Opinion: Mark Zuckerberg’s massive bet on virtual reality is about to meet actual reality, and it won’t be pretty

Mark Zuckerberg is targeting corporate users with Meta Platforms Inc.’s expensive new virtual-reality headset, but even if the Meta Quest Pro did appeal to remote workers, the timing could not be worse.

In a keynote address at Meta’s META,
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annual developer conference Tuesday, Zuckerberg unveiled the latest VR headset at a whopping price tag of $1,499, due to ship later this month. The device is lighter than its consumer models, and Meta has forged alliances with rival Microsoft Corp. MSFT,
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and Accenture to target the device to office workers with remote colleagues and for training, with integration with Microsoft Teams, Office 365 and more.

With the Quest Pro, workers can join meetings in Microsoft Teams from a Meta Horizon Workroom and feel more like they are in a room with their colleagues, including seeing co-workers’ facial expressions in the avatars, Zuckerberg said.

“If a few people are in a conference room and others are dialing in, the experience is not that great,” Zuckerberg said. “We think this will help hybrid teams collaborate.”

That seems like a pitch that would have worked with corporate procurement offices earlier in the COVID-19 pandemic, but not now. Most companies will not want to pay $1500 to keep remote workers more engaged or productive in meetings amid earnings warnings, cost cuts, layoffs and recession fears. In addition, businesses are pushing to get employees back into the office, instead of trying to spend money to make working from home feel more like an office. And the Quest Pro’s reported battery life of two hours would make that expenditure feel even more like a waste of money.

Zuckerberg surely knows this. He confirmed his company’s own hiring freeze to reporters on Tuesday, after reportedly warning employees of the move at the end of the third quarter, and wrapped up the second quarter by warning employees that they face one of the “worst downturns that we’ve seen in recent history.”

However, Facebook’s co-founder and the chief executive of its parent company is stuck between a rock and a hard place — in this case, a deteriorating online-advertising industry that is the core of the current business and the need to present any kind of growth case to Wall Street. He has rebranded and redirected the entire company in a major bet that virtual reality will be adopted by the masses in the not-too-distant future, a bet that has lost time and time again over decades of hope for the technology.

Zuckerberg’s bet is massive. From 2019 to the most recently reported second quarter, Meta’s Reality Labs business — formed from the $2 billion acquisition of Oculus in 2014 — has lost $25.4 billion. A recent New York Times article on Zuckerberg’s Metaverse struggles quoted one unnamed senior executive saying he was “sick to his stomach” over the amount of money spent on unproven projects.

Despite that reality, Zuckerberg continued to present his version of reality on Tuesday. He said the Quest Pro could even be a better way to work than with a personal computer, as he wistfully hopes to get some part of that massive 200 million unit market. But the PC market, too, is seeing a major downturn right now, with the industry seeing its sharpest downturn since the mid-1990s, after cresting during a huge pandemic-fueled boom — just one shred of a mountain of evidence that businesses are looking to cut back just as Zuckerberg the headset salesman knocks on their door.

Wall Street did not react well to the unveiling of the new device. On Tuesday, Meta shares fell 4% and on Wednesday, they lost an additional 1%. Rohit Kulkarni, an analyst at MKM Partners, said in a note that he was surprised by the reaction, since he was impressed by the partnerships that Meta introduced and the updates on monetization that implied some “growing traction among developers and users.”

Clearly, though, the Street also does not like the implication of more spending on what seems like, for now, a bottomless money pit project. Kulkarni admitted that spending is going to continue. “The stock’s YTD [year–to-date] price trend has not dampened Zuck’s engagement and enthusiasm related to Metaverse; and we interpret this enthusiasm to translate into a fairly high rate of capital
investments to likely continue,” he wrote.

There is a market for enterprise offerings in the virtual-reality and augmented-reality field — Microsoft is selling its HoloLens to businesses, and Magic Leap pivoted to corporate users two years ago. But the price point, timing and specifications of the device Zuckerberg showed off Tuesday will keep it from mass adoption, which he needs to prove to Wall Street and Silicon Valley that his new reality will make up for the potentially declining fortunes of Facebook and Instagram.

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