if it is even important to them.

          0
          August 12, 2022
  2. Fred Stein said:
    Zuck’s Metaverse business is a desperate attempt at denial that his core business no longer hot. He’s fooling himself. Because he owns controlling votes, this can’t be fixed.

    7
    August 12, 2022
  3. Michael Goldfeder said:
    It now appears that Facebook/Meta’s singular claim to the Metaverse is going to be limited to their name change only. Everything else will be viewed by them from the cheap seats only.

    4
    August 12, 2022
  4. Here’s the deal, until someone can figure out a way to build portals from Kirby and the Forgotten Land to World of Warcraft to Eldon Ring to Sonic Origins to Entropia Universe to RuneScape and Second Life, the whole virtual universe remains pigeonholed.
    The top 3D games run on different platforms and are unlikely to let you easily leave & take that Sword of Damocles you just bought to a competitor’s world. At least not anytime soon.
    Apple’s iPhone & iPad already host some version of most major game platforms, except Fortnite. If any firm could get the various 3D players to coalesce it is Apple, Inc.

    1
    August 13, 2022
  5. Kirk DeBernardi said:
    Once again — “It’s on your face.”

    The touchiest of real estate.

    It’s bad enough for Meta-huh? to be up your data keister, let alone on your melon.

    0
    August 14, 2022

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