Facebook's Plan to Dominate Virtual Reality—And Turn Us into 'Data Cattle'

Emily Marren needed a break from the self-imposed isolation of the coronavirus pandemic, so she decided to go to the movies. She bought a ticket in the theater lobby, grabbed some popcorn at the snack bar and chatted with other maskless theatergoers, including a man from Finland who wouldn't stop talking about the new PlayStation 5. She found an empty seat in the half-full auditorium. The lights dimmed, conversations subsided and the sci-fi flick 'Interstellar' filled the big screen.

The outing satisfied a quintessentially human need for social contact, but Marren didn't have to leave her living room—the interactions took place remotely, in the virus-free world of virtual reality. All she had to do was don a cheap headset and sign on to a service that allowed her to mingle with other participants at the movies. "It was almost eerie how realistic it all was," she says.

In this photo illustration, the Facebook logo is displayed on the screen of an iPhone in front of a TV screen displaying the Facebook logo on December 26, 2019 in Paris, France. Chesnot/Getty

Virtual reality has thrived in a small but enthusiastic community of video gamers for years, but so far it has failed to break through to the larger world of digital intercourse. That is changing quickly, thanks to advances in technology and a growing demand, fueled by life under COVID, for new ways of remotely interacting with people. In recent years, VR has been quietly moving into many aspects of current life—in corporate training and hospital therapies, for instance.

To bring VR into the mainstream, what's been missing is the backing of a Silicon Valley behemoth. Facebook is now stepping into that role. For better or worse, the social-media company is going all in on the technology, devoting considerable technical, financial and marketing resources in an effort to transform it from a niche technology to a vastly entertaining and useful new form of reality—and a surprisingly affordable one. Even Facebook's critics acknowledge that its newest headset—the standalone $299 Oculus Quest 2, which Marren used in her theater outing—is just the sort of high-performing, affordable entry the industry needs to launch VR into the realm of the mass market.

If Facebook succeeds in its quest to bring VR to social-media masses, it could bring a level of realism and ease-of-use to remote interactions that makes Zoom video look like stone tablets by comparison. It would also position itself to determine not just how we swap posts online, but much of what we experience in an increasingly simulated world—in work, play, education, family, health, commerce and even love.

The prospect of Facebook bringing its trademark dominance to the next big thing in technology has many people worried. The company has been attracting criticism from a broad swath of the public wary of its penchant for tracking online behavior and selling the data to advertisers. (They are also angry at Facebook's reluctance to crack down on the vast streams of misinformation that is distributed on its platform.)

Governments are taking notice, too. Facebook has been hit with multiple fines and other regulatory face-slaps for its transgressions and will most likely face more in the months ahead. On December 9, the U.S. Federal Trade Commission and, separately, 48 state attorneys general, sued Facebook, alleging that the company's acquisitions of Instagram and WhatsApp violate antitrust law. Although neither Facebook's ownership of Oculus, the maker of VR headsets, nor its VR plans were specified the lawsuits, the Department of Justice is reportedly investigating its VR activities and is considering bringing charges of anticompetitive behavior. Germany's trade regulatory agency also plans to take action against the company for its efforts to dominate the VR industry.

Many critics say Facebook's ambitions are a brewing disaster. If Facebook dominates VR the way it dominates social media, it could take its practice of tracking customer behavior to new and almost unimaginable levels, all for the purpose of subjecting us to ever-more-invasive advertising. Research has shown that VR can record 20 million data points on a single user's behavior and surroundings every 20 minutes, notes Kavya Pearlman, who heads XRSI, a non-profit dedicated to guarding VR privacy and safety "Do we want to give that to Facebook, the troubled child of Silicon Valley?" asks Pearlman. "It would turn people into data cattle."

Facebook executives insist that the company is ready to turn over a new leaf and begin respecting its users' privacy. "We welcome the criticism," says Andrew Bosworth, who heads the VR efforts at Facebook. "We know we have to earn the trust, and we're taking all the lessons we've learned from the past ten years and retooling the company to do that."

But Facebook has a long way to go to convince competitors and consumers—as well as government officials—that it would be a responsible steward of the power of VR to embed us in other worlds. Given that Quest 2 is selling faster than Facebook can make it, many of us may already be spending a chunk of our lives in a Facebook-controlled reality before the question is settled.

Facebook's aggressive investment in VR underscores the central dilemma that many people have regarding the company: as it grows increasingly unpopular from practices that seem monopolistic and exploitive, its sheer scale may be instrumental in delivering technology, like VR, that attracts people like moths.

Alternate Realities

Is VR really going to be the transformative technology that experts say it is? Some skepticism is understandable—as the joke goes, ubiquitous VR has been five years away for the past 20 years. But there is reason to think that VR's heyday is at hand.

