FB - Facebook

[MattR]

Yep, 13000 employees working on it...almost as many as the Engineering division. Reflects his big priority

 

Is there any confirmation from the company? I don't have a sub to The Information, but it is plausible they misinterpreted the org chart.

 

I'm trying to get through The Information interview with Zuckerberg without puking, but so far it sounds like they are burning billions of dollars on a bet that is unlikely to pay off.

 

On the one hand, I have no interest in investing in an AR/VR startup. On the other, that would mean core Facebook is insanely profitable.

 

I mean if they can create glasses with AR capabilities and social media interaction in the real world, they would probably be the most valuable company in the world.

[KCLarkin]

I mean if they can create glasses with AR capabilities and social media interaction in the real world, they would probably be the most valuable company in the world.

 

If this was something I believed in, I'd invest in the smartphone company with a thriving wearables business and best-in-class SoC. Other than the willingness to burn billions of dollars, why is FB likely to succeed?

[Jurgis]

Personally, I don't share the enthusiasm for AR/VR. Feels like a honey trap for nerd CEOs -- similar to space travel.

 

+1.

 

I had a prediction in 2014: "In 2020 VR headsets will have <10% of games/entertainment market."

This was a smashing success. If only I could have invested in my prediction. ;)

Let me up this prediction now: "In 2025 VR headsets will have <10% of games/entertainment market."

 

At some point I will be wrong though.  8)

 

Re: FB. I don't feel ick about it. It's possible that FB users track older. There are a lot of 50-60-70-80y old relatives on the platform. I'm drawn into to consult: how to create groups, clubs, upload, etc. And they post, they share, they upload, etc. Maybe they will all die off at some point, IDK. I personally use FB infrequently to see what friends/relatives are up to. Definitely not a big draw for me, but I use it. I don't think FB is ad-saturated. I think it's pretty reasonable.

 

I don't use IG at all. I don't use WA at all.

 

In terms of social networks, I started using Twitter recently. As some people noted, there's way more investing info on Twitter than on CoBF.  ::)

Maybe this means death to Twitter, since I may be way-lagging indicator.  ;D  :P BTW, IMO Twitter is way more ad-saturated than FB. At least I am shown way more crap that I don't want to see there.

 

Disclosure: I have a large FB position that I have had for a while now. I keep adding once in a while slowly. I have small TWTR position that I have had for a while now. Not adding. I may change my mind at any time.

 

[Ice77]

I don’t know if/when AR/VR reaches mass market quality but it already has substantial enterprise traction including an unlisted Unicorn doing 9 figure revenues. Some of the listed proxies are up 10-40x in the last 12 months.

[Jurgis]

an unlisted Unicorn doing 9 figure revenues.

 

Source?

[Ice77]

an unlisted Unicorn doing 9 figure revenues.

 

Source?

 

Look up RealWear

[Jurgis]

an unlisted Unicorn doing 9 figure revenues.

 

Source?

 

Look up RealWear

 

RealWear is not VR or AR in strict sense. If it's considered AR or VR then any handheld is AR/VR really...

Ah, wait, they call them "assisted reality" headsets. Not "augmented reality". But still AR. Clever marketing.  8)

And you did not provide the source for 9-figure revenues.

But thanks. ::)

[Ice77]

This is what Cisco, their partner, says...

 

“By turning the augmented reality glasses in the Realwear HMT-1 into a voice-activated collaboration headset, the Webex Expert on Demand application can connect frontline workers to knowledgeable experts. Cisco says this technology allows workers to “significantly enhance their productivity through multi-party video calling, providing the ability to annotate images, and share these annotations between the expert and frontline worker, as well as share key documentation, all in real time.”

 

As for the revenue, there have been a few tweets on the revenue number. Since it’s private maybe someone with access to pitchbook/crunchbase can confirm the exact current number.

Zoominfo had a $53m revenue number from a few months back. 2021 is likely much higher.

https://www.zoominfo.com/c/realwear-inc/398239571

 

Anyhow, you can believe what suits your bias on AR/VR

 

[Jurgis]

This is what Cisco, their partner, says...

 

“By turning the augmented reality glasses in the Realwear HMT-1 into a voice-activated collaboration headset, the Webex Expert on Demand application can connect frontline workers to knowledgeable experts. Cisco says this technology allows workers to “significantly enhance their productivity through multi-party video calling, providing the ability to annotate images, and share these annotations between the expert and frontline worker, as well as share key documentation, all in real time.”

