New World Notes

Carmack: Quest 2 Price Was Raised Because Free Metaverse Platforms VRChat & Rec Room Are More Popular Than Quest's Premium Games

Update, October 17: Carmack later acknowledged that Rec Room and VRChat do make money for Meta via 30% commissions on in-app payments. However, as most free-to-play multiplayer games/worlds monetize at under 10% (usually much less), it's still likely the case that the vast majority of Rec Room/VRChat players on Quest aren't paying Meta anything through those platforms.

I noted yesterday that the Quest 2 attach rate seems pretty small based on Meta's reported revenue numbers, but the rest of that story -- and the explanation for why the Quest 2's retail price was recently raised -- comes from senior Quest advisor John Carmack himself, in his Connect 2022 keynote.  

Basically, he says, Quest 2 owners are not buying enough premium content and instead, are using their headset for free-to-play metaverse platforms VRChat and Rec Room.

"When you have some of the most popular apps on Quest are free apps, VRChat and Rec Room, that we get no revenue from at all, and while they are sitting there at the top of our ranking list in many cases, there's there's not a lot of internal push for that," as he puts it. (Watch above at about 41 minutes in.)

This is a pretty jaw-dropping revelation. Meta developed the Quest 2 and the Quest app store to grow the market for its metaverse platform. But instead, Quest 2 owners are going in droves to VRChat and Rec Room -- leading metaverse platform competitors.  (Rec Room alone, as I recently reported, had 3 million active VR users, most of them on Quest.)

In fairness to Carmack, he adds that he's completely supportive of that happening. Full context of the quote below, and thanks to the eagle eyes of VR devs Derek Johnson and Kim Baumann Larsen for catching this point that I originally missed! 

This VRChat Explorer Photographs Beautiful Worlds Like These -- But The Most Popular One Here May Surprise You

Neomance is another great VRChat explorer. Like Bradlee, he explores the platforms' many worlds, takes breathtaking photos of his favorites, and posts them in a dazzling cascade on his Twitter.

Like many -- most? nearly all? -- of the active VRChat community, he discovered VRChat through "random YouTube videos, and I got on to socialize with random people".

Unlike most others, he's spent 2 years actively exploring the platform, deeply browsing the user-created worlds, and learning to photograph them like a pro. (That's even led to a few for-hire VRChat photography jobs.)

Here's five of the favorite recent worlds he's photographed -- tweets include creator credits and info for visiting them yourself:

• Abrepear
• suishogu (pictured at right)
• Ecology (pictured below)
• Forest Magic Shop
• Floating Delight (also pictured below)

If you've explored VRChat at all, you'll notice that many of the most popular and well-visited worlds aren't necessarily the most beautiful -- and vice versa. In fact, of the five worlds listed here, the most popular one might surprise you:

No, Virtual Reality is Not In Its "Early Days" (Comment of the Week)

Above: Nintendo's consumer VR launch in 1994 

Is the market for VR headsets small and active usage apparently low (especially among Gen Z) because virtual reality is still in "early days"? Reader Nadeja thinks otherwise:

I don't think we are in the early days of VR. The earliest HMD were made in the 1960s. NASA worked with HMD in the 1980s, Nintendo had something too. [See above - WJA] Then there were several commercial releases in the 1990s. Now we are in the 2020s.

I rather think that VR headsets aren't so practical and human-friendly. I'm not talking about the technical limitations, the lack of peripheral vision, nausea, the risk of hitting or stumbling on anything as you have essentially a blindfold... but about the HMD device itself.

You could say that someone can wear a HMD for hours, but in general sunglasses and eyeglasses are probably about as much as one can take, and some people still prefer contact lenses.

We need a paradigm shift around HMDs. When VR will be as widespread as smartphones, we would likely not use HMDs, but something else.

Fun fact: In 2015, Mark Zuckerberg predicted that VR HMDs would replace the smartphone by 2025. With the smartphone market currently at about 6.5 billion, compared to VR's total install base of maybe (and at most) 30 million, I'm sort of guessing that's not going to happen.

The categorical mistake, I think, is not realizing that unlike VR, mobile phones had an immediate and obvious broadly valuable use case from the very beginning:

Since Only 5% of Gen Z Uses VR Every Day, is Meta Wrong to Promote Virtual Reality Like a Mainstream Technology? (Comment of the Week)

Responding to our question on how many active users on the Quest VR headset there are, a reader points us to a recent market survey which suggests that use is quite tiny, especially among Gen Z:

Piper Sandler completes 43rd semi-annual Generation Z survey of 7,100 U.S. teens...

