A decade after buying Oculus VR, Meta's Reality Labs' losses are spiralling out of control, with no end in sight (2024)

A decade after buying Oculus VR, Meta's Reality Labs' losses are spiralling out of control, with no end in sight (1)

Despite producing one of the best VR headsets around, the Quest 3, Meta's Reality Labs division just isn't making any money. Nearly $2 billion of revenue in 2023 was completely swallowed by $18 billion of expenditure, leaving Mark Zuckerberg's dream of the metaverse facing a loss of $16 billion. And the CEO has said that the losses will continue to worsen for the foreseeable future.

Meta's virtual reality woes aren't a surprise, as the company routinely posts financial statements in which the revenues and operating profits (or losses) of each division are laid bare, for all to see. In a report by Yahoo Finance, the reasons for burning through almost $50 billion in four years aren't about technical development costs or cutting-edge research—the blame is laid squarely on a "lack of a clear vision and mismanagement."

In March 2014, an almost unthinkable event happened. Facebook, the social media platform that had long passed being cool and hip with the kids, purchased a virtual reality hardware company, Oculus VR, for $2 billion. At that point, Oculus VR had barely just released its first product, the Oculus Rift headset, and the acquisition was felt by some to be contrary to the nature of Kickstarter, the crowdfunding project that paid for the hardware's development.

By the time Facebook had fully integrated Oculus VR into its folds and rebranded it all as Facebook Reality Labs in 2020, the division was burning through cash—the popularity of the Oculus Quest 2 headset (now known as the Meta Quest 2) gave rise to an annual revenue of just over $1 billion. Even by the standards of the tech world, that was an impression sum of money.

However, in the same year, Reality Labs had spent a little under $8 billion, giving the whole division an operating loss of $6,600,000,000. That figure was worse in 2021 ($10b loss), 2022 ($10.1b loss), and in 2023 ($13.6b loss). According to Yahoo Finance, Meta is estimated to have already lost between $8.4 and $8.8 billion so far in 2024.

This time last year, Meta's chief financial officer issued a warning in its Q2 financial report that "for Reality Labs, we expect operating losses to increase meaningfully year-over-year due to our ongoing product development efforts in augmented reality/virtual reality and investments to further scale our ecosystem."

But how exactly does one turn around from having an operating loss multiple times the size of the revenue? And even if Reality Labs starts making a profit next year, shareholders are unlikely to be happy with the amount of expense accrued just to get to that point.

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A decade after buying Oculus VR, Meta's Reality Labs' losses are spiralling out of control, with no end in sight (2)

According to the people interviewed by Yahoo Finance, Meta's Reality Labs has been a scene of chaos, with "chain of command reorganizations…every three to six months" and a "lack of understanding of the technology [which] often led to tension between new managers and the existing staff."

At the moment, Meta has four AR/VR products on the market—Quest 2, Quest 3, Quest Pro, and Ray-Ban Meta smart glasses. It's claimed, though, that in the past, Meta had 24 hardware products on an 18-month schedule, which seems like a ludicrous number of devices to develop, streamline, and support.

Virtual reality

A decade after buying Oculus VR, Meta's Reality Labs' losses are spiralling out of control, with no end in sight (3)

Best VR headset: which kit should you choose?
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It's probably not helped that Meta spent an undisclosed amount of money developing its own chips to use in AR and VR products, before deciding to switch to Qualcomm processors in 2021—apparently to the fury of its engineers. And over the years, Meta has lost some of its key figures in VR, such as Oculus co-founder Nate Mitchell and legendary game developer John Carmack, leaving in 2019.

How much longer Meta is willing or able to sustain such losses is unknown but its share price is almost as high as it has ever been, so the market doesn't seem overly concerned at the moment. Given how much Zuckerberg has invested himself in all things augmented and virtual when it comes to reality, I can't see Meta shutting down or selling off its Reality Labs just yet, but there's no infinite pot of gold to keep things afloat.

So don't be too surprised if it turns out that Meta's excellent Quest 3 headset is the last VR hurrah for its Reality Labs.

