China Goes VR Cold as Tencent, ByteDance Shrink Metaverse Arms

Following moves by Meta, China's big tech firms Tencent and ByteDance are downsizing their metaverse units despite earlier enthusiasm for VR.

As recently as February, Tencent was announcing ambitious web3 plans involving the metaverse, holding its first global web3 summit in Singapore.

Read more: Tencent Cloud Unveils "Metaverse-in-a-Box," Web3 Partnerships

Since, Tencent has pedalled in the opposite direction, cutting down its metaverse unit, alongside fellow Chinese tech giant ByteDance.

ByteDance also bet large on the metaverse in China, acquiring VR gaming headset developer Pico Interactive for US$1.5 billion in August. Pico's headcount grew from 300 to 2,000 post-acquisition.

Despite China's firm stance against crypto, Tencent's and ByteDance's metaverse reversals were reportedly not regulation-related.

The source described pointed towards the "disorganised ways" the firms handled investments in new businesses.

ByteDance VR bites the dust

Pico had invested in marketing its VR content to boost sales of its VR headsets, even offering refunds for half of what they paid for if they used it for under 30 minutes per day for 180 consecutive days.

The firm managed to capture 71% of the market in China but sold 300,000 VR headset units short of its 1 million targets for 2022. Furthermore, Pico reported lost money on each device due to its cash-burning strategy.

Its 71% China market share also accounted for just 9% of the global VR headset market, whilst Meta's Oculus took 73%.

Tencent

Tencent also reportedly cut its metaverse unit XR (extended reality) and downsized the team to focus on VR.

Senior vice president Steven Ma had projected that Tencent would launch industry-leading VR hardware by 2026 or 2027 after toying with its own VR headset TenVR in 2018, which has since failed to resurface.

In February, Tencent Cloud partnered with blockchain startup MultiverseX to help the company expand its metaverse offerings.

Tencent also announced in 2020 that it would be investing 500 billion yuan ( approximately US$70 billion) over the next five years in various emerging technologies including cloud computing and blockchain. It recently added a function to support the digital yuan - China's CBDC (central bank digital currency).

In 2021, Tencent launched NFT trading platform Huanhe and sold 300 NFTs of audio clips from the talk show Shisanyao. The company’s streaming platform QQ Music was the first music platform in China to issue music NFTs.

Read more: Tencent Apes into Web3 With MultiversX Partnership

However, sources familiar with the company said that “Tencent does not see the metaverse as a central development direction.”

Tencent has not acquired VR firms to expand its platform and has not yet integrated XR into its current products such as WeChat.

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