Until recently VR headsets were typically clunky, heavy, costly gizmos that offered only crude, jerky imitations of a 3D world, more likely to evoke dizziness and eye strain than a magical experience. The Quest 2, in contrast, is a light, comfortable device that can instantly transport users into rich alternate realities, which can offer the near-exact look and even much of the feel of actual reality, complete with the ability to peer around in any direction and move anywhere in a virtual world.

With a VR headset like the Quest you can use your hands and sometimes your whole body the way you do in real life to interact with objects and surfaces in these ersatz environments, heightening the illusion that you're not merely running a software program, but actually physically inhabiting a space. "Computers and phones always leave you aware you're staring at an image on a screen," says Darshan Shanker, CEO of Bigscreen, whose movie- and video-watching app boasts two million users. "With VR, you feel you're right there in another place, engaging with other people who are there, too." (The new headsets are apartment-friendly, too: They keep a careful eye on your real-life surroundings, providing visual cues to keep you from crashing into or punching walls and furniture, and letting you move through virtual spaces without having to physically walk if you don't have the space.)

Oculus form FB
The latest version of the Oculus headset has been flying off the shelves at a $299 price tag, well below that of competitors. Photo by JOSH EDELSON/AFP via Getty Images

The companies bringing us VR make up what is still a young industry. But it is rapidly growing into a potentially life-changing one that offers astounding new capabilities ripped right out of beloved science-fiction stories like The Matrix and Ready Player One. Think of meeting up in cozy, real-feeling rooms with family, friends and colleagues who are scattered around the world, exploring jungles and moons, getting treated by distant doctors, shopping in Parisian boutiques, and dodging an assassin's bullets—and experiencing it all as if it were the real thing, even if you're actually in the middle of your living room. In fact, all those experiences are available today with a $300 headset. "Anything you can do in real life, you can do in VR, except you can do it better, whenever you want, and with anyone you want," says Nima Zeighami, a consultant with Agency XR, a firm specializing in VR. "It's a kind of superpower."

Facebook is doing more than any other company to bring that superpower to the masses—in large part, simply because it can, thanks to the money and influence that comes with counting most of the human race in your customer base. "When you do things at the scale of a billion users, a lot more becomes possible," says Facebook Chief Technology Officer Michael Schroepfer. He's being modest; Facebook and its subsidiaries Instagram and WhatsApp host a combined 3 billion users around the world, including more than two-thirds of all Americans.

Facebook has been moving aggressively into VR since 2014, when it dropped $2 billion to buy Oculus, the leading player in virtual-reality headsets. VR headsets essentially place two tiny screens in front of the wearer's eyes in order to create an intensely realistic illusion of not just looking at but being inside another world, one conjured up entirely through software. Cameras, motion sensors and handheld controllers track the movement of your head, hands and entire body, allowing you to look around, reach out and interact with virtual objects, and move through virtual spaces, with far more control and detail than previous headsets provided, and almost none of their annoying lag time.

Oculus's Quest, introduced in 2019 at a price of $399, advanced the state-of-the-art by virtue of being entirely self-contained--other VR headsets still require a corded connection to a computer, which can be a distraction and limit movement. The Quest 2 came out in September at a mere $299, bringing it down to the price of mid-range game consoles, while offering higher resolution and more computing power than the original Quest for an even more realistic experience. Orders have been flooding in at five times the rate they did for the original Quest, and the new headset quickly sold out into 2021. International Data Corporation, a market intelligence firm, says Facebook has already captured 39 percent of the VR hardware market, making it the clear leader over Sony, HTC, and Valve, whose VR offerings are more expensive, and leave users tethered to computers or game consoles.

The VR industry is in its infancy, worth, in total, less than $7 billion in annual sales; Facebook's share of that take contributes only about 2 percent of the company's revenues. But the company clearly sees enormous potential for the business. It is building a new campus in Burlingame, Calif., between Silicon Valley and San Francisco. The cost of the project, scheduled for completion in the next few months, hasn't been made public, but the construction financing alone has amounted to half a billion dollars. The four new buildings there will provide space for about 4,000 of the company's employees—and all of them will be working on virtual reality or related technologies such as augmented reality. It won't be enough space: The team is getting another 160,000 square feet around the Bay Area for thousands of other employees working on the project.

Zuckerberg introduce Oculus
Facebook CEO Mark Zuckerberg introduces the Oculus Quest at the Facebook F8 Conference in San Jose, California on April 30, 2019. AMY OSBORNE/AFP via Getty Images

How will VR affect Facebook's billions of users? Imagine waking up, reading the national and local news, taking some meetings and fleshing out some spreadsheets at work, sitting through a graduate-school class, getting a health problem checked out, visiting family, doing some shopping, arranging a date at a movie theater, and playing video games before heading off to bed. Now imagine you've done all these things inside a Facebook VR headset. You could do it today with a Quest headset and existing software and services.

It's hard to convey the experience of VR to someone who hasn't tried it. It is an enormous leap beyond looking at a screen, one that makes the user feel fully inside a computer-generated world, rather than just an observer of content.

"Instead of you adapting to the computer by having to type on a keyboard or use a mouse, the computer is adapting to you by taking your body's movements as the input," says Rebecca Poulson, an engineer who led VR projects at Northwestern University's Knight Lab for the last four years. "A meeting in VR feels like you're really in the room with the other people, and you can talk with them the way you do in real life, without the awkwardness of a Zoom meeting in Brady-Bunch mode."

The experience is all the more compelling, of course, if instead of just blabbing with work pals you're dodging zombies rushing in from all directions, climbing weightlessly through a hatch in the International Space Station, or walking around a new home that hasn't been built yet. VR tools that make such fake-world experiences possible have been around in relatively primitive form for decades, notes Facebook's Bosworth. But getting the worlds to feel realistic, and delivering them through a light, comfortable and affordable headset, has taken a raft of breakthroughs in miniature screens and cameras, computing chips, and high-speed networking, as well as in the artificial intelligence software needed to instantly adapt the VR world in response to a user's every motion.

"The hardware and artificial intelligence software have hit an inflection point," says Bosworth. "The promise has been around a while, but it's only now that we have the ability to execute on it."

Rules of Engagement

Many of VR's early adopters have been gamers—the game "Superhot VR" alone has sold more than two million copies, and VR game revenues are expected to hit a billion dollars this year. Educators, too, have been quick to embrace VR's you-are-there quality to bring students through, for instance, the Anne Frank house or King Tut's tomb. Arizona State University's management school held its December graduation ceremony in virtual reality.

VR evangelists are springing up across a number of key domains, rapidly bringing the technology into every sphere of life. Walmart, State Farm Insurance and management consultancy PWC and other companies have developed VR training programs for employees, and Facebook's "Infinite Office" allows work-from-home employees to embed themselves in a comfortable virtual office equipped with multiple giant computer screens. Industry research firm IDC predicts business applications could account for half the VR industry's revenues within four years.

Healthcare professionals, too, are gravitating to VR. Cedars-Sinai Hospital in Los Angeles is one of more than 200 U.S. hospitals using VR in treatments. More than 3,000 Cedars-Sinai patients have received VR therapy, which has been proven to ease the pain and discomfort of cancer therapies, childbirth, back problems and burn injuries, reducing the need for opioids. "The next step is to look for biomarkers in the blood to see if VR can make changes in the immune system," says Brennan Spiegel, a physician and director of Health Services Research at the hospital. In February private healthcare provider XRHealth opened a clinic focused on providing FDA-approved VR stroke rehabilitation and other VR therapies to distant patients via telehealth.

The application that's driving Facebook's big push into VR is the same one that's driven the company since its founding in 2004: social engagement. "Gaming is a great on-ramp to the technology for us, but long term we think VR will be about connecting people," says Bosworth. So eager is Facebook to ensure that the engagement takes place on a Facebook platform that it sells the Quest 2 at a loss of around $75 per unit, according to industry experts.

Bigscreen CEO Shanker thinks Facebook has it exactly right in focusing on social engagement as the future of VR. Tens of thousands of Bigscreen's users spend more than 20 hours a week inside the application's various virtual venues—theaters, living rooms, sports bars, and so on—for displaying movies, television shows and other content. But watching the content hasn't turned out to be the real attraction for Bigscreen users; rather, it's hanging out with friends and meeting people. "The screens are just social lubricants," says Shanker.

Facebook is building an entire virtual world—a universe, really—that promises to provide an endless variety of social lubricants. Called Horizon, the company envisions it as a vast virtual conglomeration of interconnected spaces and attractions where millions of people, and maybe eventually billions, come to work, play, shop, have adventures, and most of all socially engage, whether it's meeting up at political rallies, bowling alleys, conference rooms, clubs, shopping centers, or living rooms.

Horizon, which is in beta and open only by invitation, is currently a somewhat minimalist, cartoonish sort of experience, to judge by demos. As with most social VR applications, users appear to one another as crude "avatars"—simulated, customizable characters that mimic to some degree our physical movements and relay our speech. That's a far cry from the rich, ultra-stimulating VR world of Ready Player One, in which people are drawn to spend large parts of their lives.

On the other hand, Facebook's mainstream platform once did little but display a user's photo and a short personal description. The company is pouring work into fleshing Horizon out, says Bosworth, and in particular has created a powerful set of tools that let outside companies and developers build their own spaces and services in Horizon.

In other words, Facebook will build out Horizon the way a real-estate developer would build out a mall—an infinite, virtual mall that can house any landscape, structure, amenity or service a company or VR entrepreneur is capable of dreaming up. Eventually, whether you want to hold forth with colleagues in a plush conference room overlooking the Swiss Alps, or play tennis on a court embedded in a moonscape with a friend from Japan, you may well be able to do it in VR in Horizon, with your avatar faithfully conveying your confident grin and killer backhand.

