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AMY OSBORNE

RJ White, 29, knows how difficult it can be to persuade Meta to put a game onto its virtual reality headset. He first applied in 2019 with a multiplayer shooting game called “Animov” but was informed through a form email that the game wasn’t a good fit.

He tried again with “Hardlight Blade,” a game in which players use laserlike swords to slice and dice attacker robots. That application was rejected, too. Finally, after submitting “Sun Shard,” a basic sword-fighting game set inside a dungeon, White gained approval from Meta and what he hopes will be a lucrative foothold in the virtual reality industry.

“All the power in the industry — at least at the moment — definitely feels like it’s in the hands of that one company,” he said. “If you can’t get that one company to let your game onto their headset, then you are going to have a rough time in the business.”

Meta, which as Facebook grew to dominate social media in part by buying up-and-coming rivals, appears to be repeating that strategy in virtual reality. Now renamed, the company has funneled billions of dollars into virtual reality-powered services, helping the market grow from a niche audience of gamers to one with mainstream recognition. Since <a href="https://about.fb.com/news/2014/03/facebook-to-acquire-oculus/" target=_blank>buying</a> the small virtual reality start-up Oculus eight years ago, Meta has become the dominant player in the space, claiming 90 percent of all virtual reality headset sales, according to a June <a href="https://www.idc.com/getdoc.jsp?containerId=prUS49422922" target=_blank>estimate</a> from the International Data Corp.

Facebook is changing its name to Meta as it focuses on the virtual world

Soaring Roc Studio

“If you total up everybody else, they don’t even come close to approaching the same kind of volume that Facebook has or Meta has,” said Ramon Llamas, a research director at IDC. Does Meta have the “dominant position? Absolutely.”

The sheer size of Meta’s investment — and its increasingly aggressive moves to consolidate control of the virtual reality developer ecosystem — has, so far, given Meta virtually unchecked power in the nascent market to determine which software makers have a shot at economic success and which might stay in obscurity.

Some virtual reality developers complain that Meta imposes overly strict requirements to get programs into its app store; others are worried that Meta’s acquisition spree in the market and poaching of top talent are throttling competition. Still others are worried about Meta’s ability to amass data on the most popular apps in its app store and then release its own competing programs.

Meta says such concerns are misplaced, and it defends the way it has approached the virtual reality business as one intended to make “VR accessible.” “We recognize we won’t be successful unless VR developers thrive,” company spokesman Chris Sgro said in a statement.

The experience of developers, however, offers a window into Meta’s strategy to gain power, money and influence as it makes a big gamble on building out immersive digital worlds known as the <a href="https://www.washingtonpost.com/technology/2021/08/30/what-is-the-metaverse/" target="_blank" class="contextual_link">metaverse</a>. Meta’s quest to cultivate an ecosystem of virtual reality developers could be a critical tool as the company faces down expected competition in the space from rivals such as Apple and ByteDance.

Anshel Sag, an analyst at Moor Insights &amp; Strategy who covers virtual reality businesses, said that Meta will eventually have more virtual reality competition but that those competitors will face a company with a huge head start. “The challenge is that they’ve kind of built this moat of content where if a developer wants to develop for VR, they go to [Meta] first because that’s the most economically viable platform,” Sag said. “I think the real question is whether Apple can match that and how long that will take for them to do that.”

Federal Trade Commission sues to block Meta’s acquisition of VR company

Meta’s relationship with virtual reality developers is facing fresh scrutiny from the Federal Trade Commission, which in July <a href="https://www.ftc.gov/news-events/news/press-releases/2022/07/ftc-seeks-block-virtual-reality-giant-metas-acquisition-popular-app-creator-within" target=_blank>sued</a> to block the company’s acquisition of Within, the maker of a popular VR workout game, “Supernatural.” That lawsuit followed months of conversations between developers and the FTC about Meta’s role as a gatekeeper in the virtual reality industry in much the same way antitrust regulators have raised questions about the market power of Amazon, Apple and Google, according to people familiar with the matter who, like some others, spoke on the condition of anonymity for this article because they were not authorized to speak publicly.

Kay Nietfeld

In Meta CEO Mark Zuckerberg’s vision of the future, virtual reality will allow people to work, create and spend time together in ways that were once relegated to the <a href="https://www.washingtonpost.com/history/2022/06/30/snow-crash-neal-stephenson-metaverse/" target=_blank>imaginations</a> of sci-fi novelists. Colleagues in disparate locations will wear headsets in which they choose their own avatars and attend meetings. Friends will teleport together to attend church, concerts and 3D exercise classes in far-flung corners of the world. Creators will design virtual trinkets such as clothing, paintings and other goods that can be purchased only in these virtual worlds.

