Zhang Yiming and ByteDance have stepped half a foot into the Metaverse

Original title: "Zhang Yiming has half a foot in the metaverse"

ByteDance is recruiting on a large scale for its VR business Pico.

Server-side development engineers, ergonomics experts, visual perception algorithm engineers, software testers, battery experts... Opening ByteDance's official recruitment website, "China Entrepreneur" found that as of March 15, Pico had as many as 291 recruitment positions, distributed in Beijing, Shanghai, Qingdao and other regions.

In August 2021, ByteDance founder Zhang Yiming spent $1.5 billion to acquire Pico, a VR all-in-one manufacturer, and completed internal integration within a few months. At a time when rumors of layoffs at major Internet companies continue, Pico has become one of the few businesses within ByteDance that is still expanding.

"Pico is now a rare hot commodity, with abundant resources, many HCs (head counts, recruitment quotas), and a lot of money." An internal employee of ByteDance told China Entrepreneur. Liang Rubo, the newly appointed CEO of ByteDance, also attaches great importance to Pico's business.

Regarding the company's management changes, according to LatePost, following Xigua Video head Ren Lifeng, Douyin variety show head Song Binghua and Douyin entertainment director Wu Zuomin will both transfer to Pico.

"China Entrepreneur" learned that around the Spring Festival of 2022, ByteDance also organized an internal purchase of Pico, and the half-price discount attracted many employees to participate. ByteDance has set a target for Pico's annual sales: more than one million units.

The internal enthusiasm has also spread to the outside world. From the outside world's perspective, after the beginning of 2022, ByteDance's pace of VR layout has also accelerated significantly.

On March 1, at the 2022 MWC (Mobile World Congress), Qualcomm announced a partnership with ByteDance, and the two parties will cooperate in the development of hardware devices, software platforms and developer tools. It is reported that this cooperation is mainly aimed at the development of XR (Extended Reality) technology, with the goal of developing a global XR ecosystem.

It is worth noting that the giants are also taking action. On the same day, Apple's patent application for "facial joints and head-mounted XR displays" was authorized; Qualcomm has also reached cooperation with many XR software and hardware manufacturers. For example, Zuckerberg's Meta Quest 2 and other VR headsets use Qualcomm's XR dedicated chips. Qualcomm President and CEO Cristiano Amon believes that "this (VR) is an opportunity that may be as huge as the mobile phone market."

With Zuckerberg paving the way in front and Pico providing support in the back, ByteDance urgently needs to launch various major moves such as recruitment, management, and external cooperation behind the huge capital investment, and increase investment in hardware, games, social networking, and multimedia content, which are closely related to the Metaverse, in order to establish a complete ecosystem and pave the way for the Metaverse.

Pico

In August 2021, when Zhang Yiming spent $1.5 billion to acquire Pico, a VR all-in-one manufacturer, it was hard not to be reminded of the scene in 2014. That year, Facebook spent $2 billion to acquire VR device developer Oculus, launched a new VR social platform Horizon, and announced in October 2016 that it would invest $500 million to support the Oculus content ecosystem.

In October 2021, Zuckerberg changed Facebook's name to Meta (from Metaverse), showing the outside world his determination to enter the Metaverse. Prior to this, Zuckerberg had stated that he would transform Facebook into a Metaverse company within the next five years. Meta's all-in-one VR machine Oculus Quest 2 was launched in 2020 and has sold more than 10 million units.

In contrast, Pico is the hope Zhang Yiming sees in China. Pico was founded in April 2015, and its products include Pico Neo 3 VR all-in-one machine, Pico VR glasses and Tracking Kit.

At the same time, Pico, like ByteDance, is also a highly globalized company with a team of more than 300 people. It has branches in Tokyo, San Francisco, Barcelona, ​​Gyeonggi Province, an office in Hong Kong, and offline sales channels covering seven major regions and more than 40 domestic cities.

In addition, Pico's hardware production capabilities and level are also envied by the outside world. It has almost become one of the few companies that survived the capital winter in the last wave of VR.

