Social Gaming and The Future of VR
How Facebook and Fortnite are building the “metaverses” of tomorrow, and what their efforts say about the future of VR and social networks
Last Tuesday, while Amazon bombarded the tech world with a deluge of new hardware products, Facebook held a comparatively low-key event to announce its latest VR initiatives. The disproportionate media coverage following the two events offered an obvious temperature check on the respective development of voice and VR technologies — voice is hot and VR is not. However, taking a closer look at what Facebook announced at its VR-themed event, it appears that the social network is trying a new strategy to tackle social VR in the hope of making Oculus headsets a viable mainstream consumer product as well as laying the groundwork for a kind of next generation social media.
Similarly, Epic Games, creator of Fortnite, recently announced it is adding a cross-platform voice chat feature to the hit MMO (massively multiplayer online) game to facilitate in-game communications among players. Given that the feature is based on the technology from Houseparty, a group video chat app that was once popular among teens before it was acquired by Epic, it likely won’t be long before more advanced social features are integrated into Fortnite to encourage more users to use the game as a platform to socialize with fellow players both in and out of gameplay.
Together, Facebook and Fortnite are tackling the future of social networking from the same vantage point of building MMO environments for people to play in, but with the distinction that Facebook wants to leverage its early lead in VR to make it a more immersive experience while Fortnite is focused on building a truly cross-platform experience. How their efforts will play out over the next few years will shape the course of not only VR development, but also how we socialize with each other online, with profound and far-reaching implications on consumer behavior that warrant a deep-dive.
The State of VR
It is no secret that the hype surrounding virtual reality has died down significantly over the past two years, thanks to stagnant hardware adoption that led to investors losing interest in funding the development in this space. Despite the arrival of more affordable, standalone VR headsets like the Oculus Quest and Lenovo Mirage Solo, VR adoption among consumers has yet to see a significant uptick.
We declared 2018 to be a “make-or-break” year for VR hitting the mainstream consumer market, and so far there has been little evidence to suggest that VR made it. Although one YouGov survey found that VR adoption (generously including both VR hardware and software use) grew to 11% among all U.S. adults in 2018 after hovering around 7% for a couple of years, other data sources did not corroborate the suggested momentum in VR adoption. According to data from IDC and Statista, worldwide VR headset shipments for consumer use totaled 4.55 million in 2018, and it is estimated to only grow 6.6% year over year and reach 4.8 million this year. The decline in overall VR headset shipments was much more dramatic, shrinking over 50% from 31 million units in 2017 to only 15 million units in 2018, according to the latest data from Strategy Analytics. VC funding in VR startups, meanwhile, has seen a sharp decline from $857 million in 2016, the peak of VR’s hype cycle, down to just $280 million in 2018.
Facing waning consumer interest and dwindling VC funding, many VR startups had no choice but to downsize or pivot, if not outright close shop. Jaunt, an once-promising VR content startup that counted Google Ventures and Disney among its backers, has since pivoted to developing AR experiences and was recently acquired by Verizon. Vreal, a Seattle-based startup that aimed to build “the Twitch for VR” also shut down its operations this August due to lack of growth. Even IMAX has shut down its pilot program that ran pop-up VR experience arcades in select movie theaters, which provided one of the most accessible consumer VR experiences. One way or another, they all acknowledge that they may be ahead of the time and VR is far from ready for mainstream consumer market.
Still, market leaders are still trying, at least on the hardware side. Leading the existing consumer VR market, Sony’s PSVR headsets accounted for 30% of the global VR headset market value in 2018, thanks to its tie-in with its popular PlayStation game console. Facebook’s Oculus and Taiwan’s HTC trailed Sony at 25% and 22% of market share, respectively, according to Statista. Both Google and Samsung, who once flooded the VR headset market with low-end, smartphone-powered headsets, have fallen off the map as the novelty factor wore off and sales of mobile VR headsets for smartphone went down by 50% between 2017 and 2018.
Among popular VR use cases, a recent survey suggests gaming still leads the pack with 54% of all VR users. As we noted in our recap of VR’s strong showing at the Sundance Film Festival last year, immersive video games remain the most viable path for VR to reach mainstream audiences, although good VR games that are truly worth trying are still few and far between. If anything, enterprise usage of VR has been growing in a steady, promising manner, offering immersive ways for companies to conduct employee training and hospitals to simulate surgical rehearsals. Research firm Tractica estimates a CAGR of 60% for enterprise spending on VR hardware and content from 2016–2021, up from $592.3 million to $9.2 billion.
So, given the sorry state of VR, how does Facebook still plan to resuscitate it? The social network has a grand plan that hinges on making VR a social product.
