The VR Wars: Zuckerberg vs Cook

Introduction: Meta VR Strategy vs Apple VR Strategy

Meta and Apple (META vs AAPL) are in a war over market share for VR hardware. Who will win? Meta's VR Strategy is surprising users, especially when compared to Apple vision pro.

In one corner we have the reigning hardware champion, Tim Cook and AAPL. They've been around a while, they have traditionally owned the hardware space, but are they adapting and innovating enough for the future?

In the other corner we have the young contender Mark Zuckerberg and META. Mark not only founded Facebook, but successfully matured the company into a global powerhouse that continues to surprise users, investors, and the world.

In this post I'll uncover general thoughts and perceptions about both companies, both leaders, and what I think they outcome might be. (Remember: if anyone says they are certain of the future, they're either ignorant or lying to you.)

Meta's Hardware 'Gamble'

On May 31 of 2022 I took a hard look at Meta before they released the Meta Quest 3. It was a trying time for the company. Mark Zuckerberg was under fire for investing tons of money into Meta Labs and VR. The stock was in decline.

Marker for reference to my writeup linked above.

Articles scrutinizing Zuckerberg's leadership were commonplace near the bottom. This article published September 12, 2022:

Then, almost magically, Zuckerberg's leadership skills improved at the same time META stock soared:

It's easy to peg "leadership improvement" on his performance and execution, but in fact, nothing has changed. Mark Zuckerberg simply did what he said he was going to do. He brought an amazing product to market on top of running the world's biggest social media family.

The Lesson for Investing

Investors lie to themselves all the time. I do it, and so you do. We take a glimpse of history in a business and try to forecast performance in the future. It's next to impossible, but one thing I've found is that any leader will tell you exactly who they are, way deep down, if you listen closely. So much of investing is finding leaders who do what they say they are going to do, who have a history of making things happen. Tough in the short term, great in the long term.

This, coupled with Mr. Market's short-term thinking, provides a great opportunity to invest in wonderful companies at misunderstood prices.

However, it's a tough pill to swallow when you see the stock price declining and see Q1'23 results:

It looks like Zuckerberg's metaverse 'gamble' should aptly be called his Meta VR strategy, and it is paying off.1

Is Apple Squeezing The Customer? "King Syndrome" Creeps In

For a while now I've watched how Apple operates. They're great at making money, but at some point, they run the risk of over squeezing the customer. As the saying goes, "You can shear a sheep once a year, but you can only skin it once."

Apple is in a bit of a predicament with thinking it's a semi-luxury brand (and it is! There's a blue-text romance preference.2) But this is no reason for Tim Cook and Apple to alienate users and make things more difficult. Mark Zuckerberg understands this.

While Apple has a closed ecosystem strategy, Meta has a open ecosystem strategy. Businesses and users can interact with each other more freely with Meta than they can with Apple. Tim Cook thinks this is a winning strategy of exclusiveness, but it's false-exclusion. In reality it just hurts the customers, whether they are people or businesses.

You can see this with minimal innovation, higher fees, slowing down phones, ads creeping into the apple ecosystem, etc. Meta is going the other way, allowing users to interact with the rest of the world, start their own businesses, and make money.

This goes back to my "digital-first" idea I had back in 2022:

From my post titled Meta Platforms (FB, META): Metaverse or Sharing Pictures with Nana?:

  • They have already built some functionality with VR headsets and the like, but people do not want gimmicky out-of-the-box functionality, but worlds teeming with adventure and connection with others who are not in their immediate network.
  • I am calling this transition digital-first network, while Facebook traditionally is a IRL-first network. People are mostly friends with others they met first In Real Life (IRL), while powerful networks create friendships on the internet first (digital-first).

You can see how Meta embracing this digital-first network is such a game changer for users, especially with the new era of VR. Apple is still stuck with the "talking heads" syndrome, showing off simple apps that allow you to essentially facetime other users. All for 7x the price.

Zuckerberg Firing Back

In a recent Instagram Reel, Mark Zuckerberg fired back at Tim Cook and Apple, comparing his headset to theirs. It's a great short video. Please check it out:

At some point, people start to realize that you can't roll out subpar technology, slap a premium price on it, and expect fan base to gobble it up.

From Bloomberg:

Source: Apple Vision Pro: Returning $3,500 Device Over Comfort, Lack of Apps and Price - Bloomberg

The Meta VR strategy doesn't confuse luxury and technology like Apple's strategy. Instead, Zuckerberg is focused on simply being better.

Conclusion: Who's Winning?

Right now, it's obvious that Meta is winning the respective race, especially when being so undervalued at the beginning of 2023. Now that Apple has their first iteration out, it's game on. I suspect that Apple will continue to squeeze customers to the benefit of the company in the short term, and Meta will continue to build an open system to the benefit of many in the long term.

I didn't get into margins or environment. That's a story for another time. For now, I simply wanted to highlight the different strategies these two companies are using, and my thoughts on each.

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