The VR Cheatsheet for Beating Facebook and Oculus

VR startups, quiz for you: Are you a pirate?

Answer: You better believe it.

If you are a VR startup figuring out where you are going to acquire your users and customers, consider yourself a pirate as you steal and pillage distribution from the majestic King Facebook.

You see, Facebook and Oculus own and patrol the high seas of the web. This is because Facebook controls the waters (i.e. the social distribution) for most forms of content today. From traditional print to online video content, Facebook packages, transports, and taxes the distribution flow as it goes from user to user.

Even when startups unexpectedly breakout from the pack, Facebook uses company acquisition to control them before they encroach on their territory. In the case of VR, it’s early enough that Facebook acquired the entire Oculus hardware platform to increase control and reduce the number of breakout social apps they have to acquire (see WhatsApp and Instagram). You better believe that Facebook is playing to own every piece of this ecosystem in much the same manner that Apple owned the 2000s up and down the mobile chain.

So if you are a VR startup looking for users and distribution, you inevitably face the daunting challenge of creating distribution in a Facebook controlled ecosystem. When VR startups contact me, they mostly seem oblivious to the reality of Facebook’s dominance and the challenges of user acquisition in the modern world. Sorry, users don’t magically appear on your doorstep.

In pitch and advisory meetings, I like to ask, can we figure out which version has the best chance to compete against King Facebook?

Here is the way I think about it.

I believe we’ve had 3 dominant platform eras. In the early days of the web, it was the portal. By the mid 2000s, we moved to a feed system with the advent of Twitter, Facebook, and Instagram. And in the last several years we are shifting to mobile messaging platforms as our starting place to digest all forms of content.

Will VR start all over and begin with late 90s style portals as the dominant platform? Or will VR continue the evolution we’ve all experienced and pick up where messaging platforms have left off?

Good, tough question.

Here is the platform cheatsheet I personally use to evaluate VR startups:

1) The Portal (think AOL and Yahoo)

Pros:

1. The easiest for new founders to imagine and build today.
2. Feeds into our Second Life fantasy of what VR “should be.”
3. Utilizes three dimensional space in VR in a clear and simple way.
4. Building the “YouTube of VR” is easier to sell to VCs for venture funding.
5. Once users are locked in, they are harder to lose.

Cons:

1. The hardest model to acquire distribution and users. It’s like starting a new restaurant. Brutal until word of mouth happens.
2. Easiest for Facebook to throttle and cut off. See Viddy and Meerkat.
3. You have the most competition coming from traditional, well-moneyed players who want a foot in the door.

2) The Social Feed (think Twitter and Instagram)

Pros:

1. Fits how we currently consume content.
2. Easiest to acquire traffic from a variety of places.
3. Facebook and Oculus may actually encourage growth for the best VR startups who use this model early. They need some winners.

Cons:

The problem is Facebook is the main supplier and will be watching carefully. Not difficult to throttle, again see Viddy and Meerkat.
If you are acquiring users through mature platforms, you will quickly be forced over to paid acquisition before you know it. Think of it as a forced rev-share with Google and Facebook.

3) The Messenger (think WhatsApp, FB Messenger, and Snapchat)

Pros:

1. Most viral and sticky.
2. By far the least number of VR startups are using this approach today.
3. Text bubbles in 3D virtual worlds are ugly, but I think Snapchat proves messages don’t have to always be thought of as only text. Short visuals are extremely powerful.
4. Music lends itself well to this platform style. Music dominates YouTube views, and is especially viral.

Cons:

1. Hardest to build today without entrenched HMD ecosystems.
2. Most technical to build.
3. You have to navigate cross-platform functionality very early.

I suspect we’ll see the most early success from VR startups who build using the social feed model. It’s the fastest way to acquire users today, and it’s especially suited for this transition time from the two dimensional web to the three dimensional web. I’m always surprised to see so few VR startups using this model. It can be executed on today, with nearly no money or funding at all. I keep telling VR startups, go get users now before they become $5 an install in 12 months. It’s not rocket science. It’s called user acquisition. Vamos!

The biggest danger I see is to build portals and then hope they will come. I have news for you. They just don’t come. We saw this phenomenon in online video over and over again. You can’t build a destination and expect people to show up. If you don’t go get users now, you’ll be out of business and pivoting to become a VR app agency for hire.

Building new platforms is indeed a game of thrones. I’ve been beaten bloody building video startups in the YouTube ecosystem before. You’re competing against everybody in the world, from kids in India and China to MBAs at Stanford. Someone like Facebook always has more power than you. If you want to beat Facebook and Oculus, you need to work smarter. Pirates, the time to do this is now. It will never be cheaper to acquire your VR users than today.

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