Smothered in Ads

Almost all of Facebook's $71 billion a year in revenue comes from advertising. So it's a good bet that whatever Horizon and other Facebook-controlled virtual platforms and applications ultimately look like, they will be densely permeated with ads. They might appear as billboards, signage, skywriting, computer-generated characters hawking goods and services, logos embedded in objects and surfaces, and any other form that can be crammed into any nook or cranny of fake reality.

"The more invasive the ad, the more money Facebook will make from it," says Zeighami, the VR industry consultant. "You'll see ads wherever you look. Mark Zuckerberg will be monetizing your field of view."

Facebook's ability to bring in so much ad revenue owes to its power to match ads to what it knows about its users' online behavior. That knowledge will explode when someone straps on a Facebook headset. As the devices become more sophisticated, cameras and sensors in them will be able to track users' expressions and movements, and everything in the room around them. That real-world data could then be collated with information about each user's behavior in VR, enabling advertisers to know both the real-world you and the VR world you, and the relationship between them.

"They'll know when you're tired, or when you're cognitively overloaded, and they'll build a complete physical and psychographic profile for you," says Pearlman. After a user spends a few minutes in VR, she says, an advertiser could amass 400 times as much data as Cambridge Analytica ever had per user when it profiled Facebook users to devastating effect on behalf of clients seeking to influence the 2016 US presidential and other elections.

Facebook doesn't have to share that data with advertisers, of course, or even record it at all, and Bosworth insists the company is determined to be respectful of users' privacy. But outsiders are skeptical.

"Given their long track record of invading users' privacy and misusing their data, you have to be concerned," says Zeighami. And given that Facebook is prepared to lose money on the headsets, notes Northwestern's Poulson, it's not clear how the company can make VR pay outside of user-data-based advertising.

Sony, HTC, and other VR competitors haven't saddled themselves with Facebook's reputation for unsavory behavior and disregard for privacy. But can they really compete with Facebook? Those companies can't afford to sell headsets at a loss. And software companies need to be on Facebook's platform to reach its big VR user base, which means they need to play by Facebook's rules.

"The only thing that could stop Facebook from dominating VR is government intervention," says Bigscreen's Shanker.

Government intervention could be in Facebook's future. The suit brought by the FTC and the 48 states could yet wind up spilling over into Facebook's VR business. What's more, Bloomberg reported in early December that the Justice Department was separately considering bringing charges of anticompetitive behavior specifically aimed at Facebook's VR business; Newsweek confirmed that report with a source who has first-hand knowledge of the investigation. Meanwhile, officials at Germany's version of the FTC have beaten their US counterparts to the punch, declaring the agency plans to take action against the company for its efforts to dominate the VR industry.

Zuckerberg testifying in Congress
Mark Zuckerberg, Chief Executive Officer of Facebook, testifies remotely as Sen. John Kennedy, R-La., looks on during the Senate Judiciary Committee hearing on "Breaking the News: Censorship, Suppression, and the 2020 Election" on November 17, 2020 in Washington, DC. Photo By Bill Clark-Pool/Getty Images

Whether Facebook's aggressive play to rule VR ultimately meets the legal criteria for anticompetitive activity in the US or elsewhere remains to be seen. But these first government salvos have mostly been met with cheers in the VR industry—even among some of Facebook's VR software partners, many of whom have stories of being bullied and threatened with getting cut out of the business by the social-media giant. Some say Facebook has warned them not to complain publicly. And while the tech industry is generally no fan of government meddling, few players are coming forward to defend Facebook. (Google, too, is facing charges anticompetitive behavior.)

It's perfectly possible that, as Bosworth insists, Facebook intends to tread more respectfully when it comes to VR than it has with its main social networks—if the government leaves the company intact long enough to have a chance to prove it. In the meantime, the industry is watching the company's advances in VR with a mix of concern and enthusiasm.

In spite of all the controversies that have plagued Facebook, none has led to an exodus of users or advertisers, or otherwise slowed the company down. A great majority of the hundreds of millions of Americans who use Facebook visit the site daily—and their numbers continue to grow. "It's popular to bash the company and create negative hashtags," says Sherry Pagoto, who runs the University of Connecticut's mHealth & Social Media program. "But if there are frustrations with Facebook, they don't seem to be affecting people's use of it."

Distrust and enthusiasm don't seem at all incompatible. "I just don't trust Facebook," says Zeighami. "But last night I watched the Mandalorian in my Quest."

Correction: 12/29/2020, 11:44 pm: The 4,000 people at Facebook's Reality Lab work not only on virtual reality, as originally stated, but also on related technologies such as augmented reality. This was corrected in the text.