Meta’s VR Reality Check: $70B Later, Still Not a Platform

[music] So, let's go to the next story, but let me just do a quick segue because as this one ramps up, another platform, ironically, for Meta now is going to ramp down. So, Crust is going to do a sad story and [laughter] actually a victory lap, I guess, as Meta announced a significant layoff to its Reality Labs division that's going to impact the MetaQuest VR gaming division, which I work with some folks who have a VR game. So, it's kind of interesting to like live through this a little bit. It's not over for VR, but this is starting to feel like when Facebook remember when Facebook did the rugpool on Facebook gaming. And so back in 2010, I was actually working on Farmville back in the day and I was a bit more on the mobile side, but remember when they took out all of the reality features of Facebook Canvas? Farmville went from 84 million MAU to 57 MAU in 2010 like in a single year because
they're talking about the spam. The spam

that would be like
water my plants, water my plants, Mike. Yeah, my cow's sad.
My cow's sad. You know, like the you know, help me find the cow. So when they made all these changes, basically it killed an entire gaming platform in the span of two years. Okay, I'm done with memory lane. So let's go to Meta now maybe killing VR.
Yeah, I mean there's some specific differences here. I mean they made a significant investment in this the VR platform, you know, they changed their goddamn name, you know, to Meta, right? I mean I mean he was all in, right?
I know.
There's just no doubt that he was all in. But the latest news is that they're shutting down Twisted Pixel, Senzura, and Armature Studios. Now, the significance of this is that these guys were acquired and also built some of the best games on the platform with Asgard Wrath, Deadpool VR, and then Resident Evil VR, right? So, like these are like premier studios that are building games that in theory would sell the platform. So what people are basically saying this is the final death rattle of you know

Zuckerberg's A16Z Matthew Ball's like metaverse delusion like this is what was going to happen. So what's really happening is they can't monetize the platform at scale. Like it was all about the engagement that we've talked about is that people are buying the hardware but they're just not buying software, right? And so that's not aing platform, right? And that's exactly why Microsoft is struggling because actually no one's buying the hardware either. But the fact is that when you need billions of dollars to subsidize a platform, it just can't exist for longer period of times. And eventually again what we've seen is the music has stopped. Now, the pivot to AI glasses kind of makes some sense to me personally,
but it just kind of is proof positive what we've been saying. VR is not a mainstream platform and it can't go on with just even with unlimited capital. What's unique about this is they just had such huge investor in Facebook and Meta is that like even with that kind of investment, it didn't work, right? And

so like it is just not a viable platform. So sad. I mean, I actually personally like VR and we actually need a new platform, but VR is just not it, unfortunately.
So, Crest, I mean, you know, sadly, you're not wrong about what's going on with VR. I pulled a little bit of data, but first I just want to say I'm always sorry when people get impacted and studios get closed, especially ones as quality as those studios. But first, I want to play let's guess how much Meta Reality Labs lost since 2020. You want to take a a guess of like how much they've put into this platform? It's in the billions.
4 billion.
125 billion.
70 billion.
No,
70.
Oh, that includes all the other hardware stuff.
Yeah, it's Well, it's everything in reality lab. So, you got Horizon, you've got all of the work. But that's how much they have spent.
And I imagine that they spent 70 billion on AI like last year. Like it's I imagine I don't know. Anyway, so on the data side, I pulled a chart from it's

called the ESA essential facts 2025. So this is current data on platform usage. Just a reminder, this is US only data. The ESA is our kind of like lobby system in the US. But what it shows is platform usage across generations. So you have, you know, Gen A Z, Millennials X, and then you have Crest in the boomer category. So this shouldn't this shouldn't be shocking to anyone but mobile is the highest of all of the platforms for all of the age groups. You know everything is above 80% and you know even Gen A is what 85 87%. And when you look over on the right of this chart basically you know sadly no one is playing VR games especially if you're under a millennial. So that has about what 14% usage for Gen A you know Gen X and boomers don't even know. I can't even put this thing on without throwing up, you know, 3 seconds without playing it. So, the strategy is how do you take a successful game in VR and take it to other platforms because the

future is not sadly in VR that it hasn't grown and it's just, you know, when you're addressable audience is only, you know, 14% of, you know, the bottom three generations. It's just how do you make money in that? Mishka.
Yeah. I don't know. Like today's episode, like the second part is going to be a lot about Gen AI and I was kind of, you know, projecting when going through this because the exact same folks that were very bullish on VR and AR and really believed it was the future and were trying to make it a future. Like I remember in 2015 or 14 where they brought these things to Best Buy and they were like Oculus is the thing and they tried multiple different variations. Co seemed to be the way and this never happened. So, I'm not saying AI is not happening or anything like that, but I'm just perplexed, maybe, pun intended, on how Meta got this so wrong for such a long time because I don't know anybody who was bullish on VR even