“The next platform and medium will be even more immersive — an embodied internet where you are in the experience, not just looking at it. We call this the metaverse,” Zuckerberg said last year as he announced the company’s name change. “We believe the metaverse will be the successor to the mobile internet.”

Others share Zuckerberg’s vision. Among Meta’s top competitors in the headset market is Pico — owned by China’s ByteDance, which also owns another Meta rival, TikTok — which has traditionally focused on providing virtual reality services for education and health-care <a href="https://www.picoxr.com/us/testimonials.html" target=_blank>organizations</a>. Smaller rivals include DPVR, a virtual reality headset maker primarily focused on the Asia market, and the Taiwan-based High Tech Computer Corp.

What is the ‘metaverse’? Facebook says it’s the future of the Internet.

Other companies, with better name recognition, are also investing in the space. PlayStation is planning to <a href="https://www.instagram.com/p/Chk-esavBOG/" target="_blank">release</a> a new virtual reality headset early next year. Microsoft, which owns the gaming system Xbox, <a href="https://news.microsoft.com/2022/01/18/microsoft-to-acquire-activision-blizzard-to-bring-the-joy-and-community-of-gaming-to-everyone-across-every-device/" target="_blank">said</a> this year that its purchase of Activision Blizzard will play a key role in developing the metaverse. Earlier this year, Apple previewed a headset to its board of directors, according to Bloomberg News. The company is expected to release the device to consumers in 2023, according to <a href="https://www.bloomberg.com/news/articles/2022-05-19/apple-shows-headset-to-board-in-sign-it-s-reached-advanced-stage" target="_blank">Bloomberg</a>. Meta also is planning to release Project Cambria, a high-end device focused on mixed reality, later this year, Zuckerberg has <a href="https://s21.q4cdn.com/399680738/files/doc_financials/2022/q2/Meta-Q2-2022-Earnings-Call-Transcript.pdf" target="_blank">said</a>.

Tomohiro Ohsumi

For now, however, Meta is the clear leader in the burgeoning virtual reality headset market. The Oculus mobile app, which connects to Meta’s popular virtual reality headset Quest 2, has been installed more than 20 million times around the world, breaking a record in December for most installs in a single month, according to data from <a href="https://sensortower.com/" target=_blank>Sensor Tower. </a>

Meta has good reason to want the head start in this new computing platform. For years, the company has been forced to play by the rules set by mobile phone makers such as Apple and Google to get its services into the hands of users. That vulnerability became evident last fall when Apple imposed new rules to crack down on targeted advertising. The move forced Meta’s Facebook to explicitly ask users whether they wanted their internet activity tracked — something many device owners rebuffed. Apple’s new privacy rules, coupled with advertisers’ budget cuts, have forced Meta to slow hiring and warn its shareholders and employees that it would be facing tougher economic times.

Meta has funneled billions of dollars into Reality Labs, the division that works on its hardware including Quest 2; its smart glasses, Ray-Ban Stories; and its video-calling device Portal. Last year, Reality Labs lost nearly $10.2 billion and the year before, it lost $6.6 billion, according to Meta’s regulatory <a href="https://d18rn0p25nwr6d.cloudfront.net/CIK-0001326801/14039b47-2e2f-4054-9dc5-71bcc7cf01ce.pdf" target=_blank>filings</a>.

“I love that they’re burning $10 billion of cash a year to propel this hardware,” said Amir Berenjian, a Minnesota-based developer who has participated in a virtual reality training program run by Meta and currently runs his own virtual reality lab. “The trade-off is there are a lot of perverse incentives in that because they — at the end of the day — want everybody in their ecosystem.”

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One way Meta has cemented its ties to developers is through direct grants to start-up virtual reality companies. Those can range anywhere from $25,000 to more than $1 million, according to people familiar with the matter. Under the terms of some of those contracts, developers must agree to launch their app on the Oculus app store at the same time as on other platforms, the people said.

Meta’s approach to working with independent third-party developers is born out of a longtime debate inside Oculus. For years, executives argued over whether to heavily curate the apps in its headset app stores to ensure quality or to open the door to many developers to give consumers plenty of choices. In 2019, the company announced it would be taking a quality-first approach.

Justin Sullivan

“I will take quality over quantity every day of the week,” Chris Pruett, Oculus’s director of content ecosystem, <a href="https://www.youtube.com/watch?v=jWFk96ZYaAE" target=_blank>said</a> at a gaming developer conference in March. “I think a handful of really good games is worth more than 1,000 mediocre games for our customers.”

Once a developer has a finished project, they can apply to be part of the Quest app store — a lengthy process that includes both technical and content reviews. So far, the company has added more than 400 apps to its Quest store — 60 percent of which are games, according to Pruett. The Quest store has <a href="https://twitter.com/c_pruett/status/1489012183212068866" target=_blank>surpassed</a> $1 billion in software sales; at least 120 titles have made more than $1 million, he said.

