Facebook: Oculus for Education
By: Turner Tobin & Charlie Mortimer
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School
Facebook: A Social Media Dilemma
Facebook’s mission is to “give people the power to build community and bring the world closer together.” With over 2.7 billion monthly active users, the social network is well on its way to achieving this goal. Facebook’s last major strategic update occurred in 2016 with the unveiling of its ten-year strategy, which signalled Facebook’s core focus on three pillars: connectivity, artificial intelligence (AI), and virtual reality (VR).
From a financial perspective, Facebook’s revenue is driven by three factors: the number of users on the platform, user engagement, and monetization. It has become progressively harder for Facebook to grow its core user base as the platform has lost its appeal towards younger demographics that generally favour platforms like Snapchat, TikTok and Instagram. Facebook must therefore look to bolster its other two revenue drivers to continue pursuing its mission.
Engagement and monetization are closely tied together: the more time spent on a platform, the more advertisements users can be exposed to. Simultaneously, the more engaging the platform, the higher the clickthrough rate. In a play to increase engagement, Facebook has turned to improving content delivery through its VR platform Oculus. Originally developed as a Kickstarter project for gaming, Oculus is a VR headset development company that was acquired by Facebook for $2 billion in 2014. Oculus’ main product offering, the Quest 2, sells for a base price of $350. To encourage VR adoption, Facebook is currently building a Facebook Horizon: an interactive VR-based social media platform powered by Oculus.
Virtual Reality’s Catch-22
One of the greatest drivers of new users for social media platforms is perceived critical mass, the idea that a platform has a large number of other users to engage with. Perceived critical mass influences up to 38 percent of a user’s decision to join a social media platform, second only to user enjoyment. To make an effective VR social media platform, Facebook needs to prioritize user engagement and ultimately increase the number of Oculus users. However, given the upfront cost of purchase for the headset, Facebook must first create a compelling value proposition for users to purchase Horizon. Their past strategy has been driving down prices and producing more accessible standalone units via the Quest line. However, six years post-acquisition, it is clear that Facebook must adjust its strategy to drive adoption and achieve the required critical mass.
When a critical mass of users is achieved, a rapid acceleration of adoption occurs to the point of plateau. This point occurs once 15 percent of a community has converted. In Facebook’s case, the number of total US smartphone users can be used as a proxy for the size of America’s tech-savvy “community”. Reaching the goal of 15 percent adoption within the community would require a total of 41 million VR users. Currently, Facebook’s Oculus VR device ships 38.7 percent of VR headsets; if this market share were to remain constant, Oculus will have sold roughly 21 million units by the end of Facebook’s ten-year strategy. Without a change in the status quo, Facebook would be 20 million units short of achieving the 15 percent adoption threshold. Fortunately, a sizable end market exists which offers a compelling opportunity for Facebook to make up this shortfall: higher education.
COVID-19 & Zoom University
COVID-19’s impact on schooling has seen institutions forced to adopt online applications such as Zoom to recreate the classroom environment. In April 2020, Zoom saw an average of 300 million daily meeting participants, a drastic increase from just 10 million in December 2019. Among the newly-added users were 90,000 schools located in 20 countries around the world. Post-secondary institutions, many of whom strategically position themselves through offering unique campus experiences, can adopt VR as an avenue to differentiate themselves in the race to adopt more novel, innovative platforms and services for their students.
The education sector has historically been one of the least digitized in the United States. However, institutions have been progressively ramping up their investments in technology to better meet the needs of their student population. The first half of 2020 saw the second-largest six months for global ed-tech investment, totalling over $4.5 billion. Institutions are now looking towards VR technology in particular to transform the educational experience. Educational content designed for VR headsets is already being created by Oculus for a wide range of academic subjects and “field” trips. Increased investment in digitization within the world of education represents an opportunity to tap into a large and growing market.
Furthermore, VR has already seen some success in the education sector, as demonstrated by Labster, a developer of virtual science labs. Historically, Labster partnered with institutions such as Harvard University, MIT and ETH Zurich to provide lab experiments in VR using Daydream, Google’s smartphone-enabled VR headset. However, as Google recently halted the Daydream venture citing the limitations of its technology, Labster’s VR technology has now become software searching for a new host platform. Ultimately, the existence of VR educational tools demonstrates an interest in the technology being used in a post-secondary context.
Oculus’ Greatest Quest
Facebook should position Oculus as an educational tool for post-secondary institutions. Capitalizing on an opportunity provided by COVID-19’s disruption, Oculus’ presence in educational institutions could increase visibility and accessibility to VR while demonstrating VR’s value-add even after the impact of COVID-19 has waned. Having already partnered with Osso VR to develop professional surgical training and assessment using Oculus, Facebook could use its existing connections with past partners to build a wide variety of applications that meet the needs of its prospective educational customers. Ultimately, in order to drive adoption, Facebook should partner with post-secondary institutions to distribute and sell headsets for students to own.
Phase 1: The Medical Community
Facebook should partner with Labster by providing its Oculus headset as a platform for the company’s software. Bolstered by Osso’s medical expertise and background, Oculus for Education should immediately target leading institutions such as Stanford and Clemson which have already demonstrated interest in VR as a tool for education. Oculus could foster the creation of lesson plans and lab exercises hosted on its hardware platform to enhance the educational experience. Facebook could then use their adoption as a selling feature to other top U.S. medical schools in an effort to capture a broad market of 278,000 medical students, medical residents and medical graduate students in the U.S.
Phase 2: STEM and Business Programs
To expand Oculus adoption into a significantly larger market, Facebook should next target undergraduate, college, and diploma STEM and business programs. Developing tools and use cases for STEM students will be simplified by the overlap with existing applications for medical students, including virtual environment rendering. There is already demonstrated demand within business schools; institutions such as MIT and Stanford have begun to use the technology to enable virtual interaction and case simulations, which can easily be applied at an undergraduate level as well.
Phase 3: Achieving Critical Mass
Achieving critical mass in the United States requires leveraging the STEM and business community to penetrate the undergraduate market. Cumulatively, each user needs to bring in on average 1.03 new users per year for three years. For context, between 2013 and 2015, Zoom’s user base on average added an incremental 4.77 users annually to grow from 3 million users to 100 million users in just two years. If successful, Oculus would obtain the 21 million users required to get Oculus to the U.S. critical mass point of 41.3 million users.
Facebook’s Next Horizon
As Facebook’s flagship platform continues to struggle with attracting younger users, the company’s long-term pillar of connectivity leans on expansion into the VR space. Implementing Oculus for Education in a phased approach would allow Oculus to make up the current 20 million user deficit by the end of its current ten-year strategy. By offering VR in post-secondary institutions, Facebook’s Oculus would become the answer to universities and colleges searching for differentiation in unique educational offerings. In the future, other universities and colleges may increasingly see VR as a mandatory investment as larger portions of their student population begin adopting Oculus. Since the future of education is not only digital but also virtual, Facebook should position themselves to capitalize on the education market to fuel its own social media ambitions.
