Author | President

Data support | Pythagorean Big Data (www.gogudata.com)

Looking back at the development of technology, especially the big technology bull market in the past 20 years, the path is generally technology change+deflation, improving efficiency/experience while stimulating the release of potential demand, and eventually forming a strong trend or even an industrial cluster. And the reflection of this in the capital market will also be very intuitive—market capitalization continues to expand.

Looking ahead to the development of future technology at this point in time, what makes us excited is that many black technologies have already been created. Some of them are entering the early stages of commercial monetization through deflation, and VR, which opens the door to the metaverse, is one of them. Regarding the metaverse, we have introduced and analyzed several articles before, such as “The Metaverse's Technical Puzzle and Wealth Code”, “Roblox”, “Unity”, etc., so today we will follow up on another major protagonist, Oculus.

01 Oculus and Quest 2

Oculus, formerly known as Oculus VR, was founded by Palmer Latch and Brendan Irby in 2012. The main product was VR head-mounted displays, which were acquired by Facebook for $2 billion in cash and stock in March 2014.

An early product after Oculus was founded was the Rift VR headset, but Rift did not have the ability to commercialize on a large scale at this time. At the Oculus Connect Conference in Los Angeles in 2014, Oculus showcased a next-generation VR headset prototype, Crescent Bay, which mainly improves the frame rate and integrates a headset to detect 360-degree motion of the head, and is also lighter. At the same time, Oculus launched the new Oculus Platform at the conference. Developers can launch various virtual reality applications in the fields of virtual travel, healthcare, film and television entertainment, and online education. Although large-scale commercialization is still not possible, the technical and ecological puzzles of Oculus have been improved little by little.

In June 2015, Oculus officially released the consumer version of the Rift virtual reality headset. This device was officially sold on 2016/03/29, and the price at the time of launch was 599 US dollars. There are further technical updates to this product, but what's even more exciting is the price — the ever-shrinking price will lay the foundation for phenomenal commercialization, which we saw particularly clearly on Tesla's Model 3.

Since the underlying technology and application scenarios were imperfect, and coincided with the rise of smartphones led by Apple, Oculus did not and could not kill a single path. However, this did not affect its further technical changes and price reductions as much as possible. In May 19, Oculus released a next-generation product called Quest, which also marked a major shift in Facebook's VR strategy — a complete transformation from the PC platform to a VR all-in-one. Perhaps looking back a few years from now, this event marks the entry of VR into the 2.0 era.

In order to create a new 6DoF VR all-in-one, Oculus also prepared more than 50 debut apps for Quest, including “Beat Saber,” which was a hit at the time, and “Immortal Vader VR” adapted from Star Wars IP. Quests is divided into two versions, 64GB and 128GB, with retail prices of $399/$499 respectively.

Technology iterations and price reductions have further accelerated.

In October 2020, Oculus released a new product, Quest 2. Judging from data tracking, this should be the beginning of VR entering the phenomenal level.

Note: XR (extended reality) includes VR (virtual reality) and AR (augmented reality)

According to data from Counterpoint's Global XR (VR & AR) Model Tracker, shipments of extended reality (XR) headsets doubled year-on-year in Q1 of '21, and it was Oculus' Quest 2 that drove these sales. As you can clearly see in the black part of the picture, Oculus's share of shipments began to grow rapidly in 20Q4 (when Quest2 was released), reaching a maximum of 75%, while the market share of other established players such as Valve, Pico (ByteDance will be purchased for 5 billion dollars in August this year) and Sony rapidly shrank.

This is a phenomenon that makes us particularly excited. Technological iteration+deflation has spurred a phenomenal explosion in demand.

02 Higher performance, more scenarios, cheaper

Quest2 was released at a minimum price of only $299. According to industry evaluations, the summary was simple and crude: it didn't fully meet expectations, but it's still the best VR all-in-one so far! (And it's cheap)

Changes in hardware parameters: The Quest 2 uses a Qualcomm XR2 chip. Compared with the 835 chip, the Quest 2 doubles the performance while bringing 5G access capability; in terms of memory, the original 4G was upgraded to 6G; the screen uses an LCD screen with a single-eye resolution of 1832*1920 px; and there are two storage capacity options: 64GB and 256GB.

In terms of appearance, the Quest2 retains the same all-in-one design as the previous generation. Overall, there are no major changes, but many details have been optimized—the Quest 2 is more compact than the first generation and uses a pure white body design. In order to save $100 in costs, the body of the Quest 2 is made entirely of plastic, and the headphone material was changed from the previous silicone inverted triangle headset to a cloth headset similar to the Oculus Go.

Note: Quest 2 is pictured on the left

Additionally, the Quest2 offers a padded wraparound dial headband for an additional fee. Probably for a better fit and replacement, the original Ques2 headset is very easy to remove, and it will fall off with a little force (also part of saving costs). However, the subtraction of this step will reduce the longevity of the headset, and wraparound dial headsets do not have this problem. Although the Quest 2 has reduced a certain amount of weight through a compact internal architecture design and a new lightweight screen (the measured weight of the Quest 2 is 507 g, and the weight of the Quest 1 generation is 571 grams), there has not been much change in the ergonomics of the wear, and you will still be unaware of “fishing” after wearing it for a long time.