What Facebook Sees on the Horizon
Looking back, Facebook acquiring Oculus for $2 billion in 2014 was really an inciting incident that kicked off this hype cycle around VR technology as it spurred VC investors to fund hundreds of VR startups. It’s easy to see why Facebook bought it and has been funding its development ever since — Facebook has always wanted to build a developer platform since it almost missed the boat on mobile, and the company has been betting on VR as the next personal computing paradigm that will enable it to leverage its social graph to build a post-mobile platform that will one day replace iOS and Android.
To realize its platform dream, Facebook has not only poured millions of resources into Oculus to develop a viable VR headset for average consumers, but also tried multiple interactions of social VR, including Oculus Rooms, Oculus Venues, and Facebook Spaces. All of these previous attempts at building social VR experiences failed to take off, because they function more like online chat rooms with different virtual wallpapers. It was fun and novel to the VR enthusiasts and early adopters, but it offers no real social benefits to most people to socialize in VR.
Still, Facebook has decided to keep on trying. Last week, during its Oculus Connect event, a new Facebook Horizon project was announced for a beta launch in early 2020. Unlike those previous iterations of social VR products, Horizon is designed to be a VR sandbox universe that will support mass presence and allow users to create their own virtual spaces. It will allow users to design their own digital avatars and hop between virtual locales through portals called Telepods. Instead of hanging out in virtual spaces and chat, users can watch movies or consume other media with friends and play multiplayer games together. It will also be populated with real-human guides known as Horizon Locals, who can assist users to navigate the space and protect them from trolls. Showing its resolve in Facebook Horizon, Facebook also announced will shut down Facebook Spaces and Oculus Rooms in a few weeks.
Compared to previous social VR products, which never really felt more than VR lobby rooms, Horizon undoubtedly marks a huge improvement in how it aims to deliver the social potential of VR, as it is designed to be more like a destination that users can freely express themselves and spent a lot of time exploring together. In other words, it is built more like a massively multiplayer online (MMO) game, but in VR. It is a modernized take on Second Life (a popular online role-playing game from the early 2000s) or a mass-scale Minecraft (a popular online sandbox game) with Pixar-like graphics. Betting on gaming to be a lead generator among early adopters, users will be able to invite their Facebook friends to join them in Horizon for specific VR games. Oculus reportedly gives every employee a copy of Ready Player One, where humans living in a dystopian future escape into a virtual world called OASIS en masse for both entertainment and employment, and now Facebook is finally unveiling its own version of OASIS.
Although VR adoption is not going nearly as fast as Facebook expected, it is clear that they are not ready to give up on it just yet. Besides Horizon, Facebook also recently acquired CTRL-labs, a New York startup whose work in developing neural interfaces could help Facebook to develop an intuitive VR control interface based on hand gestures without requiring full-room tracking or bulky controllers. It has also effectively consolidated its Oculus product line from three to one: the mid-tier Oculus Quest, as it seeks to increase the install base of VR headsets. Still as we explained, VR will remain a niche category for the foreseeable future, and adding a social layer alone likely won’t be enough to spur mass adoption without a solid user base to build upon. Not to mention, there is already a popular MMO world that many young people are hanging out in.
The Vast Potential of Social Gaming
By now, you have probably heard a thing or two about Fortnite, the popular MMO battle royale-style, first-person shooter game. It is free to play, available across all gaming devices, and has amassed over 250 million players as of March 2019. The thing to understand about Fortnite, however, is that it is more than just a popular online game — for some, it has quickly become a virtual space to hang out in, either with friends they know in real life or the ones they made in the game. In other words, think of Fortnite as less of a game and more like a place or a venue for people to congregate and socialize. Gameplay is becoming secondary to presence and peer interactions.
The creators of Fortnite are keenly aware of this social aspect of Fortnite, which is why they are starting to add more social features to the game as well as experimenting with in-game events to truly explore the vast potential of social gaming. DJ Marshmello hosted a virtual concert in Fortnite in February that drew over 10 million concurrent players, offering a fascinating glimpse into what the future of attending social events may look like. Last week, it also finally put its Houseparty acquisition to good use and added a cross-platform voice chat feature to its game to further facilitate social interactions. Before long, we will likely see group video chat and even more virtual events to take place in the Fortnite universe to build upon its momentum as a new kind of social network. If Twitter is a digital town square full of shouting matches and Instagram a digital mall of beautifully curated window displays and pretty people showing off, then Fortnite is becoming a digital skatepark where all the cool kids hang out.
