XR is cold, Luo Yonghao is in the wrong line again?

Shynrancaijing original

Author | Wang Min

Edit | Jin Xuanfan

Luo Yonghao was ridiculed again.

On February 16, the XR (extended reality) business of ByteDance and Tencent two Internet giants successively reported the news of business adjustment, "Luo Yonghao's temperament of the 'industry lamp' is highlighted again", "Lao Luo is in the wrong line this time" and other voices have risen one after another.

Although it is just a joke, the cooling of the XR industry is a fact.

In the past two years, under the popularity of the metaverse concept, XR products have been regarded as the hardware entrance of the metaverse era and have also become the object of pursuit.

In 2021, ByteDance acquired PICO for 9 billion yuan, and according to VR gyro data, there were 124 financing and M&A events in the XR industry throughout the year, a year-on-year increase of 130%. In 2022, Tencent established an XR department and Luo Yonghao announced that he bet on the AR track to start a new venture, which also made the popularity of the XR industry go further.

I just didn't expect that a basin of cold water would be poured down so quickly. Shen Ran learned from a number of people familiar with the matter that Tencent's XR department of more than 300 people has almost all laid off employees, and the "optimization" ratio of PICO is about 15%, involving hundreds of people.

The two major manufacturers adjusted their XR business, and the outside world couldn't help but wonder, what happened to this industry? Comprehensive analysis can find that the large factory XR has come to this step, and under the macroeconomic environment, the large factory is eager to reduce costs and increase efficiency; There are industry characteristics with a long investment cycle and still unable to quickly obtain considerable returns in the short term; It is also inseparable from the internal strategy formulation and management style of large factories.

What is the future of the XR business? In the short term, practitioners believe that there will be new flashpoints in the next 1-2 years, Apple MR (mixed reality) devices may become the biggest dark horse, and after experiencing countless highs and troughs in this industry, they have also learned to be moderately optimistic.

Tencent Byte also adjusted its XR business

In 2022, the XR industry can be described as a boom, and large manufacturers have entered the market with high profile. However, for the consistent style of "fast forward and fast out" of large manufacturers, practitioners at that time did not expect today's "sharp turn". Today, the "boots" have finally fallen.

In the adjustment of XR business by these two large manufacturers, Tencent's determination to "break the wrist" is stronger.

The new department established in June last year has a major change in staff due to the change in the business development path. Xinran, an employee who joined Tencent's XR department when it was first established, told Shen Ran that since the suspension of the failure to acquire Black Shark, Tencent's XR hardware route is not clear. By November last year, the departure of Shen Li, the head of the XR department, made the team's hearts float, "XR business lines will inevitably have major adjustments", and employees discussed this privately.

Around the Spring Festival, the entire team of Tencent's XR department was waiting for the "final judgment". Xinran originally thought that team adjustments might be more in the hardware department, and it might be safer to do content by yourself. However, unexpectedly, the adjustment of the XR department also involved him.

Compared with Tencent, ByteDance's optimization of PICO this time cannot be regarded as a big move, but this may be just the beginning.

In the past year or so since Byte's acquisition of PICO, the team size has grown from 300 to 2,000. Li Wei, a former employee of PICO, revealed that the layoff ratio of PICO is about 15%, affecting 300-400 people, and the main adjustment is the C-end line market and operation personnel.

Since 2023, in addition to PICO, ByteDance's TikTok, Feishu and other departments have also had different degrees of optimization, in this context, the optimization of PICO this time is not surprising. However, Li Wei told Shen Ran that there are some new projects within PICO that are expected to be launched in April and May, and by then, there may be a new batch of optimizations.

According to Li Wei, PICO has lowered its sales target for 2023. Last year, PICO's goal of achieving sales of about 1 million in the domestic market was ultimately unfulfilled. At the same time, PICO's budget is shrinking. From acquisitions and investment, Byte spent at least 20 billion yuan on PICO last year. A few years ago, PICO applied for tens of billions of dollars in budgets for the next three years, but the result was a significant reduction.

However, the above claims of targets and budget adjustments have not been officially confirmed by PICO.

Once a high-profile entry, Tencent and Byte have found different cuts to try.

Zhao Feng, a senior practitioner in the VR industry, told Shen Ran that Tencent does XR, although at the hardware level, from PICO to Black Shark, after many unsuccessful attempts to acquire it, Tencent has always been in a vacillating state for whether to develop its own hardware. However, it is still clear at the software level, and it pays more attention to "game + social", hoping to release the advantages of social and game capabilities, make differentiation in interaction and fun, and have not given up on trying at the content level.

