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Meta opens a store as sales of VR headsets are inches closer to mainstream




Katie Contreras and Chris Nguyen, experienced experts, stand at the Customer Onboarding station for the Quest Demo site during a preview of the first physical store of Facebook owner Meta Platforms Inc in Burlingame, California, May 4, 2022.

Brittany Hosea-Small | Reuters

A good number of teens have virtual reality headsets, but have they started using them in a way similar to smartphones? So far the answer is no.

A quarter (26%) of teens say they own a virtual reality headset, a level of VR device ownership that is higher than many expected, but with only 5% of teens saying they use the technology regularly, the level is on Engagement remains “not convincing,”[ads1]; according to the recently released research report by Piper Sandler, “Taking with Teens: Spring 2022.”

The use of VR headsets is low due to a number of factors, from costs that have not yet come down to the reach of most consumers, to an inadequate range of applications. But the latter should not be a problem for the possible emergence of a VR-enabled metaverse, since the metaverse may well be the solution to that adoption problem. When it comes to applications, there really is not much out there yet, absolutely nothing that has captured much interest.

Gaming, which already has $ 200 billion in annual sales with an estimated three billion players globally, is a natural on the ramp for Gen Z and subsequent generations that will have grown up solely in the digital world. That’s a goal for Meta’s major technology rival Microsoft, which spends nearly $ 70 billion to buy Activision Blizzard. A recent study of Gen Z players by Razorfish and Vice Media Group found that 20% of their entertainment / leisure budgets will be earmarked for in-game purchases over the next five years.

But to date, there are only a small number of VR games (only 3% of users on the popular gaming platform Steam have a VR headset).

Concerts and sports also have significant potential, but there is still no real driver for any of these. Even education, where immersive class trips to anywhere in the world are part of the collective notion of the benefits of VR, has not yet taken off in significant ways.

Metaversen is certainly the biggest application space for VR on the horizon, so maybe the “Field of Dreams” approach – if you build it, they will – can work.

Clearly, Facebook parent Meta Platforms is investing in it as part of its efforts for diversity beyond the advertising revenue from the Facebook family of apps, including the core app, Instagram and WhatsApp, which accounted for 97.5% of revenue in the last quarter, closes to $ 28 billion.

“Everyone is talking about the meta-verse,” Nicola Mendolsohn, Meta’s global business director, told CNBC from the sidelines of last week’s Milken Institute Global conference.

But the revenue contribution for the Reality Labs division – the part of the company that designs products for the metaverse – was 695 million dollars. Reality Labs remains a money laundering, if a major bet on the future of the company, with a loss of $ 2.96 billion in first quarter results, compared to a loss of $ 1.83 billion in the first quarter of 2021. Managers suggested that while spending will come in a little easier than previous expectations, this unit will continue to be an area of ​​spending growth. The company has spent over $ 10 billion on building the meta-verse.

The cycle between investing and “meaningful enough revenue growth” to be profitable is going to be long, according to the company. “I think it’s going to take longer for Reality Labs than for too much of the traditional software we’ve built,” said Mark Zuckerberg, Meta CEO, at the recent earnings interview.

“We are making huge investments to deliver the next platform that I believe will be incredibly important, both for our mission and business comparable and value with the leading mobile platforms today. Now I realize that it is expensive to build this. It is something which has never been built before. “

In the midst of the huge costs, some experts say it is possible that a major breakthrough will happen soon.

There has been significant innovation in VR already, says Sarah Ostadabbas, assistant professor of electrical and computer engineering at Northeastern University, so much so that she believes widespread adoption may actually be “just one or two killer applications away.”

“With high latency and poor headtracking, previous VR was basically useless,” she said, adding that Oculus “has already overcome these biggest limiting factors.”

On Monday, Meta opens its first physical store and showroom for VR headset technology, where customers will be able to buy the Quest 2 headset. It is also preparing for an advanced headset, currently referred to as Project Cambria and to be released later this year.

It can be argued that, given these technical advances, the design side is where there is room for growth, a territory usually owned by Apple (long rumored to be developing a headset).

“There have been rumors for years that Apple will release disruptive AR / VR hardware,” said David Lasala, team leader, interactive development and XR technology at New York University.

But he says among active players right now, the clear frontrunner is Meta (formerly Oculus) Quest 2. The other is likely to be the Valve Index. Other important headsets include the Lynx and Pico Neo. Also worth mentioning: Pimax, Varjo, HTC Vive, and there are still some Windows Mixed Reality activities.