In terms of pupil distance adjustment, Quest 2 abandoned the previous bottom rail design (58Hz-72Hz) and switched to three-level screen slide adjustment (58mm, 63mm, and 68mm). According to user measurements, the pupil distance matching is still very high.

In terms of refresh rate, users can increase the default 72Hz to 90Hz by setting it. The overall display experience is far superior to Quest, especially in terms of displaying text. However, as part of saving costs, in terms of screen selection, Quest 2 uses a cheaper LCD screen. Compared with OLED, the LCD screen has improved brightness. Testing and feedback from more users is still pending on the issue of blue backlighting that hurts the eyes. In terms of battery life, the game time is 2 to 2.5 hours, which is basically the same as the 1st generation.

Next is the highlight. Facebook announced in August of this year that it will begin requiring new users and those who have purchased Quest 2 to log in to the Oculus headset using a Facebook account. This is also in line with Facebook's strategic layout — Quest 2 is an important part of building its metaverse ecosystem, aiming to break the game with an immersive experience+social experience.

The picture above shows Facebook CEO Zuckerberg's online VR conference in the virtual scene Workroom on August 20. According to some high game reviews, this experience was excellent. The core is “immersive”, which is a significant difference compared to Zoom. For example, during meetings, you feel truly immersive, and you can interact with other senses, such as being able to touch someone's head with your hands. This touch is close to the real world.

Additionally, it is possible to write and type on a virtual blackboard/screen, effectively summarizing content and interacting in real time. There are also some AR functions and application scenarios, such as scanning items such as keyboards, screens, desks, sofas, etc. into virtual space. While these are still in their early stages, they certainly pave the way for further into the metaverse.

03 The future

Many analysts agree that the XR market will maintain a high 2-digit CAGR growth over the next 5 years, while Quest 2 will continue to maintain its leading position and lead the expansion of the industry.

Earlier, a Facebook spokesperson said that Quest 2's MAU surpassed the 1st generation in just 7 weeks (the 1st generation contributed 150 million US dollars in revenue to FB before Quest 2 was released), and shipments had reached 5 million units in just 6 months — the PlayStation VR, the best-selling VR headset of the previous generation, took 5 years to reach the milestone of 5 million units. The speed at which it crossed must be shocking. Analysts expect Quest 2 to reach 10 million units in the second half of the year.

Hardware shipments have been accompanied by the expansion of software/scenarios. Previously, games were the broadest application scenario for VR. In September 2020, more than 35 games on the Quest platform earned more than one million dollars. In February '21, this number became more than 60 games. In other words, one-third of paid apps in the Oculus store had revenue exceeding 1 million US dollars.

For example, a few months after the battle royale game “POPULATION: ONE” went live on the Oculus store, it already made more than $10 million in revenue. “Onward” was originally a multiplayer Rift game. After landing on the Quest platform, Quest alone generated more than $10 million in revenue.

Judging from Steam data, more than 1.7 million users used Steam for the first time to experience VR games in 2020. VR users used PC VR 104 million times in 2020, averaging about 32 minutes each, increasing total VR gaming time by 30%. The social networking product “VRCHAT” logged on to Steam in February 2017, and the number of people online at the same time in November 2020 exceeded 24,000, and 52% were VR users; the social+ game product “RecRoom” launched Steam on June 1, 2016, and it was announced that VR mobile activities exceeded 1 million in early 2021, of which 50% were Quest 2.

All kinds of data and signs indicate that the rapid development of VR continues unabated. Given the few new products that major players are planning to launch in 2021, Quest 2's leading position won't be challenged for the time being. However, we believe that the participation of more players and healthy competition will be more conducive to promoting the overall development of the industry.

Currently there are many XR devices and scenarios (education, training, media...) There is also a trend of increasing investment by giants in related fields, such as Microsoft's HoloLens, Apple acquired NextVR Inc. in May 2020 to enhance VR capabilities in the entertainment and sports fields. It is predicted that head-mounted VR/MR products will be launched in '22, and Facebook is studying more advanced wristband neural interface AR glasses...

Since Facebook acquired Oculus in 2014, the total number of people in the AR/VR department has exceeded 10,000, accounting for nearly 20% of the total number of employees (the department was only 1,000 in 2017). It can be expected that Facebook will continue to make efforts in this field in the future to promote the advent of the metaverse.

Referring to the smartphone development path, as enterprises invest more in technology iteration, price drops, and demand for terminals, the VR/AR industry will accelerate development, thereby driving the market capitalization of related enterprises to expand. According to Zuckerberg's view, a platform requires more than 10 million people to buy and use VR content to profit from R&D. Once this threshold is exceeded, content and ecology will develop by leaps and bounds. And we'll see that threshold soon. In addition to Facebook, which has sustainable tracking and even advanced deployment, there are also computing power companies such as Nvidia and Qualcomm, optical companies such as Shunyu, holographic technology such as Microbeauty Holography, which sells shovels such as Unity, etc.

NOTE:This article was originally written by the US Stock Research Institute team. Please indicate the source for reprinting, thank you!