During Facebook’s Q4 2020 earnings call, today CEO Mark Zuckerberg said that Quest 2 is “on track to be the first mainstream virtual reality headset”, noting that the device increased the company’s non-advertising revenue by 156% Has
In a previous earnings call, Zuckerberg has generally lowered the company’s XR business as a forward-looking investment that is not expected to pay off for years. His tune has changed significantly in the company’s latest earnings call, where he told investors that Facebook’s XR business is “one of the areas I’m most excited about its progress in 2021.”
Although Facebook has not confirmed how many Quest 2 units have been sold so far, Zuckerberg was excited about the headset’s sales performance, stating that it is “on track to the first mainstream virtual reality headset.”
It is not entirely clear what he means by “mainstream”, although we have a good guess. At Oculus Connect 5 in 2018, the company’s annual XR developer conference, Zuckerberg explained that he believed 10 million VR users to reach the company to create a sustainable ecosystem for VR developers was an important milestone .
The big question is, what does it have to take for VR to be profitable for all developers to make these big efforts? To get to that level, we think that we need about 10 million people on a given platform. This is the range where the number of people using and purchasing VR content makes it sustainable and profitable for all types of developers. And once we cross this boundary, we think that materials and ecosystems are just going to explode. Importantly, there are not 10 million people of all different types of VR at this threshold. Because if you make a game for the Rift, it doesn’t necessarily work on Go or PlayStation VR. So we need 10 million people [one] Forum.
So while Quest and Quest 2 are unlikely to have sold 10 million units yet, Zuckerberg’s belief that Quest 2 could become the “first mainstream virtual reality headset” suggests the 10 million unit threshold might be understandable. Huh.
“In the past quarters I’ve talked about my long-term future goals when it comes to virtual reality,” Zuckerberg told investors, “but I think the results for this quarter suggest that this future is here.” ” He adds that “more than 60 Oculus developers are generating revenue in the millions, and this is more than double what it was some time ago.”
Zuckerberg also said that Quest 2 was “one of the hottest holiday gifts this year,” and was a key driver behind the company’s $ 885 million Q4 non-advertising revenue. Facebook’s chief operating officer Sheryl Sandberg said on the call that it was a one-year increase of 156%, and noted in particular that it was “due to strong Quest 2 holiday sales.”
Some back-of-the-envelope math can give us ballpark estimates for the Quest 2 unit sales in Q4. The company earned $ 855 million in non-advertising revenue, including both Oculus products and portal products. Sandberg pointed to Quest 2 as a key driver for the increase without mentioning the portal, saying we could probably get at least 50% of the revenue from the Oculus headset.
From there we can understand that 75% of the headsets sold are Quest 2, with the soon-to-be-discontinued crack S making the other 25%. Similarly, we will understand that 75% of the 2 units sold are 64GB models, while 25% are 256GB models.
Plugging into those assumptions yields 1,000,000 Quest 2 units, though Facebook’s content sales and first-party goods cuts would have to dial back some portion for revenue.
Looking to the future, Zuckerberg confirmed that Quest 2’s successor was already in development.
“We are continuing to work on the new [VR] As well as hardware. The new hardware will fit on the same platform, so the content working on Quest 2 should be forward-compatible [with the new hardware], So that we’re going to build a big install base around the virtual reality headsets that we have. “
While it won’t come as a surprise to anyone seeking attention, it stands in the opposite position of Sony – whose PSVR has long been a leader in VR headset unit sales – but any plans to make the next Gene headset is avoided to indicate.
Facebook has made no secret about its plans to manufacture AR headsets; The company shared a look early last year. On the call, Zuckerberg confirmed plans to start with Smart Glass first, before launching full-blown AR glass in the future. He also called Apple as a potential competitor in the AR landscape.
“[…] In the long run, as we move towards building the next computing platform, I think we will expect to see [Apple] As a competitor [in AR] Too.”
However it is unclear if Facebook has some information about Apple’s XR plans, or if Zuckerberg is citing recent reports suggesting that Apple will launch its own headset next year.