As EU & US Regulators Investigate Facebook, VR Evangelist Robert Scoble Warns That Oculus May Not Survive

Hitting Facebook at the worst possible time for the company (but they should have expected it),  regulators in Germany, the European Union's most powerful member state, are now going after Oculus’ now-mandatory Facebook log-in:

“In the future, the use of the new Oculus glasses requires the user to also have a Facebook account. Linking virtual reality products and the group’s social network in this way could constitute a prohibited abuse of dominance by Facebook,” federal cartel office President Andreas Mundt said in a statement on Thursday.

This is happening, of course, just as the United States government files a monopoly suit against Facebook, basically tossing Zuckerberg alone in the ring in a tag team deathmatch.

“I think that it is a good example of the different and sometimes complimentary antitrust approaches in the EU and the USA,” the EFF’s Cory Doctorow tells me. “The EU has historically gone big on conduct remedies, that is telling companies what they can and can't do but allowing them to create these big monopolistic silos. The US is now coming around to structural remedies, that is, breaking companies up so that they have no reason to self-preference.”

Doctorow suggests that the US simply requiring Facebook to sell off Oculus would be more effective, rather than prohibiting mandatory log-in:

“If Facebook didn't own Oculus,” as he puts it, “there would be no reason for Oculus to require a Facebook login, so breaking Facebook up would produce a more durable remedy than banning it from self-preferencing with Oculus accounts.”

One way or another, it seems like the end of mandatory Facebook log-in is coming soon. But VR evangelist Robert Scoble tells me that would also be the end of both Facebook and Oculus:

“Doing that would kill Oculus,” as he puts it to me, later adding, “If Facebook is forced to divest Oculus, then Oculus won't survive.”

Here’s why he thinks that:

“Zuckerberg needs to hook Oculus up to the advertising engine. No way around that. Zuckerberg is putting a $1,500 check in every Quest box sold this year. There's no way to do that if he can't hook it up to the advertising engine.”

Sony has actually far sold more PSVRs than Oculus without any apparent plan to leverage it for ads, but Scoble doesn’t think that’s a viable alternative for Facebook:

“PSVR is cheaper to develop and has an existing ecosystem. Quest is a far far better product

Facebook is spending $10 billion or more on these things. The future REQUIRES everyone to use the same ID for everything. Apple too. It's just that we trust Apple a LOT more with these kinds of things”

As Scoble explained in a must-read New World Notes guest post last Summer, he believes Facebook and Apple are on a crash course to launch competing XR headsets tied to user data, with no other company able to join the fray:

The truth is, if Facebook and Apple both had a pair of glasses on the market for $500, no one would buy Facebook’s. Why? Apple is perceived as a safer, more privacy-focused, and more luxury and service-focused brand (rightfully so, by the way).

So, my research is finding that Facebook will not be able to sell for the same price Apple is but must price its products for far less, say, $300.

So, now, Apple will have a dramatic pricing advantage and profit advantage over Facebook because it can split the cost over an ecosystem that consumers will pay $1,500 to $2,000 for, while Facebook has to come to market with products that are $300.

How will anyone survive this price war? Only a few companies that can afford to subsidize products with other revenue streams can. Facebook has a huge revenue stream from its advertising engines. Google has an even bigger one. Amazon could subsidize glasses with its e-commerce profits. There are very few others who have revenue streams that will be able to subsidize businesses this way. HTC? Nope. Valve? Nope. Huawei? Nope. Magic Leap? Nope.

So if the Justice Department asked Robert Scoble if they should cite mandatory Facebook log-in as a monopolistic practice that must be ended by court order, what would he tell them?

“Then the whole business falls down. Everything Facebook is requires you to have a real account and only one. In the future that will be 1000x more important. You will use these futuristic devices to do EVERYTHING including buying everything, or work, or play, or education.I would tell them that will destroy Facebook's business. That might be a goal, but it will have many effects.”

But Facebook is hugely profitable just running ads on its social network alone. Why would that go away if they can't leverage that network to run ads on devices?

“Because,” Robert Scoble tells me, “everything is about to change.”

I’m skeptical that the changes he has in mind will be as drastic or as mass market as he believes, but he’s definitely right that what the EU and the US decide about Facebook now will have unforeseen consequences for decades. Then again, given Facebook’s track record up to now, not doing anything about the social network’s power also has many dangers of its own.

Comments

[Adeon Writer]

Oculus is dead to me if Facebook is involved, so separating and risking their destruction is worth it. Let’s roll the dice and see if we get lucky.

[Joey1058]

I'm sure there are a few Boomers out there, like me, that feel this stuff is happening faster than we can wrap our heads around. And in some respects, some of it can't come soon enough. We are definitely approaching some kind of convergence point. For now, I'll avoid the term "singularity".

Robert is correct, for the most part. Apple does need competition on that scale. It is still early in the tech as a whole. Not many are pleased with how Facebook handled the situation with Oculus. In my opinion, if the Feds attempt to break up Facebook, Zuckerburg will fight to retain Oculus under his control. I'm thinking he will sacrifice most of the properties under the FB banner, if push comes to shove. With Oculus, he can start over.

The spatial computing future is going to be a hodge-podge of companies that rumble along with propritary offerings. The rest of the independents will dart in and out using ISO web standards. Just like the internet operates today.

[irihapeti]

nothing is going to happen

Facebook, while the largest provider of some services, is not a monopoly in any of the services it provides