Pico founder Zhou Hongwei was once a senior executive of Goertek, where he worked for 10 years, mainly responsible for the hardware R&D team in Qingdao. Currently, Goertek is both a shareholder and supplier of Pico, and all the optics and hardware of Pico's products are provided by Goertek. What's more worth mentioning is that Goertek is also the main foundry for Meta's Oculus Quest series.

In the 2021 semi-annual report previously released by Goertek, the VR sector was specifically listed in the financial report. Goertek explained that "compared with the same period last year, this was mainly due to the increase in sales revenue of the company's VR virtual reality and other products, and improved profitability."

In May 2021, Pico released the new generation of all-in-one VR machine Pico Neo 3, and its sales exceeded 10 million yuan in 24 hours. It is understood that Pico now has 349 authorized patents, covering core VR technology fields such as imaging, acoustics, optics, hardware and structural design, operating system bottom-level optimization, spatial positioning and motion tracking.

"Pico is indeed the hope of the current domestic VR field, but in terms of device experience, Pico's products still have gaps with Oculus in terms of hardware, system, algorithm, ecology, etc. In addition, the current sales of terminal devices are actually largely influenced and driven by the IP content ecology, and ByteDance's content ecology is still in the planning stage." A gaming industry practitioner who has experienced multiple VR all-in-one machines told "China Entrepreneur".

As we all know, in the field of smart hardware, the right to speak on important components such as chips and the closeness of cooperation with suppliers affect the quality of hardware. The latest cooperation with Qualcomm means that Pico is expected to improve the experience of its hardware devices.

According to a report by market research firm IDC, Pico's domestic market share exceeded 50% in 2021, ranking first. It was followed by Dapeng VR, iQiyi VR and HTC VIVE. However, in the world, Oculus has a 70% market share.

Building a content ecosystem

The acquisition of Pico is just the first step for ByteDance to lay out the Metaverse. In addition to hardware, users need rich scenes and content to buy VR and other devices. This is also an important reason why ByteDance transferred Ren Lifeng, head of Xigua Video, Song Binghua, head of Douyin variety shows, and Wu Zuomin, director of Douyin entertainment, to Pico.

Although ByteDance has not yet established a clear advantage in video content production, adjustments in its management team show its determination to build a content ecosystem that matches Pico.

Talking about the importance of content ecology to Metaverse manufacturers, an Internet investor analyzed to China Entrepreneur: "Looking at the main players in the current Metaverse, they can be roughly divided into two categories: the first category is three Internet companies, Meta (acquisition of Oculus), Tencent (acquisition of Black Shark) and ByteDance (acquisition of Pico); the second category is three game console companies: Nintendo (Switch), Sony (PS) and Microsoft (Xbox + Activision Blizzard). The basic routine of the first three Internet companies is to form an integrated operating capability of software, hardware and content through acquisitions to compete with game console companies."

On January 18, 2022, Microsoft acquired the gaming company Activision Blizzard for $68.7 billion, shocking the entire gaming industry. In the minutes of the meeting on the acquisition of Activision Blizzard, Microsoft CEO Nadella mentioned the Metaverse many times, such as "Games are the most dynamic and exciting category of entertainment on all platforms today, and will also play a key role in the development of the Metaverse platform."

Currently, Microsoft has launched the HoloLens series of enterprise-level MR headsets, providing MR solutions for the industry and allowing enterprises to customize them. The consumer-level AR headset HoloLens 3 is expected to be released in the next 2 to 3 years.

If we look back at Zuckerberg's path to the metaverse, it may be more relevant to ByteDance.

In December 2021, Zuckerberg released a virtual reality app called Horizon World, a social platform with metaverse significance, allowing users to create content and interact in it. Prior to this, in August 2021, Zuckerberg also launched a remote office software Horizon Workrooms, which allows users to enter the virtual workspace through Oculus VR devices.

At the same time, Zuckerberg also attaches great importance to the construction of the content ecosystem. In November 2019, Oculus, a subsidiary of Meta, acquired Beat Games, the developer of the VR music game Beat Saber. In February 2020, Meta acquired Sanzaru Games, a virtual reality game developer. In the game industry, the importance of Beat Saber to current VR devices is equivalent to that of Fruit Ninja to the iPhone at that time.