After Byte acquired PICO for 9 billion yuan, it will also contribute money, people and resources in 2022. In 2022, Ren Lifeng, the former head of Watermelon Video, Song Binghua, the head of Douyin Variety Show, Wu Zuomin, Douyin entertainment director and many other cadres will also transfer to PICO.

Therefore, in his opinion, PICO to do VR is also to maximize the resources and advantages of bytes, take "video + live broadcast" as a power point, take fitness as a differentiated gripper of products to attract consumers, and introduce more head content in terms of games.

But no matter which incision was chosen, the result of the two major manufacturers' attempts was that it did not take long to test the water and began to shrink.

Why are big manufacturers shrinking XR?

When it comes to the adjustment of the XR business by the two major manufacturers, many practitioners have analyzed deep-burning, and there are many factors behind it.

The most direct factor is macroeconomic headwinds, and large manufacturers are reducing costs and increasing efficiency. In particular, the growth of the main business of mobile Internet has peaked, and listed companies must maintain profit margins and use financial reports to account to shareholders, and they will inevitably be cautious about projects with low short-term returns.

Moreover, also affected by the macroeconomic environment, the overall sales of consumer electronics products have not been optimistic in the past two years, and VR products are no exception. TrendForce Consulting said that in the first half of 2022, the demand for consumer electronic products such as PCs, laptops, TVs, and smartphones cooled significantly.

From the perspective of the path of industry development, the VR industry still needs long-term investment.

In the first two years, the concept of the metaverse was hot, accelerating the market's emphasis on VR. Moreover, in 2021, Meta's product Quest 2 sales reached 10 million, and by April 2022, 124 apps in the Meta Quest store had generated more than $1 million in revenue, and 8 apps had generated more than $20 million. These are all seen as VR products moving towards mass adoption.

However, even through the acquisition of studios and the support of independent excellent VR content teams to support the construction of the content ecosystem, Meta, the industry leader, did not take advantage of VR, but because of the huge investment in the meta-universe brought losses, resulting in a sharp decline in stock prices, the market is worried that Meta has fallen into an operational crisis.

According to the financial report, in 2022, the Metaverse sector lost a total of $13.7 billion. In the face of huge losses, Meta founder Zuckerberg also admitted the mistake of a large expansion, and carried out the largest layoffs in history, and was more cautious about investing in the metaverse sector.

Meta's encounter has also reminded domestic Internet manufacturers to do XR business, even if it is already tens of billions of dollars of investment, it may be difficult to quickly produce results.

Zhao Feng said to Shen Ran that VR has been very clear in product technical solutions, such as the general use of "Micro OLED+Pancake" optical scheme, the improvement space of sensors and computing power, the interaction mode, and the level of future lightness and portability can be basically predicted.

Correspondingly, the current limitations of VR development are also clear. First of all, the clarity can only reach monocular 2K resolution, which is still far from the monocular 4K that can meet the user's better experience; Secondly, the interaction mode takes the spatial positioning handle as the transition, and if there is no new breakthrough, it is difficult to innovate in content design, which affects the construction and innovation of content ecology; In addition, VR is currently only suitable for indoor use, and cannot be used outdoors immersively and portable.

"It will take at least 2-3 years for VR products to have the ability to be popularized on a large scale," Zhao Feng believes.

There is no considerable commercial return in the short term, and the early stage is relatively heavy investment, which requires all-round accumulation of product capabilities, user experience, and content ecology, and XR business will naturally be compressed within large factories that want to reduce costs and increase efficiency.

In addition to external factors and industry characteristics, the hindrance of the XR business of large manufacturers is also inseparable from the influence of internal strategy and management.

Some industry insiders analyzed that Tencent has always lacked the genes to do hardware, and the middle and senior management of Tencent's XR department, including Ma Xiaoyi and Shen Li, are also strong in software and technology, and it is difficult to develop hardware from scratch.

An XR practitioner told Shen Ran that VR content can quickly produce results by doing it yourself in the early stage, but in the long run, it still needs to rely on the platform and attract more application developers to establish a real content ecology. Insisting on self-research of content is also a deviation in the understanding of content ecology.

The complex structure of large factories also affects the promotion of new businesses. A former PICO employee told Shen Ran that he could not bear this internal friction because of the internal struggle between different factions, and chose to leave at the end of last year.