during the co times except Zuckerberg like that. He seemed to be like all about it even going on JR.
I was optimistic for it too. I'll own that. I Yeah. The only issue I saw is that Yeah. the is mobile's easy to get. And I think if I look at if I mean just looking at the gener generational split, this stuff's expensive, right? So if the younger generations are using mobile and they're not picking up virtual reality, I mean one, the headsets are heavy. Two, they're expensive. So how do you get it in the hands of everyone and have enough people playing this content for I think something where the hardware is not there yet? I stand by that and I my hope is that this is not it's not a it's never going to happen. It's just the timing is not right now. I still think the tech is cool. The immersiveness when I played when I've put on I don't own an Apple Vision Pro or was Yes, there it is. It's one of the most immersive things I've experienced. It's just I don't have a lot of use cases for it. I'm not dropping $3,500 on it and I have the MetaQuest 2. That thing dies. Like it's heavy. I'm sweating. I'm playing

Beat Saber and it's just like I'm covered in sweat. Everything's wet. It's not as sleek as you pick up your phone and you can, you know, do your little Pixel Flow game. Put it down. It's not the right type of tech for right now or for the generation, but it doesn't mean I think it's never going to be.
Let's not like revise history here. I think Laura's right. But what I'm saying, Mish Mishka, we had McKenzie. We had the the that wrote metaverse. Heing wrote a book called Metverse, right? [laughter] About VR, about Ready Player One right? We had A16 popping about this foring years. They're bullshitting this. McKenzie was out there actually selling their wares to like everyone that would listen and doing strategies around building UGC and metaverses and it was all right? And it didn't make sense to anybody that even thinks about this stuff. But these guys were pushing this narrative for years and making a ton of money at doing so, you know?

And so like, no, they're not off the hook, you know? Like billions of dollars were spent because of this right? And like there are people that need to be hopefully be held responsible. Matthew Ball was out there making $70,000 a presentation perpetuating this nonsense, right? That made no sense then and it makes even less sense now, you know? So, no, no, no. I'm not letting them off the hook. There are bulls out there and they were pushing the narrative and they're pushing a lot of spend in the space.
But on the hook, they stay. [laughter] Isn't there a little difference between VR and the metaverse? So like Tim Sweeny's vision is interoperability, not necessarily with a headset.
I I don't know. I think there's like a little bit of a distinction in my mind between like I'm going to put a headset on and live in a VR 3D world versus like interoperability of tech and engine and like I still think there's something interesting about that. They were pushing that this new metaverse was

going to be a ubiquitous platform that had open standards. It was like the internet for 3D engagement, right? That was the definition that they threw out there and it was complete and utter right? Because there was way too many constituents that are out there trying to make money at this stuff and they're not going to agree to some open standard, right? But that was the vision that they saw and what Facebook and Meta were trying to do is build that open standard right with their operating system because they don't want to be beholdened upon the platform holders including Apple, Google and Microsoft to run their software right so they wanted a new OS and that was his vision right like and none of that made sense frankly even though Meta had the money to actually do it right
this is the they were pushing and it didn't work
and I know we're going to get to the AI stuff soon but I think AI is different because AI is not pushing a platform. It's a tool. It's a kind of a different calculus when it comes when you think

about AI, but we'll get to that in a minute.
You don't have to wear it.
Yeah. I I do have to say about like I know you go hard on Matthew Ball because of one book, but nevertheless like you can't let the companies off the hook like if somebody gives me a their let's say perception or vision of the future and I end up spending a house on it, [laughter] it's also my fault for believing it. It's not like like he has a command over like Meta and Unity and everybody else by releasing a book. They believed in his vision of the future and he believed in his vision at that time. So, you know, McKenzie is a different thing. They actually get paid to consult.
He worked for McKenzie. He was an adviser for sure and Mackenzie believed
he was the one responsible for McKenzie pushing this narrative and I think he ultimately he got fired. Right.
Eric is on the accountability train right now. I [laughter] yeah I don't think he worked for McKenzie. I think he was an adviser for them. But nevertheless, I'm just saying that yes, you can write all kinds of things. But

nobody forced these companies to make this and he wasn't on like an investment board at EA or anybody saying like we're going to do this and everybody said like okay yes because you wrote a book. It's the companies believed in that future and they ended up investing. So just want to I don't think this is Matthew Balls doing the whole metaverse. Matthew Ball was on the in the ears of many people at the highest levels at places like Warner and places like Facebook and places, you know, like people that were making these huge investments telling them that this is the future, right? And they executed based upon that input as well as McKenzie, which they spent gajillions of dollars. Like this is all part of the old drift that they had going on with that at that time. And it never made sense then and I was talking about it then right now again and in retrospect it makes even again less sense. So all right let's move on.
I wonder if it was FOMO from like missing mobile is like oh we don't want to miss mobile you know. [music]

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