When Facebook announced its latest financial results on Wednesday, it came as no surprise that the company said demand for advertising was down. But unexpectedly there was also a silver lining thanks to its virtual reality business.
The company's non-advertising revenue grew by 80 percent year-over-year, increasing to $297 million from $165 million during the same period last year. According to CFO David Wehner, the increase was "driven primarily by the sales of Oculus products." For context, Facebook includes Oculus hardware and software sales, as well as revenue related to its Portal devices in the category.
As you might expect, the coronavirus pandemic and the fact so many people are stuck inside has helped spur VR usage, but it seems, more so than anything else, the Oculus Quest, which came out last May, has been the biggest contributor to Facebook’s other revenue category. In fact, CEO Mark Zuckerberg lamented the fact Facebook couldn't manufacture the headset at a faster clip.
"I wish we could make more of them faster during this period," he said during the company’s investor call. "It's possible that [the pandemic] accelerates some of the trends around virtual or augmented reality, but I'm not sure what will happen there long term."
Even without factoring in the pandemic, Quest sales have been consistently strong. Following the first fiscal quarter in which the device was available, Zuckerberg told investors the company was selling the headset “as fast as we can make them.” Since then, coronavirus-related supply constraints have made it even more difficult to track down Oculus Quest units, with stock selling out almost as soon as its available in a lot of circumstances.
The company didn't cite it, but the recent release of Valve's Half-Life: Alyx may have also helped push demand for the device. With an Oculus Link cable (and a PC that meets the game's system requirements), the Quest is one of the VR headsets you can use to play the medium-defining game. Valve has similarly had trouble meeting demand for its Index headset. What’s clear is that while it may have taken a while, a confluence of factors has created genuine demand for consumer VR devices.