I got an Oculus Quest for Christmas.

I’ve been a fan of consumer VR for decades, ever since Snow Crash planted the seed. I was an early backer of Oculus (I still have the Developer Edition hardware) and bought both a Rift and an HTC Vive to see where they were headed, because I firmly believe it’s the future.

The Quest is so close to ready—in an Apple, it-just-works kind of way. So much so that it’s suddenly easy for me to believe that Apple will launch truly consumer-ready, phone-incorporated VR within 2 years. And then Samsung and Huawei will follow suit, and it’ll be a phone feature the way Airpods or smart watches are, and general-population VR will be real.

Facebook has deep pockets, to be sure. And they’ve invested in making the Quest’s onboarding experience not only effortless, but fun. Remember, however, that Facebook isn’t a hardware company. Apple is, and its war chest is uncontested among the big tech firms.

From https://finance.yahoo.com/news/apple-lead-faang-performers-again-144241234.html

Criticize Apple all you like, but they know hardware. The Airpods are magic (and the pros are currently sold out all across Canada.) There are definitely cool VR things happening in Cupertino.

Hardware agnosticism

Most apps are hardware-agnostic. Sure, there are things you can only do on Android or Apple. But the major social platforms all work on every device. So do most productivity suites, and any significant game.

Consider Valve. Fans of the Half-Life franchise have been waiting for the third instalment for a decade, to the point that it’s a meme now. Valve became a game platform (Steam) and launched a superb VR device (the Index.) Valve’s Gabe Newell could easily claim that the decade-long Half Life delay was because there was no hardware that could support the company’s vision for the next edition, and all would be forgiven.

Just looking at the trailer for this VR-only game makes me want to forgive him already.

Alyx’s hardware support list. Where’s my Quest?!

But despite almost literally willing a headset into existence just to put a game on it, Alyx will work with a wide range of headsets and controllers. The economics of game development simply don’t make it realistic to limit content by platform over the long term.

(We’re seeing the Balkanization of content on streaming services, with exclusive blockbusters aimed at justifying subscriptions: Watchmen and Game Of Thrones on HBO; Bright and 6 Underground on Netflix; Jack Ryan on Prime; The Mandalorian on Disney+; The Morning Show and For All Mankind on AppleTV; and so on. But I don’t think we’ll see hardware-exclusive games or platforms on VR. I may be wrong about this, but I think they’re significantly different. For one thing, this is consumed, not participatory, content. We interact with Baby Yoda around the watercooler, or on Twitter.)

Unsolved problems

VR tech still has plenty of issues. The Quest was the first really compelling user experience I was able to hand to technophobes who could use it well within five minutes. So we know what the UI looks like, maybe.

Even then, VR is fraught with complications. You feel in VR, so when someone moves into your physical space, it’s an aggression—far more so than when you stumble across a tweet you disagree with. The ethics of physically invasive spaces are just one of the many problematic aspects of VR (so much so that the World Economic Forum is writing about it.)

Like most tech, we’ll anticipate some of these issues, and mitigate them; and others will be unmitigated disasters borne on the backs of marginalized users. This is an unfortunate truth dating back to spears, fires, and cars. But I firmly believe the tech is at a point where consumer-ready, app-agnostic VR is here.

So why isn’t it here?

VR lacks a social business model

Tech is a necessary, not a sufficient, factor in sustainable consumer VR. This isn’t about the number of games in an app store, or who has the most installed headsets. Because long-term, sustainable VR isn’t about hardware. It’s about monetizing the social platform.

From https://www.statista.com/statistics/382260/segments-share-revenue-of-apple/

Apple has been pushing towards services revenues with the launch of Apple TV, News, and other products. It knows that hardware demand hits a wall once the tech equals a human’s ability to consume it: Good refresh rate, decent resolution, proper haptics. So where does the money come from?

The real money is in monthly Metaverse subscriptions. When a billion people first sign into their Apple or Oculus or Valve or Samsung screens, they’ll connect to a virtual world. This is the first, best time to onboard them to a social platform. That social platform is the next Facebook or Twitter or Tiktok. That’s why Facebook, smartly, used its deep pockets to acquire Oculus.

What’s the business model?

Nobody knows what the VR business model looks like.

  • Will people sign up (Netflix like) and then use it, paying a monthly fee?
  • Will companies subsidize VR use by pushing advertising or clever product placement, like Youtube?
  • Will it be a consumption-based economy, or one where avatars and skins and premium abilities cost more, like some free-to-play games or Snapchat filters?
  • Will we pay for storage and consumption, like Dropbox or AWS?
  • Will we pay a per-transaction fee, like an app store tax? Or will the virtual world include its own currency, playing the float, some variant of Bitcoin or Etherium?or something similar.
  • Will it be a form of rent for property, the way Second Life worked some of the time?
  • Maybe it’ll be many worlds — “I’ll meet you in Azeroth.” Vernor Vinge’s Rainbow’s End has a collision of two incompatible worlds (what he calls “Belief Circles”) at its climax. But a major theme is the crowdsourced nature of that future. Most traditional media haven’t noticed the rise of demand-then-business content creation (Complexly is a good place to start.) And there’s always Patreon.

We’ll try familiar business models first (subscription, advertising, and so on.) Some may work. My Quest really wants me to sign into Facebook. I don’t know what Apple wants me to sign in to, and if they don’t either, maybe that’s why they haven’t launched.

It’ll several take cycles of iteration between mass-market VR and business models for us to figure out how we’d like to pay for our virtual worlds. And because you seldom get a second chance to make a first impression, hardware makers are reluctant to launch until their social platforms are ready.

Great fortunes come from business models

If history teaches us anything, it’s that the long game in VR will be something we don’t expect, or a commingling of these business models. Great fortunes aren’t made from new products, they’re made from new business models.

James Watt’s eponymous steam engine was four times as efficient as its predecessor. But Watt was no businessman; it took his partner, Matthew Boulton, to really make money.

“The firm rarely produced the engine itself: it had the purchaser buy parts from a number of suppliers and then assembled the engine on-site under the supervision of a Soho engineer. The company made its profit by comparing the amount of coal used by the machine with that used by an earlier, less efficient Newcomen engine, and required payments of one-third of the savings annually for the next 25 years.”

Watt and Boulton’s fortune came primarily from selling the engine’s output as a service based on how much more energy it generated. That was the true innovation of the steam engine.

250 years later, we’re wondering what the business model of Steam’s engine will be.

(Yes, this is a hell of a long way to come for a punchline. I’m sorry. It’s the holidays.)

Writer, speaker, accelerant. Intersection of tech & society. Strata, Startupfest, Bitnorth, FWD50. Lean Analytics, Tilt the Windmill, HBS, Just Evil Enough.