The emphasis on content ecology is gradually becoming Meta's obvious advantage.

During the fourth quarter 2021 earnings call, Meta content head Mike Verdu revealed that since the release of the Oculus Quest platform in 2019, the Quest content platform has generated more than $1 billion in revenue, and more than 120 games have generated more than $1 million in revenue on the platform.

Of course, Pico is not ByteDance's only metaverse layout. As early as April 2021, ByteDance invested 100 million yuan in Code Qiankun, a game developer known as the "Chinese version of Roblox" and whose representative work is "Restart the World".

Although ByteDance's gaming business started in 2018, it has significantly accelerated its layout in the past two years, investing in many game developers such as Youai Interactive Entertainment, Zhiyu Zhishan, and MYBO. Through acquisitions and self-organization, ByteDance quickly built its own gaming team, and its momentum in content development cannot be underestimated; on the other hand, relying on game promotion channels such as Douyin Volcano Edition and Xigua Video, and through the operation of Douyin topics and other means, ByteDance has released a number of games as an agent.

Regarding its determination to build a software and hardware ecosystem, ByteDance has stated that after acquiring Pico, it will support its long-term investment in the VR field, absorb Pico's advantages in software, hardware, talent and expertise, and gradually deepen its long-term investment in the metaverse field. In terms of funding, ByteDance has raised $1 billion for metaverse development, seeking its own metaverse platform in the escalating competition among Internet giants.

Future market prospects

The popularity of the Metaverse is attracting more and more manufacturers to join this battlefield.

In early 2022, according to 36Kr, Tencent plans to acquire gaming phone company Black Shark Technology. After the acquisition, Black Shark will be integrated into the business group led by Tencent's Chief Operating Officer Ren Yuxin. It is reported that after the acquisition, Black Shark will transform its business, and its business focus will shift from gaming phones to VR devices.

Judging from the profits in the financial reports, Tencent is already the world's largest gaming company. Whether it can cooperate with Black Shark to produce enough hardware blockbusters is crucial to Tencent's layout in the Metaverse. After all, Tencent founder Ma Huateng was also full of expectations for the world of the Metaverse.

At the end of 2020, Ma Huateng wrote in Tencent's annual special issue "Three Views": "Now, an exciting opportunity is coming. After ten years of development, the mobile Internet is about to usher in the next wave of upgrades, which we call the "Full-Real Internet"... The doors to the virtual world and the real world have been opened. Whether from virtual to real or from real to virtual, we are committed to helping users achieve a more real experience." He also emphasized that the Full-Real Internet is Tencent's "next battle that must be won."

However, this is not the first wave of VR craze. As early as around 2014, there was a wave of craze in the domestic Internet, but it disappeared with the subsequent capital winter.

"Before 2020, VR/AR hardware and software were not mature enough. For example, the biggest problem was the dizziness that the hardware brought to users, which greatly affected the gaming experience. In addition, the platform was very limited, with only Steam, Oculus PC and VIVE dominating the market, and there were even very few playable applications." The above-mentioned game industry practitioner told China Entrepreneur.

Today, VR can make a comeback with the help of the Metaverse because after 2020, Pico, Side Quest, APP Lab and Oculus Quest have successively launched platforms, and developers have vigorously expanded application projects. Among them, Steam has more than 6,000 VR applications.

IDC data shows that global VR device shipments are accelerating, and it is expected that global VR headset shipments will maintain a compound annual growth rate of 41% from 2021 to 2025. It is expected that shipments in 2021 will increase from 6.7 million units in 2020 to 8.5 million units, and will reach 28.6 million units in 2025.

In addition, HSBC predicts that from 2021 to 2030, the structure of VR/AR applications will undergo a huge reversal, from being dominated by games to being dominated by social networking. HSBC predicts that the VR market size will reach US$45 billion in 2030, social network VR applications will reach US$30.2 billion, accounting for 70% of the total VR demand, and game applications will reach US$9 billion.

Against the backdrop of the declining Internet economy, the Metaverse has become the future that Internet giants are vying to pursue. Before the grand picture unfolds, ByteDance and others first need an admission ticket.