A decade after buying Oculus VR, Meta's Reality Labs' losses are spiralling out of control, with no end in sight (4)

Nick Evanson

Hardware Writer

Nick, gaming, and computers all first met in 1981, with the love affair starting on a Sinclair ZX81 in kit form and a book on ZX Basic. He ended up becoming a physics and IT teacher, but by the late 1990s decided it was time to cut his teeth writing for a long defunct UK tech site. He went on to do the same at Madonion, helping to write the help files for 3DMark and PCMark. After a short stint working at Beyond3D.com, Nick joined Futuremark (MadOnion rebranded) full-time, as editor-in-chief for its gaming and hardware section, YouGamers. After the site shutdown, he became an engineering and computing lecturer for many years, but missed the writing bug. Cue four years at TechSpot.com and over 100 long articles on anything and everything. He freely admits to being far too obsessed with GPUs and open world grindy RPGs, but who isn't these days?

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A decade after buying Oculus VR, Meta's Reality Labs' losses are spiralling out of control, with no end in sight (2024)

FAQs

A decade after buying Oculus VR, Meta's Reality Labs' losses are spiralling out of control, with no end in sight? ›

Despite producing one of the best VR headsets around, the Quest 3, Meta's Reality Labs division just isn't making any money. Nearly $2 billion of revenue in 2023 was completely swallowed by $18 billion of expenditure, leaving Mark Zuckerberg's dream of the metaverse facing a loss of $16 billion.

What problem is VR trying to solve? ›

Additionally, VR therapy has emerged as a promising solution for treating mental health issues such as anxiety, PTSD, and phobias, providing patients with immersive experiences to confront and overcome their fears in a controlled setting.

What is Meta's Reality Lab? ›

Reality Labs, formerly Oculus VR, is a business and research unit of Meta Platforms (formerly Facebook Inc.) that produces virtual reality (VR) and augmented reality (AR) hardware and software, including virtual reality headsets such as Quest, and online platforms such as Horizon Worlds.

Why is virtual reality failing? ›

The most glaring issue right now is user input. Designers seem to think virtual keyboards and voice assistants are the path forward, but the former is clunky, and the latter isn't private. Next time you're in a public place, count the number of people looking at screens. Then, picture those people wearing headsets.

What negative effects does VR have? ›

Does VR Cause Side Effects?
  • Eyestrain.
  • Headache.
  • Looking pale.
  • Sweating.
  • Dry mouth.
  • A full feeling in your belly.
  • Getting disoriented.
  • Vertigo.
Feb 24, 2024

Is Meta VR worth it? ›

The Meta Quest 3 is the best mainstream VR headset currently available thanks to its improved passthrough experience from the Quest 2, rich catalog of games and services, and near-untouchable performance at the $500 price point.

What happened to Oculus VR? ›

We've stopped manufacturing the original Oculus Rift, but are continuing to work on PC VR with Oculus Rift S. Rift and Rift S run on the same core platform, so both devices will be fully supported with regular updates and releases. Oculus Rift owners will continue to have access to the same Rift and Rift S store.

What has Meta done for VR? ›

Meta will partner with external hardware companies, including Lenovo, Microsoft and Asus, to build virtual reality headsets using the company's Meta Horizon operating system. The move essentially recreates the “Android versus iOS” dynamic in smartphones — only for virtual reality headsets.

What is the reason for VR? ›

The goal of virtual reality technology is to create an immersive experience that can be used to explore an environment that helps to educate or entertain the end user.

How will VR change the world? ›

VR's impact is clearly extensive. Not only is it transforming the way we do business, but also how we relate to one another, how we access education and even how we address (and perhaps redress) our own fears.

How does VR help people? ›

Virtual reality (VR) therapy uses a computer-simulated world as a treatment tool. A person might use it to practice new skills, face a fear in a safe environment, or become more confident in social interactions. VR therapy does not replace standard treatments for mental health conditions.

How has VR impacted society? ›

Through VR, people with disabilities can participate in social activities that might otherwise be inaccessible. For example, VR therapy can help individuals with social anxiety practice communication skills in controlled, virtual environments.

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