Virtual reality market plummets nearly 40%

This downturn is more pronounced than the 2% decrease to $1.1 billion in the previous year.

Despite showing signs of contraction, Meta is investing billions each quarter to realise CEO Mark Zuckerberg's vision of a futuristic virtual world, the Metaverse.

Zuckerberg announced Facebook's rebranding to Meta in late 2021, predicting a decade-long journey to reach a billion users. However, with shareholder scepticism growing over Meta's significant investments, the company is under pressure to present more positive data. Meta's Reality Labs, spearheading VR and AR development, reported a $3.7 billion loss in the third quarter against $210 million in sales. Since early 2022, the division's losses have totalled approximately $25 billion.

A recent blog post by Chief Technology Officer Andrew Bosworth highlighted the intersection of AI and the Metaverse as "two long-term bets on technologies of the future." Bosworth acknowledged the challenges and costs involved but emphasised their value for a tech company's long-term relevance.

Ben Arnold of Circana attributes the market's struggles to a lack of new standalone VR headsets and the absence of a widely appealing breakout app.

Meta leads the VR market, primarily through its Quest-branded headsets. Meta's recently launched Quest 3 VR, priced at $499, has shown strong sales, contributing to a 42% increase in US VR headset sales during a crucial eight-week period in late 2023. Arnold notes improvements in headset design and appeal but emphasises the need for compelling content to attract developers and users.

Meta's Quest 3 aims to encourage developers to create apps and games utilising its augmented reality features. At Meta's Connect conference, developers praised the Quest 3's passthrough technology for enhancing mixed reality experiences.

Meta is also exploring generative AI technologies in its Ray-Ban smart glasses, aiming to integrate AI perspectives with daily experiences. The second-generation Ray-Ban glasses, launched in October, represent another avenue for realising Zuckerberg's metaverse vision.

Apple's entry into the VR market in 2024 with its Vision Pro mixed-reality headset, priced at $3,499, is poised to impact the industry. Analysts anticipate Apple's influence could stimulate the VR and AR markets, with its integration potential with existing Apple products.

Meta's ambitious Metaverse project continues amid market uncertainties and the looming presence of Apple. While the journey is fraught with challenges, it represents a significant stride in the evolution of VR and AR technologies. Meta's investments and innovations, coupled with Apple's upcoming entry, will likely shape the future of this emerging tech landscape.