While 26% of teens own a VR device, just 5% use it daily. 48% of teens are either unsure or not interested in the Metaverse

This prompts reader "lieisacake" (LOL) to observe:

Forget the Quest 2's Install Base -- How Many Quest 2 Owners Are Active? (Comments of the Week)

Above: Most popular games in the Quest store as of today

I spent much of last week pondering the mystery of why Meta hasn't announced that the Quest 2 has crossed a 10 million unit install base (as it almost certainly has by now, based on earnings reports). Reader Zack makes an even better point:

Consider Meta might actually experience terrible numbers of ACTIVE users... I personally worked in VR since DK2 days, 2015 or so. I own a Quest 1, and although I believe in this tech's future, I still have to fight my way into my next VR session, every not so often time I decide to wear it.

So only guessing here... if say 50%+ of Quest2 owners don't even use their headsets past the first 30 hours of "novelty and excitement" phase... THAT would be really embarrassing for them... and I feel that's the reason why 10M units is not enough to have a self-sustaining ecosystem.

While Zuckerberg did say 10 million was Meta's magic install base milestone, Zack's point helped remind me to double check Zuck's specific wording in 2020:

We had this milestone in our mind that first we needed to get the technology to the place where you could have a standalone headset, it could be portable, it could be high quality — do the tracking and all that. And Quest was the big milestone on that. Then, from an ecosystem perspective, we believed that if we get to 10 million units active, then that’s kind of a critical magic number.

Emphasis mine! That could really solve the mystery: Maybe 10 million Quest 2 units are sold, but that doesn't mean 10 million are being actively used. 

Martin K. chimes in on that tip:

Mystery: Quest 2 Install Base Must Have Passed Zuckerberg's 10 Million Target By Now - So Why No Meta Announcement?

With Meta's Q2 2022 earnings report out now, it's once again time to engage in some Quest 2 install base tea leaf reading. I've written about this multiple times (most recently here), but the basic gist is: Most or nearly all the revenue from Meta's Reality Labs division comes from sales of its Quest 2 hardware device, with an MSRP of $299. So doing the back-of-envelope math:

• Back in April, I calculated the Quest 2 install base as about 11-13 million.
• According to the latest revenue report, Q2 revenue for Reality Labs was $452,000,000 million.
• Which suggests up to 1.5 million more Quest 2 units were sold between April and June 2022.
• Giving us a grand total Quest 2 estimated install base of 12-14.5 million units maximum.

Even at a very conservative estimate, Quest 2's install base crossed over 10 million months ago.

Which brings up a new mystery: Why hasn't Meta announced Quest 2 hitting a 10 million milestone?

10 million is, after all, Mark Zuckerberg's (somewhat arbitrary) target goal for the Quest 2. As he put it in 2020:

Don't Expect Apple to Announce an AR/VR Headset -- It's Been Working on an Unannounced HMD Since at Least 2015!

To the disappointment of many XR/Metaverse fans, Apple's slew of announcements at this year's Worldwide Developers Conference did not include anything about its much-rumored, long-awaited VR/AR headset. I'm not surprised, even though the New York Times just reported one is coming out next year. 

Because the thing is, I've been following such dubiously sourced predictions and rumors since at least 2015. Seven years! To wit:

Watch: What Social VR / Metaverse Platforms Can Learn About User Safety from 2D Virtual Worlds

Here's the latest talk from Linden Lab veteran Jim "Babbage" Purbrick, who applied what he learned from Second Life and other pioneering virtual worlds in his work for Eve Online and Meta, with the focus here on user safety, i.e. keeping annoyances from trolls and other bad actors in the virtual world down to a dull roar.  

These are lessons, as he tells me, "from older, 2D and text-based virtual worlds [that] are often ignored by VR developers. This talk shows how we applied those lessons to Oculus Venues.

"Technologies change, people stay the same."

This is true. One key lesson Jim and his team applied was real time responses to active harassment. (Starting at around 29 minutes in.) If a troll is scurrying about causing problems during a live event, they need to be dealt with in real time, not after abuse reports have been filed by users and processed the next day: 

Watch: How BONELAB Could Become the Garry's Mod for VR

Via VR scout Adeon, here's a very good case from YouTuber ThrillSeeker to keep an eye (and a haptic finger in the wind) out for BONELAB, from indie studio Stress Level Zero, creator of the unexpected VR hit BONEWORKS from 2019. Like that game, BONELAB has highly responsive physics and avatar customization, with this new version compatible with the Quest 2 and its install base of some 11-12 million consumers. Even more intriguing, BONELAB's teaser trailer strongly suggests that player modding will be a major feature to the game after it rolls out. Or to put it another way: BONELAB could become the Garry's Mod for VR.

Teaser trailer and feature description below from the Steam page:

Quest 2 Install Base Estimate: Now 11-12 million, Based on Q1 Meta Report

With Meta's Q1 2022 earnings report now out, it's once again time to engage in some Meta-ology. (You know, like Kremlinology, except with a publicly traded company.) The core question for us XR/metaverse obsessives being: What's the install base of the Quest 2, which is central to Meta's  metaverse strategy?

Short answer: From what we can tell based on this earnings report, about 11-12  million.

Why? If you want to walk with me in the weeds, read on: