Takeaway: Thanks to Quest 2’s performance, Facebook is more bullish than ever on VR. While Zuckerberg in years past has described the company’s VR work as long-term investments not expected to pay out for years; he says about the company’s latest results, driven by Quest 2, “I think that this quarter’s results show that this future [that we’ve been working toward in VR] is here.”

Takeaway: These signals show Quest’s momentum compared to Oculus PC, and why Facebook is largely abandoning the latter. Valve, however, continues to support the PC VR ecosystem through SteamVR, and will likely get a boost in growth as a result of users abandoning the Oculus PC ecosystem.

Takeaway: Once a leader in the PC VR space, Facebook seems content to leave that portion of the market to someone else (namely, Valve). While Quest and Quest 2 can continue to work with a PC by plugging in, the company’s PC VR store has been left to languish. Facebook believes affordable standalone headsets will capture the mainstream market it’s seeking

Takeaway: Steam may not have seen the breakout success of Quest in 2020, but the platform continues to grow. A large portion of revenue growth in 2020 came directly from Half-Life: Alyx, which shows the game cementing its mark as one of VR’s killer apps.

Takeaway: The number of Steam users with VR headsets continues on a strong growth trajectory. While Facebook headsets make up 51% of connected headsets (see graph), a larger number of induvial headsets now hold sizeable shares, showing increasing competition and choice for consumers (see graph). The five most popular headsets on Steam are: Rift S, HTC Vive, Oculus Quest, Valve Index, and Rift.

Takeaway: Index may not be selling in massive numbers, but its big price tag means it has been earning as much if not more revenue than many major games on Steam. The data suggests that Index has been a significant revenue stream for Valve—likely much larger than Half-Life: Alyx—showing that the enthusiast VR segment is willing to shell out cash for high-end headsets.

Takeaway: Despite a strong sales record and some great games for Sony’s first-gen PlayStation VR headset, in recent years the company’s silence on its future VR plans had grown deafening. With a new console just hitting the market and the aging PSVR nearing its fifth anniversary, it was beginning to look like Sony was muling an exit of the VR segment. While a new headset is on the way, the company says it won’t be released in 2021.

Takeaway: Cloudhead Games is one of the most veteran VR studios in the industry. CEO Denny Unger revealed the many ups and downs the studio and the industry at large has seen since the launch of the first consumer VR headsets to today. Cloudhead saw the initial VR launch hype dying down by 2018, leaving the studio on the verge of pivoting away from VR. Thanks to a new perspective on VR game design culminating in its latest title, Pistol Whip, and the launch of Oculus Quest, the studio has seen new levels of success in 2019 and 2020.

Takeaway: Though Google was very bullish on VR through 2016 and 2017, the company didn’t see the traction it hoped for with Daydream, its Android-based VR platform. Having largely dropped its VR ambitions by 2018, the fact that Tilt Brush lasted as long as it did is somewhat surprising. Alas, the company’s history of shutting down projects made this a likely eventuality. For companies like Google, which are only interested in projects that quickly find significant traction, VR remains a difficult sector to enter because the use-cases which can drive mass scale are still limited by the quality and cost of VR hardware.

Takeaway: Though the VR gaming market is still small compared to the non-VR gaming market, small teams that understand the medium are finding growing success. The Walking Dead: Saints & Sinners comes from a small studio which has been immersed in VR development since the early days, and has found a strong product-market fit. Quest is increasingly becoming a top priority as a target platform for VR content among studios hoping to maximize their customer base.

Takeaway: Social VR applications which also provide activities for users to partake in (rather than just chat rooms) are emerging as increasingly popular apps, though supporting both VR and non-VR players seems to be a key component to growth. Apps like Rec Room and VRChat have both benefited from that approach, as well as growth powered by a broad increase in digital entertainment in 2020 as a result of Coronavirus lockdowns.

Takeaway: VR is still far from a mass medium; live-event businesses that require large audience reach won’t find it on VR without either building it themselves through a killer app or waiting several more years for the market to continue to grow. While some VR games have amassed millions of monthly active VR users, such audiences are divided across several content ecosystems and do not easily flow from one app to another.

Takeaway: The slowly growing sector of out-of-home VR businesses, like VR attractions & arcades, was hit exceptionally hard by the pandemic. While many traditional businesses have managed to re-open after putting various restrictions in place, out-of-home VR businesses had an understandably difficult time convincing customers to wear headsets on their face that were previously worn by strangers. While Sandbox VR managed to stave off an outright shuttering, many, like The VOID, recognized as a leader in the space, weren’t so lucky.

Takeaway: With the pandemic on everybody’s mind, it’s no surprise to see recent investment activity centered around both social VR and VR collaboration & education applications, as lockdowns have highlighted VR’s ability to make distant connections feel more real. In the backdrop we can see investment interest in future VR hardware and technology from the likes of Varjo, CREAL, and Pimax.