Although a regular online game may not be as immersive as Facebook Horizon will be, Fortnite has the advantage of building upon a large and growing global user base. The fact that it is completely device-agnostic is obviously also a plus as it lowers the entry barrier significantly. More importantly, Fortnite users already have a pretty good idea of what they can do together when they log on, as Fortnite features regularly updated in-game narratives (known as “seasons”) for players to follow. It imbues the socialization with a sense of purpose through group activity, like getting together with your friends in real life to watch a movie or visit a theme park. And that, I’d argue, is far more important than the sense of simulated immersion that VR can provide at its current stage of development. Plus, should VR truly becomes a viable mainstream gaming device one day, who is to say that Fortnite won’t partner with a VR firm and build a VR universe itself? After all, Epic’s Unreal engine is already powering a lot of VR experiences, so they could surely build it themselves if they wanted.
The Metaverse Is Coming
The idea of a “metaverse” was conceived by celebrated sci-fi writer Neal Stephenson in his 1992 novel Snow Crash to describe a shared virtual universe where humans interact with each other and software agents as digital avatars similar to how we interact in the physical world. It represents a kind of natural end-game for our digital culture as our physical life starts to merge with our digital life. The aforementioned OASIS from Ready Player One is a more recent example of a metaverse that penetrated mainstream consciousness thanks to the 2018 blockbuster movie adaptation helmed by Steven Spielberg. But as Fortnite is trying to prove, maybe the early iterations of metaverses don’t necessarily need to be in virtual reality to begin with. In fact, because VR still lacks the install base, it is far easier to build metaverses as MMO game environments and port them into VR down the road.
As with any new platform, the brand opportunities that lie within metaverse will be plenty and fascinating for marketers to explore. Already, we are seeing brands doing all sorts of in-game sponsorships with Fortnite, with the latest one being an exclusive Nike Air Jordan outfit for in-game avatars. Looking forward, what if a brand was to host a live sales event in a metaverse, or to build a branded experience like an additional side quest for players to engage with? And since the overhead would be much lower in the virtual world, what if brands were to organically create their own billboards and branded sites as they did on social media?
Funnily enough, this is not the first time that brands have jumped into a popular virtual environment to market themselves. At the height of Second Life’s popularity over a decade ago, many top brands jumped into the online world in the hope of reaching prospective consumers. For example, Wells Fargo created a game within Second Life, in which young players can earn virtual currency by learning about personal finance management. Adidas and Toyota are among the many brands that offered digital versions of their real-world products for Second Life residents to use. But then the mobile era arrived, and users moved on. Before long, there are only about 100,000 weekly active American users left for US marketers to reach in that virtual world. By 2009, even IBM, a company that went all-in on Second Life and embraced its marketing and recruitment potential, had to admit defeat and pulled the plug. Linden Lab, the company behind the game, has since created a VR-compatible successor called Sansar and launched it in 2017 to little attention so far.
Part of why marketing in Second Life did not work was due to its total lack of advertising infrastructure and targeting tools, but things could be different this time around. For Facebook, a social network company that monetizes by selling ads against the attention it aggregates, an immersive metaverse will unlock the ultimate ad experience it could offer in combination of its existing ad operation and data apparatus (Horizon avatars are mandatorily linked to Facebook profiles). Although there is zero mention of brand integration in Horizon at this early stage, it is not difficult to imagine Horizon including dynamic virtual billboards for brands to bid on, Facebook-run shops for buying branded virtual goods or even third-party malls full of actual goods from whose sales Facebook will get a cut. Subscriptions to access certain gaming maps or premium environments to explore, some of them will be branded, is also a distinct possibility, especially for travel brands. Unlike Linden Lab, Facebook has the incentives and, more importantly, the capability to properly monetize its metaverse if it successfully scales.
Of course, no one would want to be immersed in the digital equivalent of Times Square all the time, so some restraint will need to be exercised, granting users some degree of control over what they can see lest they seek escape by resorting to ad blockers. It is also interesting to note that while none of these hypothesized brand opportunities are really VR-dependent, their impact would be maximized in an immersive VR environment.
Then again, considering how AR has overtaken VR in terms of both hype and deployment, perhaps the next stage of multiverse could be infused with our physical world through AR enhancement, before it ramps up to full digital immersion. Even in its current screen-bound format, popular MMO game environments have a real shot at building rudimentary metaverses that smart brands will want to test in to gain some first-hand experience. One way or another, the metaverse is coming. Are you ready?
Author’s note: As Richard Nevins insightfully points out in his tweet thread, in its current form, Fortnite is far from what a real metaverse should be. The fact it does not offer a persistent virtual world that is shared by all players simultaneously, largely by design due to its Battle Royale mode, means it is only a prototype of a metaverse at the moment. Still, my points about Fortnite’s potential to become a social network in the future stands.
