An internal email sent by Facebook CEO Mark Zuckerberg to senior executives offers a glimpse into the strategic thinking behind the company’s feet-first leap into XR following the 2014 acquisition of Oculus.
Update (February 14th, 2019): Sources tell Road to VR that the email in question is authentic. Facebook has declined to comment specifically on the email. The article below has been updated with this information.
Facebook turned heads across the tech industry and beyond when it acquired Oculus for some $2 billion in 2014. Back then, many were wondering: ‘what on Earth is a social networking company doing buying a VR hardware startup, and for that much money? A leaked email directly from Facebook CEO Mark Zuckerberg offers new insights.
TechCrunch reports that Zuckerberg sent a four page internal email to key executives at the company which outlined the strategic thought process guiding the company’s early dive into AR and VR.
The email was acquired by author Blake Harris who gained access to it and thousands of other documents through research for his upcoming book The History of the Future, which explores the formative years of the modern VR industry. Sources tell Road to VR that the email is authentic.
Dated June 22nd, 2015, more than a year after the company’s Oculus acquisition, the purported email reveals that Zuckerberg commitment to XR was driven by a desire to beat tech behemoths Google and Apple to XR, which he calls in the email (and has also called publicly) “the next major computing platform,” as a means of enhancing the company’s strategic positioning:
The strategic goal is the clearest. We are vulnerable on mobile to Google and Apple because they make major mobile platforms. We would like a stronger strategic position in the next wave of computing. We can achieve this only by building both a major platform as well as key apps.
I will discuss the main elements of the platform and key apps further below, but for now keep in mind that we need to succeed in building both a major platform and key apps to improve our strategic position on the next platform. If we only build key apps but not the platform, we will remain in our current position [of being beholden to platform holders]. If we only build the platform but not the key apps, we may be in a worse position. We need to build both.
From a timing perspective, we are better off the sooner the next platform becomes ubiquitous and the shorter the time we exist in a primarily mobile world dominated by Google and Apple. The shorter this time, the less out community is vulnerable to the actions of others. Therefore, our goal is not only to win in VR / AR, but also to accelerate its arrival. This is part of my rationale for acquiring companies and increasing investment in them sooner rather than waiting until later to derisk them further. By accelerating this space, we are derisking our vulnerability on mobile.
As a company whose users access apps and services in a large part through mobile phones running iOS or Android, the reason for Zuckerberg’s desire to get out from under the thumb of Apple and Google was recently tested put in the spotlight when Apple blocked Facebook from running its internal iOS apps when it was revealed that Facebook was using Apple’s platform in ways the company forbids.
Owning both the platform and the key apps means deep control over an ecosystem, and Zuckerberg wants that power in Facebook’s hands rather than its competitors. With mobile already a mature ecosystem, he’s placed his bets on XR as the “next major computing platform” by 2025, and nearest opportunity for Facebook to seize strategic control.
The unverified email continues with a more detailed breakdown of how Zuckerberg expects to facilitate both “winning” the space, and accelerating its arrival.
The key apps are what you’d expect: social communication and media consumption, especially immersive video. Gaming is critical but is more hits driven and ephemeral, so owning the key games seems less important than simply making sure they exist on our platform. I expect everyone will use social communication and media consumption tools, and that we’ll build a large business if we are successful in these spaces. We will need a large investment and dedicated strategy to build the best services in these spaces. For now though, I’ll just assert that building social services is our core competence, so I’ll save elaborating further on that for another day.
The platform vision is around key services that many apps use: identity, content and avatar makerplace, app distribution store, ads, payments and other social functionality. These services share the common properties of network effects, scarcity and therefore monetization potential. The more developers who use our content marketplace or app store or payments system, the better they become and the more effectively we can make money.
[…]
Our overall vision for the space is that we will be completely ubiquitous in killer apps, have very strong coverage in platform services (like Google has with Android) and will be strong enough in hardware and systems to at a minimum support our platform services goals, and at best be a business itself.
Further into the email, Zuckerberg says that he was “supportive of acquiring Unity,” one of the leading game engines for both non-VR and VR gaming content. He goes on to “outline the advantages of owning unity,” which includes giving Facebook the capability to “build world-class VR / AR experiences required to deliver on this overall mission,” and allow the company to “make our key services the defaults [in Unity] that developers use. […] Just like developers who deeply rely on Google’s Play Services are more likely to use the next Play Service API that comes out, developers who use more of our systems to build their VR / AR experiences will also be likely to use additional services as we build them as well.”
In making his case for acquiring Unity, Zuckerberg also explores what could happen if Facebook doesn’t:
On the flip side, if someone else buys Unity or the leader in any core technology component of this new ecosystem, we risk being taken out of the market completely if that acquirer is hostile and devices not to support us. Again, this likely wouldn’t be a sudden proclamation that Unity no longer supports Oculus, but Google or someone else would just never prioritize improving our integrations.
To some degree, this downside is such a vulnerability that it is likely worth the cost just to mitigate this risk, even if this deal didn’t come with all of the upsides for which we originally contemplated it.
[…]
Given the overall opportunity of strengthening our position in the next major wave of computing, I think it’s a clear call to do everything we can to increase our chances. A few billion dollars is expensive, but we can afford it. We’ve built our business so we can build even greater things for the world, and this is one of the greatest things I can imagine us building for the future… [the email concludes].
In the intervening four years, Facebook not only didn’t acquire the company, but Unity has raised more than $500 million in new investments, according to CrunchBase, making any shot at an acquisition far more expensive for Facebook today than when Zuckerberg was reportedly laying out the case for buying the company in 2015.
Facebook declined to comment on the email specifically, but a spokesperson did offer a statement regarding the upcoming book from Blake Harris which references the email:
“The book doesn’t get everything right, but what we hope people remember is the future of VR will not be defined by one company, one team, or even one person. This industry was built by a community of pioneers who believed in VR against all odds and that’s the history we celebrate,” the spokesperson said.