He described PICO CEO Zhou Hongwei as more suitable for the expert route and not very good at making decisions. As a company incubated and invested by Goertek, when it was not acquired by Byte before, Jiang Long, president of Goertek, played an important role in PICO's decision-making, and after being acquired by Douyin, PICO also faced the situation of being "seized power" by newcomers. Among them, PICO has taken "video + live broadcast" as the main direction in the past year, and it is indispensable to promote the entry of newcomers.

However, the relevant person in charge of PICO responded to The Paper at the end of November last year, saying, "For some speculations and rumors at the organizational level of the company, it can only be said that this is a speculation and does not conform to the facts." ”

XR industry, what is the future?

Once, from 2015 to 2017, the XR industry experienced a frenzy of entrepreneurship and capital, because the product was difficult to meet people's expectations, the path and scenario of commercialization were very limited, and many practitioners were difficult to maintain, and entered a trough period from 2017 to 2019.

After the heat of the past two years, entering 2023, both at home and abroad, the XR business lines of large manufacturers have begun to shrink. In the eyes of practitioners, this is a new climbing period for the industry. From another point of view, it is also because the XR industry has experienced too many desperate moments, and practitioners have even become accustomed to this adjustment.

As for the next development, the route of Tencent's XR department has changed to the future or will be the exclusive agent of Meta Quest products in China, compared with self-developed hardware, the model is lighter, but in the mobile phone era, the transformation of traffic entrance has brought huge profits to hardware manufacturers, and Tencent may lose this part of the market after giving up mastering the traffic entrance.

Although PICO's strategic route has not changed from before, I am afraid that the contraction will continue.

Although the current XR industry is somewhat depressed, in the eyes of the industry, in the next two years, XR is bound to come to the wind again. On the one hand, because the path of VR technology is relatively clear, the next step will be to quickly reduce the threshold in terms of productization, mass production and cost.

At the same time, the industry has great expectations for Apple's MR devices. VR or virtual reality allows users to immerse themselves in the virtual world, and MR allows users to combine the virtual world and the real world, which can provide users with a better experience. In terms of usage scenarios, based on game entertainment, there will be greater breakthroughs in collaborative office and other aspects.

Zhao Feng pointed out that in the future, VR may mainly develop in the direction of PCVR towards home game consoles, while all-in-one VR may be more of a MR device, further integrating virtual characters and scenes with reality.

Unlike confidence in VR, the AR industry is more uncertain and less discussed.

An XR practitioner believes that VR is more suitable for entertainment office scenarios, and AR can become a more portable productivity tool like mobile phones in the future.

Although the prospects are broader, it is not easy to achieve, "AR is more difficult to achieve, and it will be difficult to develop to mobile phones in the next 10 years." ”

Luo Yonghao chose to do the AR operating system and cut in from the software level. According to the relevant information on BOSS direct employment, the current scale of Luo Yonghao's startup thin red line is between 20-99 people, from the perspective of recruitment positions, it may be based on the Android system. The difficulty can be seen from the beginning that Luo Yonghao planned based on the 5-year cycle.

In the current market, AR hardware manufacturers, whether they are startups such as Nreal and Rokid, or Thunderbird Innovation backed by TCL, are all using movie viewing as the main scene for AR glasses. Mobile phone manufacturers including OPPO, Xiaomi, and Huawei, although they are also developing AR glasses, have not achieved breakthrough innovation, and are only followers.

Zhao Feng believes that the wind outlets are cycle-switching, for example, from 2017 to 2019, when XR was in the trough, the AI field can be described as a fire cooking oil, after several years of cooling, this year because of the popularity of ChatGPT and hot again.

Therefore, for the development cycle of this type of hard technology innovation products, practitioners must have a calm judgment, although hard technology products represent the future trend, but what rhythm they should participate in, at the beginning to consider clearly.

When the wind is up, especially for startups, do not be too aggressive and blind to do some conceptual, or very high cost products, because once the wind is over, the company is likely to fall because the capital volume is not enough to last the next cycle.

To this day, the development of the XR industry is still difficult to say, perhaps when it reaches the threshold of the outbreak, it will develop rapidly, but it is still in the darkness before dawn.

*The title image is from Visual China, and the pictures in the text are all from Pexels. At the request of the interviewee, at the request of the interviewee, Xinran, Li Wei, and Zhao Feng are pseudonyms in the article.