Reality Labs

The world’s leading social media app provider, Meta Platforms, also happens to run the world’s largest Virtual Reality (VR) headset manufacturer courtesy of its ownership of Reality Labs, formerly Oculus. Acquired by Facebook in 2014 for $2 billion, the VR start-up has since become a central component of the renamed Meta Platforms’ metaverse strategy.

Early iterations of Oculus VR headsets failed to generate mainstream interest due to the combination of lack of viable consumer use cases and lack of investment in tailored VR content. Meta’s pivot into the metaverse has injected new purpose into the subsidiary, with the unit being rebranded Reality Labs and seeing its research and development spending dramatically increased, resulting in a $10.2 billion operating loss (on revenue for the division of $2.3 billion). 

Tasked with developing and monetising Meta’s augmented and VR related consumer hardware, software and content, Reality Labs is now at the vanguard of Meta’s push into the metaverse. Heavily social-centric, Meta is betting that its dominance of the social app landscape through its family of apps (which includes Facebook, Instagram, Messenger, and WhatsApp) will enable it to successfully transition mainstream consumers into a new closed digital ecosystem, owned and operated by Meta. If this platform 3.0 strategy comes to pass, then the Oculus Quest 2 (Reality lab’s latest generation VR headset), that shipped ten-million units in November 2021, will form a key role in facilitating social avatar engagement in the metaverse. 

Successfully executing a social metaverse strategy driven by Oculus, that enables Meta to successfully bypass the current smartphone dominated social ecosystem, will prove to be even more disruptive and transformative than its pivot into messaging apps over the last decade. If this comes to pass, then the $2 billion paid for Oculus will prove a bargain compared to the combined $20.3 billion paid for Instagram (acquired for $1 billion in 2012) and WhatsApp (acquired for $19.3 billion in-2014.)

Roles

This report is relevant to the following roles:

Business Strategy