Keen to diversify its cavernous portfolio, TikTok’s parent ByteDance has acquired Chinese VR headset maker Pico for an undisclosed amount. Following a recent foray into mobile gaming, this news marks ByteDance’s first steps into VR, and the company has voiced its intentions for long-term investment in the field.
Everything that TikTok’s parent company touches seems to turn to gold right now, so a big vote of confidence in the technology naturally grabbed Faultline’s attention. ByteDance is pitting itself squarely against both sides of the VR market – OEMs and entertainment platforms – and it could present a serious threat to either.
In the former group, you find companies like Sony, Valve and HTC – all well-respected headset manufacturers, but they tend to be tethered to consumer electronics like games consoles, or exclusively serve the enterprise sector. Pico has a foothold in the enterprise VR headset in the West, so already ByteDance is stepping on the toes of those vendors.
As for the entertainment platforms – which present a lot of consumer marketing opportunities – ByteDance must find its feet outside of China, but still has potential to make a dent in the market.
Facebook and Apple are the two most notable companies that are firing up VR engines of their own in the West and both have vast enough media and consumer electronics empires to fight a war of attrition. Facebook has its Oculus VR division, while Apple acquired NextVR in May 2020 for a suspected $100 million. In China, Huawei has its VR Glass, which was launched in 2019.
Of course, ByteDance owns the most downloaded video app of 2020, which would make it seem like a strong competitor in the consumer sector. However, TikTok by nature is a fairly casual and seamless pursuit for most consumers, even if many do end up spending many hours on it each day by accident.
Adding hardware to the mindless scroll of TikTok could be a dangerous game. It will make the overall pursuit much more purposeful, and therefore potentially make users more aware of how long they have been on the app. It is harder to kid yourself that you will only be scrolling for ‘five more minutes’ if you are wearing a huge headset.
Perhaps ByteDance would be smarter to grow its VR business apart from its flagship video app. So far, there has not been any confirmation that it is looking to grow Pico outside of China, which would be a necessity if it was to be bundled into TikTok.
However, if ByteDance wanted to take on Oculus, it would have to enter the Western consumer arena for VR by some channel. Partnering with a Chinese OEM for consumer electronics for tethering will likely not get it very far if the Huawei ban in the US is anything to go by.
Some have estimated the size of the deal to be close to $800 million, which would be peanuts compared to the $2.4 billion that Facebook paid for Oculus in 2014. However, the comparison is not entirely fair, as Oculus has the potential to sweep much of the world, whereas it is unclear whether ByteDance intends for Pico to venture outside of China.
Pico offers its Neo 3 range of VR headsets, including some upgraded models such as the Neo 3 Eye which allows for eye tracking. There have been accusations that the Neo 3 specs are suspiciously similar to those of Facebook’s Oculus Quest 2 headsets, so if for no other reason, ByteDance may keep Pico in China simply to avoid a patent war from its largest competitor in the West.
The Western VR hype bubble has well and truly deflated from a few years ago when trade show floors were littered with headset demos. Facebook has continued to flood the technology with investment, but the average consumer still seems rather unphased by the promise of VR.
We thought that China could quite easily be a different story, but the numbers we have found so far suggest that the bubble has burst there too. The only difference is the sheer size of the market in comparison to any Western nation. China is the largest VR market globally, with the International Data Corporation (IDC) reporting that it accounted for 54.7% of commercial and consumer spending on VR and AR technologies in 2020.
But it seems consumer activity is flattening off. Numbers from Forward Business and Intelligence Co. find that although Chinese VR users shot up between 2016 and 2019, from 2.5 million to 18.8 million, growth was much slower in 2020, reaching 20.1 million by the end of the year.
While VR seems like a fad that has been and gone in the West, there is every possibility that it could see a resurgence of interest in the technology. ByteDance is a Chinese company that has a knack for clocking onto Western video consumption trends before anyone in the West has done so, and the same could be true here.
At present, Pico only sells its Neo headsets as a consumer product in China, while businesses in Europe and North America will soon be able to purchase the device as a ‘Pro’ product that is geared towards enterprise customers.
ByteDance is currently on a mission to diversify its business. It already owns TikTok and its Chinese counterpart Douyin, as well as a news aggregation app Toutiao, while March saw the giant acquire Chinese mobile gaming studio Moontoon for a rumoured $4 billion. ByteDance has also launched its own mobile handset, the Jianguo Pro 3, in 2019, although this was exclusive to China.
And then in April of this year, ByteDance invested around $15 million in Mycodeview, the parent of new entrant to the metaverse market Reworld.
According to the IDC, Pico is the world’s third largest VR headset manufacturer, behind Facebook’s Oculus and Chinese manufacturer DPVR. HTC and Sony finished in fourth and fifth place, respectively. Q1 of this year saw Pico’s shipments grow 44.7% year on year, a slightly slower growth rate than the 52.4% seen for total global shipments of VR headsets.