TikTok owner ByteDance battles Meta for VR app developers

In an attempt to attract developers and bring their virtual-reality apps to its own fast-growing Pico headsets, TikTok's parent company ByteDance Ltd. is offering to pay developers who have developed virtual-reality software for Meta META 2.24% Platforms Inc.

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Meta Chief Executive Mark Zuckerberg has predicted that virtual reality will be the next major computing platform in the near future, which is underscored by the incentives offered by the two companies in virtual reality, which is becoming increasingly competitive between them. According to the people who spoke with ByteDance, the company has offered some VR developers $15,000 to $25,000 per title.

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As a result, both companies are seeking to attract software developers who can develop the types of applications and experiences that will be crucial to drawing new users to virtual reality. Analysts say Apple Inc. is planning to launch a headset for augmented reality later this year, according to reports.

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In response to extended delays in gaining approval for widespread distribution of its Quest headsets, some developers have voiced frustration with the way Meta is vetting new software in its app store for the headsets. Meta, which rebranded itself from Facebook and spent nearly $16 billion in 2022 in order to put the so-called metaverse at the center of its strategy, has elected to carefully curate the available apps in the Quest Store. There is a lack of clarity in the company's process of vetting apps, according to some developers, which is why they look forward to the arrival of new competitors with eager anticipation. Founder of Squingle Studios, which makes a puzzle VR game called "Squingle," Ben Outram, said, "It's very exciting to see a major player enter the market and challenge the way Facebook has been doing things." Despite the fact that Mr. Outram's app has been on the Quest Store since July 2021, it has been awaiting acceptance.

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At the Game Developers Conference last month, Chris Pruett, Meta's director of content ecosystem, told Trade Algo that the fact that ByteDance has entered the VR market and is funding developers is a net positive for the company. Previously he had defended Meta's decision to carefully curate the Quest Store in order to ensure users have a good user experience. He said, "I want all boats to rise.".

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Quest Store's application submission system is designed to ensure the company's devices deliver a consistent, comfortable user experience to its customers, according to a Meta spokesperson. In order to provide consumers with a quality, high-value VR experience, apps are evaluated on a variety of factors, including their performance, inputs, and safety, she explained.

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Among the titles available on Quest, only one has stood the test of time since Meta's latest consumer headset launched over two years ago and has become a bona fide hit. This particular game, "Beat Saber," generated more than $255 million in sales over the course of its lifetime, according to documents seen by Trade Algo. There were 1.47 million active devices playing the game, which was acquired by Meta in 2019, according to the documents that were released. It is estimated that Beat Saber earned more than $20 million out of about 500 Quest games in the store as of October, which was one of 14 games that earned more than $20 million out of about 500.

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There were 200 apps that have made over $1 million on Meta's VR devices as of February 2023, which is a 44% increase over the previous year, according to a company spokesperson who spoke on the matter.

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It appears from the documents that Meta's Quest headset had a monthly active player base of 6.37 million as of October. In the fourth quarter of 2022, the number of Quest headsets shipped declined by more than 90% compared with the previous year, according to estimates from the research firm International Data Corp. The IDC estimates that the shipments of ByteDance's Pico headsets increased by 110% during the same period. The number of headsets shipped by ByteDance in the final quarter of the year is just short of Meta's number, which was 310,000. Meta reduced the price of one of the Quest 2 headsets by $70 in March, "so that more people can get into virtual reality," Mr. Zuckerberg said in a statement.

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ByteDance bought the VR headset manufacturer Pico in 2021 with the intention of pivoting toward the consumer market from its existing focus on the business market. Lazius Kaye, a former Pico employee who worked on the launch of the latest Pico 4 consumer headset, says that ByteDance recognized that it needed significant resources in order to compete with Meta and that it would need to subsidize manufacturing costs in order to succeed. The headset went on sale last fall but is not currently available in the U.S. It retails for about $470 in Europe and Asia, but is available in Europe and Asia. It costs $400 for the Quest 2 headset with the same amount of storage as the Quest 1.

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Although the Pico 4 was priced at a comparable price point, ByteDance knew that it might still not be able to compete with Meta's offerings: There were fewer games available, inferior hand-tracking technology, and a less developed ecosystem, said Mr. Kaye, who also runs a VR-related YouTube channel with more than 13,000 subscribers. To give you a sense of the number of apps available on the Quest Store, there are more than 500, while ByteDance's Pico has more than 300. In addition, ByteDance has teased the release of its Pico Worlds app, which is a social hangout application similar to Meta's Horizon Worlds.

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There is a common practice in the industry whereby developers are paid to bring their existing apps to new platforms, according to a ByteDance spokesperson.

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“I am excited about the prospect of partnering with some of the most creative VR developers in the industry and developing programs designed to encourage VR development that exploits our platform's unique characteristics,” said Leland Hedges, Pico's consumer market manager for Europe, the Middle East, and Africa.

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As part of its strategy to attract more developers, Meta announced in March that it has created a program called Oculus Publishing exclusively for VR games that are developed by independent developers, which is designed to support those games. More than 300 titles have been funded by the company, and another 150 are currently in the development process.

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“Our platform works out for us because what drives engagement, revenue, and adoption on our platform is quality,” Mr. Pruett, Meta's director of business development, told Game Developers Conference attendees.

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Several VR developers have expressed frustration after they were allowed to list their apps in Meta's App Lab rather than Quest Store, where there is a much broader distribution of their apps. There are a number of apps that can be downloaded using the App Lab system, but developers complain that it is difficult to search through the App Lab titles to find their apps, so their apps are difficult to discover for consumers. The consumer is prompted with a warning when they do manage to locate an app from the App Lab, telling them that Meta hasn't reviewed it thoroughly.

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This warning message warns users of the possibility that apps in App Lab may contain unknown issues related to comfort, performance, or other factors. For the app to be downloaded, users must click past the message that appears on the screen.

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There is a huge difference between being in the Quest Store and being in the App Lab, just like selling a product in a grocery store versus selling it on the street, said Sarah Hill, CEO of Healium, which makes a VR mental-health app. Healium is available in the app stores for other headsets as well, including the Pico 4 and HTC Vive Flow, said Hill, but Meta has yet to provide feedback on why Meta has not accepted her company's apps.

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“There is no disrespect intended in any way, but I find it frustrating,” Ms. Hill said.

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Meta's App Lab allows developers to make money with Meta's headsets even if their products do not align with the company's curation approach, according to a company spokeswoman.

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A VR developer on the Quest Store and App Lab is charged 30% of the revenue that they generate for their VR app, the same rate that other major app stores, such as Apple App Stores and Google Play Stores, charge most of their major developers on mobile apps.

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In an interview with the App Lab, Kevin Puryer, director of Sandford Tech, a company that develops the VR puzzle game "Color Connect," said his company's game has been on App Lab since August 2021. Since Sandford Tech launched "Color Connect" on ByteDance's Pico device in December, it has seen more paid downloads on Pico than it has experienced during its time on Meta's App Lab for the entire time it has been available there.

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“To me, it just shows you how powerful it can be to be on a main store and to have visibility to those who are putting on a headset and actually being able to download your game,” Mr. Puryer said.