Facebook Non-advertising Revenue ‘primarily driven by Oculus,’ up 80%

In Facebook’s Q1 2020 earnings call today, the company overviewed its latest financial situation and noted that Oculus products were a major contributor to $297 million in non-advertising revenue.

While Facebook makes the vast majority of its revenue from advertising, the company also separately reports non-advertising revenue which includes the sale of Oculus hardware and software, Portal video calling products, and more.

During the company’s Q1 2020 earnings call today, Facebook CFO David Wehner said that non-advertising revenue had reached $297 million, an increase of 80% year-over-year. Wehner specifically noted that the increase was “driven primarily by the sales of Oculus products.” He also reminded the audience that “we launched Quest in May 2019,” seemingly to suggest that the product has been selling well since then.

In the expense department, Wehner also said that Facebook’s R&D costs had grown 40% year-over-year, and that the increase was “driven primarily by investments in core product as well as our innovation efforts, particularly in AR/VR.”

Responding to an audience question regarding the traction of Oculus products during the pandemic, Facebook CEO Mark Zuckerberg spoke directly to Quest, the company’s fully-featured standalone headset:

On the virtual reality side—this has always been a long-term vision—Quest has surpassed our expectations. I wish we could make more of them faster during this period. I do think that [considering the pandemic] it’s one of those areas where as people can’t go out and into the world as much, the ability to have technology that allows us to feel present even when we can’t be physically together—whether that’s quest or portal or any of the software that we’re building around video presence—that stuff has certainly seen especially large spikes in usage. And it’s possible that [the pandemic] accelerates some of the trends around virtual or augmented reality, but I’m not sure what will happen there long term. But in the near-term I’m quite pleased with how Quest is doing and I wish we could make more of them.

Last year after launch of Quest and well before the pandemic, Zuckerberg said, “we’re selling them as fast as we can make them.” As the 2019 holiday shopping period approached, it became increasingly hard to find Quest (and to some extent, Rift S) in stock. Shortly after the holidays the Coronavirus began to impact the availability of Oculus’ headsets, and since February it’s been very hard to directly purchase the headset from Oculus or retailers. It’s clear that Zuckerberg’s comments about wanting to be able to “make them faster” speaks to a desire to fulfill the demand the company is seeing.

This week seems to have given a glimmer of hope for those looking to get their hands on Quest; as we reported earlier today, global availability of Quest appears to be returning, though Rift S is still largely unavailable.

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