Many app developers who don’t make it to the Quest app store often reach users through alternative methods including a platform called SideQuest, which allows developers to promote their unapproved apps directly to users so they can download them onto their Quest 2 headsets. Meta also operates App Lab for Quest, which allows developers to distribute their programs to Quest headsets without going through the same approval process as the app store. Sometimes Meta brings App Lab programs to the main store.

A picture-perfect metaverse is years away. Meta’s prototypes prove it.

Users can find App Lab apps only if they have a direct link or search the exact name of the app in a special section of the Quest app store. Even when users do click an App Lab link, they are often greeted with a screen warning them that the program is experimental and has not been approved by Oculus.

Some virtual reality creators say it isn’t always clear why Meta chooses certain apps to be in its app store over others. And the company appears to be ignoring some high-profile examples of successful apps in App Lab without offering a clear road map for how they could improve and make the Quest app store, the developers said.

Top Right Corner founder Dan Clifton is one virtual reality developer who has been frustrated by his experience trying to get onto the Oculus app store. Late last year, his studio submitted “The Atlas Mystery,” an escape room set in a 1940s-era movie theater, to the App Lab with the hope it would eventually graduate to the Quest app store. The app had a roughly 4.5 star rating out of 5 on the Oculus store among 64 reviewers as of Tuesday afternoon.

But Clifton said his studio’s efforts to reach Meta representatives multiple times through email and Discord channels to find out what they would need to do to be approved for the main store have been unsuccessful. The studio never heard back.

“We tried to really hound them and say, ‘Look, if this isn’t right for the store, we’d love to know why,’ ” said Clifton, whose studio also creates virtual reality programming for clients in the government and industry sectors. “We tried really hard to get feedback to improve what we have even though it’s pretty highly rated with users who can find it.”

ALAIN JOCARD

Even though Meta didn’t approve Clifton’s app to be in its store, the company still takes a 30 percent cut of all its sales made through the App Lab. In fact, Oculus takes a 30 percent cut from app purchases regardless of whether the program is listed in the main app store or App Lab.

App Lab developers complain that they shouldn’t have to pay the same fees as apps in the main store if they are receiving less marketing support. That commission is similar to the ones that <a href="https://www.washingtonpost.com/technology/2021/08/26/apple-app-store-payment-settlement/" target=_blank>Apple</a> and <a href="https://www.washingtonpost.com/technology/2021/07/07/google-play-store-lawsuit/" target=_blank>Google</a> have historically extracted from app makers in their respective mobile device marketplaces — a practice that has elicited scrutiny from Washington regulators.

In his statement, Meta spokesman Sgro defended the way Meta manages its virtual reality app stores. “We set the bar high for Quest Store content to give users confidence in the quality of what they’re buying,” he said. “And we give developers more choice in how to reach users through features like sideloading and distribution through App Lab.”

36 states sue Google over how it manages its Play Store, alleging damage to both consumers and app developers

Another issue for developers is Meta’s acquisition strategy. Once an app is successful, some developers say, Meta often tries to either buy it or poach its talent. Over the past several years, Meta has bought at least seven of the most successful virtual reality development studios in the world, including Beat Games, the studio behind the very popular “Beat Saber,” according to the FTC <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/221%200040%20Meta%20Within%20TRO%20Complaint.pdf" target=_blank>lawsuit</a> challenging the Beat Games acquisition.

Critics have <a href="https://twitter.com/CixLiv/status/1320486234204991490" target=_blank>accused</a> Meta of copying other popular programs in its app store, such as the multiplayer suite of games in Rec Room, the social entertainment app Bigscreen and even the virtual reality app aggregator SideQuest.

Consider the case of Yur, an app that allowed users to track their fitness statistics while using other apps on Quest headsets. While the app was available through SideQuest, the company applied to be part of Oculus’s app store.

As part of the process, Meta invited Yur executives to come to its headquarters and asked them to submit lengthy white papers about their app, including how well it performed and how accurate it was, according to a person familiar with the matter.

Soon after, Meta released a software update that blocked Yur from working properly on Quest headsets. Later in fall 2020, Meta <a href="https://www.oculus.com/blog/oculus-quest-platform-updates-oculus-link-exits-beta-introducing-oculus-move-and-more/" target="_blank">unveiled</a> its own fitness tracker with similar capabilities to the Yur fitness app.

“Basically, we gave them keys to the castle, and then they locked the castle on us,” the person said.

Princeton University, BA in sociology

Naomi Nix is a staff writer for The Washington Post, covering Meta and other social media companies. Before joining The Post in 2022, she was a reporter for Bloomberg News and the Chicago Tribune.

Naomi Nix

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Facebook repeating in VR the strategy that gave it a leading role in social media

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VR developers accuse Facebook of withholding the keys to metaverse success