Two years ago, ByteDance bought Pico, a Chinese startup that makes VR headsets. That opened a new front in the Chinese company’s competition with Meta, META -2.12%, whose Instagram and Facebook services have been battling TikTok for users and advertising money as the short-video app surged in popularity.
Pico’s headset shipments have since skyrocketed, making it a small but fast-growing #2 for Meta in the global market, according to industry data, even though Pico doesn’t sell its consumer headsets in the US
Mark Zuckerberg partially rebranded Facebook to Meta in 2021 to reflect his bet on the Metaverse, a more immersive version of the internet that can largely be experienced through virtual reality headsets.
A Meta employee demonstrated the Meta Quest Pro VR headset in Las Vegas last month. Photo: Robyn Beck/Agence France-Presse/Getty Images
The company has invested heavily in this concept. In its most recent quarterly results, Meta reported that there were more than 200 apps on its VR devices, each generating over $1 million in revenue, although total revenue in Meta’s Reality Labs segment for the quarter declined due to lower sales of Quest 2- Headsets fell by 17%.
According to research firm International Data Corp. Meta held 90% of the market share about a year ago. By the third quarter of 2022 — the latest period for which data is available — its market share had fallen to about 75%. Pico’s market share has more than tripled to approximately 15% over the same period. No other VR headset manufacturer held more than 3% of the market.
Meta’s headset shipments fell 48% year over year in the third quarter, data from IDC shows. ByteDance’s Pico was the only headset maker to increase shipments in a market estimated at $4 billion by 2022.
“We’re glad consumers have more ways to experience VR because when they do, it helps strengthen the ecosystem, which in turn encourages developers to create more great content,” said a spokeswoman for Meta.
ByteDance declined to comment on this article.
TikTok, with an office in Culver City, California, has seen its short video app grow in popularity. Photo: Jane Hahn for The Wall Street Journal
ByteDance’s foray into the virtual reality headset market comes at a politically difficult time for the company. The Beijing-based company has been in the crosshairs of officials and politicians who have raised concerns that the Chinese government may be using TikTok data to spy on Americans. TikTok’s app has been banned on federal government devices, while some Biden administration officials want to try to force TikTok’s sale to a US company.
Pico offers headsets for personal use in Europe and Asia, markets that have been more open to devices from Chinese companies than US consumers in those markets, partly in response to a $100 price increase that Meta introduced over Quest last year attracted to Pico, said Jitesh Ubrani, research manager at IDC. After the increase, Meta’s Quest 2 will cost $399. Pico’s main consumer headset retails for about the equivalent of $450. Pico is also available in some overseas markets where Meta’s device hasn’t been in the past, he said.
The latest data doesn’t reflect sales of Pico’s latest consumer headset, the Pico 4, which was released in October to positive reviews. “If anything, you would see their momentum picking up in the fourth quarter,” added Mr. Ubrani. Meta also released a new headset in October, the Quest Pro, aimed at professionals and retailing for $1,500.
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The competition is also becoming increasingly heated. Apple Inc. is expected to launch an augmented reality headset later this year, and Microsoft Corp. offers a mixed reality headset for businesses called HoloLens. According to IDC, the headset market is projected to become a $16 billion industry by 2026.
“The room will be filled with competitors who have good arguments on their side. So it’s going to be difficult for Pico,” said Rolf Illenberger, managing director of virtual reality software company VRdirect.
A robust suite of apps is crucial to making VR platforms attractive, and Pico is just beginning to expand its catalogue. It has around 250 apps available — compared to more than 400 on the Quest App Store — and teased a social hangout and world-building app called Pico Worlds, similar to Metas, when it announced the Pico 4 headset last fall Horizon Worlds.
Sonam Mobbs, a 40-year-old IT support worker in Northampton, England, bought Meta’s Quest 2 headset on the day it launched in 2020. He played games with the device daily until the Pico 4 went on sale locally and bought the device the day it was available.
“The biggest difference I notice when you switch between the two is the clarity,” he said. “The lenses on the Pico 4 are better.” He also said the Pico was a more comfortable fit.
Mr. Mobbs, who said he spends at least five hours a week playing virtual reality games, sold his Quest 2 on eBay three weeks after he started using the Pico device.
Founded in 2015, the website says, Pico initially focused on headsets for business use. In May 2022, following the acquisition of ByteDance, Pico announced it would start selling consumer devices in Europe and across Asia. Previously, Pico only sold consumer headsets in China. Pico also sells high-end business headsets that are available in the US and other markets around the world.
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Glenn Kachmar, a 55-year-old in Vancouver, Canada who teaches classes on using VR, said he was using Metas Quest 2 until he heard about Pico last year. He ordered a device in Spain that is not available in Canada.
Pico, he said, “is definitely a better headset in many ways,” noting in particular the screen resolution and fit on his head. But he hesitated to give up his quest. Pico doesn’t offer the selection of games he can access with his Quest, he said, and the games he bought won’t carry over to Pico.
“I don’t really want to spend a lot of money on apps that I already own,” he said.
TikTok is at a crossroads as US concerns over its Chinese ownership mount. Some officials have been investigating the idea of forcing a sale to a US company. WSJ explains the challenges of achieving this. Pictured: Preston Jessee
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