But since Meta is not primarily a hardware company, there is considerable freedom in the niche to let the best VR developments be used.

“I think they want to build the platform (OS),” said Ostadabbas. “Google was scared when Meta and other social networks locked them out, so they jumped on mobile phones to avoid being kept out of these big sources of information. Similarly, Meta has found out the hard way what smartphone providers can do to harm their business model. . with one policy change. “

Recent privacy restrictions for ad targeting from Apple and Google’s smartphone operating systems have cost Meta billion in advertising revenue. The company’s CFO estimates that the Apple changes could cost it $ 10 billion in revenue this year.

There are warning stories about owning hardware, such as Google Glass, which has found only limited enterprise and industrial applications to date, and 3-D TVs.

Zuckerberg said at the recent earnings interview that “the best experience will be on virtual and eventually augmented reality platforms, and especially on our platform like Quest,” but he added that the company plans to make it easy for people to enter the meta-verse from multiple platforms, and “even without the need for a headset.”

No matter who wins the hardware battle, if the technology works for consumers, it’s still the question of what people are actually going to do in the metaverse, and, really, what’s the point of it all? Skeptics see hype and rebranding, and not much beyond that. Much of the hype can be cut through in one word: presence.

“Apart from the in-depth study, one of the most interesting differences between the meta-verse and the internet presence is your avatar,” said Ostadabbas.

While sitting in a meeting in the form of a purple squid may seem silly (because it is), there is something to be said for the underlying concept. “The Internet is a source of information and people explore vast amounts of information without leaving a trace. Until you comment, you are invisible. With metavers, your avatar means that consumption requires presence, and so even exploration is active and interactive,” she says. so.

With presence comes Meta’s second promise (drawn from the Facebook days): community, a word that has seen much of its meaning devalued by social media, but there are promises here also in the metaverse in the form of community without any restrictions as to the real geography. Most of the community building through life is mostly related to a fairly thin range of opportunities (school on one side of thirty, work on the other). “In the best case scenario, someone finds out how to recreate this community experience in the metaverse, and people’s lives are enhanced through a greater sense of belonging,” Ostadabbas said.

Chris Nguyen, an experience expert, demonstrates Quest Experience during a preview of the first physical store of Facebook owner Meta Platforms Inc in Burlingame, California, May 4, 2022.

Brittany Hosea-Small | Reuters

The centerpiece of Meta’s approach is the social platform called Horizon Worlds, and it has said that after expanding “the experience, the next focus will be on expanding the community.”

At its best, this will allow people to discover themselves more profoundly than ever before, according to Lasala – grow and heal, create art and learn. Big claims can also be made, although they are still questionable. “I imagine that if half of the world’s population met and worked in VR versus commuting, it could slow down the climate crisis,” he said. “But I have not made a deep dive into the carbon footprint of server farms and silicone productions compared to vehicles, so this may be wishful thinking.”

The worst case scenario is easier to find out. Meta is convinced that today’s business model is the bridge to tomorrow’s business model. “There’s a new paradigm for computing and social connectivity,” Zuckerberg told Wall Street analysts and investors at the recent earnings call. “So over the next few years, our goal from a financial perspective is to generate sufficient operating revenue growth from a family of apps to fund the growth of Reality Labs investments, while increasing our overall profitability.”

But the meta-verse may well be just “a cynical seizure of money used to monitor people on an even deeper level, with AR headsets that allow the construction of deep social graphs and the recording of interactions in a way that was not previously possible,” said Ostadabbas.

The algorithms are spinning and creating increasingly controversial stratification of people to increase clicks and advertising revenue, and if this is a business model that sounds familiar, it should do so. There’s internet for Facebook and Alphabet, except this time you’re a purple squid in an Oculus. In fact, as Horizon rolls out across all platforms, the business will include some shorter cycles “that may be a little more like what we’re used to with apps,” Zuckerberg told Wall Street analysts.

The company recently received setbacks from creators for plans to charge high fees for virtual asset transactions.

Mendelsohn emphasized that the company’s history is rooted in successful transitions.

“I’ve been in the company for almost nine years. We’ve made some very strong pivots before,” she said, alluding to the transition from PCs to mobile, and the transition to Instagram Stories.

The fully realized version of the metaverse is, she said, “a few years free”, but she added that it is a continuum of where the company is today, and customers like Wendy’s who already use video and advertising products, and launched a world in Horizon Worlds with virtual restaurants last month.

“This lays the foundation for what I expect to be a very exciting 2030 year,” said Zuckerberg.

By Trevor Laurence Jockims, especially to CNBC.com



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