Facebook Is Going to Muscle VR into the Mainstream

At yesterday’s Oculus Connect 4 conference, Zuckerberg outlined a goal to have 1 billion VR users. This goal is rooted in his belief that once platforms reach more than 1 billion monthly users in scale, they’re impossible to compete with. He should know, given the platforms under his control including Facebook (2B), WhatsApp (1.3B), Messenger (1.2B), and Instagram (800M). Like it or not, VR will be mainstream – and we love it.

Empowering global VR adoption. While the Oculus Go hardware announcement and Zuckerberg’s billion user VR target captured yesterday’s headlines, the bigger story is that Facebook can singlehandedly turn VR from a nascent user base today into a mainstream computing platform in the next 5 years. Facebook has the capital ($502 billion market cap and $43 billion in cash) and its founder is committed to empowering global VR adoption.  It’s important to note that VR has long been a passion of Zuckerberg, and it was reportedly love at first sight when he first used Oculus. Zuckerberg’s 1 billion VR user stake in the ground will be a motivator for start-ups, private companies, and investors. We no longer have to debate if VR will be real, now it’s a function of time.

How big is the VR Market? Earlier this year we published our VR headset market share model, which calls for monthly global VR users increasing from 100 million in 2018 to 1.2 billion by 2022 and 2.4 billion by 2025. While we’re leaving our estimates unchanged following Zuckerberg’s comments, our confidence in our VR user model has increased.

How much will Facebook spend on building out VR? We estimate Facebook will spend $36 billion on R&D over the next 3 years (2018-2020). If we assume 15% is going to VR that would imply over $5.5 billion in spending, which we see as more than adequate to accomplish it’s billion user target.

Facebook gets it, VR needs to be social. Social is not only important to Facebook’s mission, but to the future of VR. Mainstream adoption of VR will not take place with the current gaming landscape, since VR is currently seen as a luxury geek item. Instead, VR will need a social aspect before there will be mass adoption of the technology. Software features like screen-sharing, virtual lounges, project collaboration, and shared experiences like watching a movie or a sports game, allow people to connect in VR.

Oculus Go is more accessible. This headset is a step toward finding the sweet spot between mobile VR and computer-based VR. Mobile VR is easy to use but offers a diminished experience, while computer-based VR offers the highest quality experience, but is far more expensive and leaves users tied down with a cable. The Oculus Go is noteworthy not only because its $199 price point is 15% of the cost of an all-in Rift system (with a compatible computer), but because it’s easier to use, offering plug-and-play with no wires and no specific smartphone needed. While the quality will not be as rich as on the Rift, it will address the need for a middle of the road system that will undergo huge improvements with further investment as more users flood to VR.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.