 

As for the revenue, there have been a few tweets on the revenue number. Since it’s private maybe someone with access to pitchbook/crunchbase can confirm the exact current number.

Zoominfo had a $53m revenue number from a few months back. 2021 is likely much higher.

https://www.zoominfo.com/c/realwear-inc/398239571

 

Anyhow, you can believe what suits your bias on AR/VR

 

 

Yes, you can believe Cisco marketing spiel, when even RealWear does not use term "augmented reality". Maybe we should call it "exaggerated reality". This has been achieved in marketing for hundreds of years already. ::)  ;D  8)

 

Or we can go with Wikipedia: https://en.wikipedia.org/wiki/Augmented_reality

 

AR can be defined as a system that fulfills three basic features: a combination of real and virtual worlds, real-time interaction, and accurate 3D registration of virtual and real objects.

 

RealWear does not do two out three features, unless you stretch definition of feature 1 to the point of being pretty meaningless.

 

BTW, Pokemon Go is AR based on Wikipedia definition, so the definition is not really that demanding. ::) But that's a topic for another discussion.

 

I'm all for progress and it's great to hear that companies are developing glasses-based devices.

 

I'm gonna stick with my prediction for consumer and entertainment AR/VR.

Anyone super bullish on VR can invest in https://www.seedinvest.com/virtuix/series.a.2 and even get the product at discount.

Or invest in FB and 13000 employees working on VR (if true). I do. In size.  ::)

 

Have fun.  8)

[Ice77]

Good for you. That's one too many emojis for me to digest but hey whatever floats your balloon. More the merrier.

 

Progress and innovation is not a step change most of the time. It is incremental and before long like the frog boiling experiment the incremental changes give way to a step change. That's why Google Glass, HoloLens, HMT-1, Vuzix blade are all step in that direction. If you expect magic, you should go see David Blaine or something. Until then you can keep being a skeptic and overpopulate your messages with dozens of emojis

[Jurgis]

Good for you. That's one too many emojis for me to digest but hey whatever floats your balloon. More the merrier.

 

Progress and innovation is not a step change most of the time. It is incremental and before long like the frog boiling experiment the incremental changes give way to a step change. That's why Google Glass, HoloLens, HMT-1, Vuzix blade are all step in that direction. If you expect magic, you should go see David Blaine or something. Until then you can keep being a skeptic and overpopulate your messages with dozens of emojis

 

You want to put the money where your mouth is? I'm fine to bet real money on my prediction.

What is your prediction? Let's focus on Facebook since that's the topic here. Can you make a quantifiable evaluatable prediction on FB AR/VR for whatever time frame you want?

[Ice77]

Good for you. That's one too many emojis for me to digest but hey whatever floats your balloon. More the merrier.

 

Progress and innovation is not a step change most of the time. It is incremental and before long like the frog boiling experiment the incremental changes give way to a step change. That's why Google Glass, HoloLens, HMT-1, Vuzix blade are all step in that direction. If you expect magic, you should go see David Blaine or something. Until then you can keep being a skeptic and overpopulate your messages with dozens of emojis

 

You want to put the money where your mouth is? I'm fine to bet real money on my prediction.

What is your prediction? Let's focus on Facebook since that's the topic here. Can you make a quantifiable evaluatable prediction on FB AR/VR for whatever time frame you want?

 

That's not how such things are underwritten. You aren't buying a paid call option. You want to buy a free embedded call option. You succeed whether it works out or not. Nobody knows the future but when dozens of companies are putting billions to work at a massive problem (Apple has 18 or 20 AR/VR protoypes in development IIRC, FB has 3 for just Quest, MSFT has the Hololens program and Google has its own projects) something is likely to come off it. I would not bet against it and if i'm getting it for free then why not. The way FB is valued right now, it is cheap on its base advertising business and the upside from transactions whether on FB e-commerce or via WhatsApp payments/commerce or AR/VR social experiences/gaming etc are mostly unpaid or cheap call options.

 

[Gregmal]

Jeez, calm down there rat clown(or whatever the avatar is supposed to be)....no need to be so aggressive! I dont see anything Ice77 posted that warrants your hostility.

 

Why cant everyone just get along??

[Jurgis]

That's not how such things are underwritten. You aren't buying a paid call option. You want to buy a free embedded call option. You succeed whether it works out or not. Nobody knows the future but when dozens of companies are putting billions to work at a massive problem (Apple has 18 or 20 AR/VR protoypes in development IIRC, FB has 3 for just Quest, MSFT has the Hololens program and Google has its own projects) something is likely to come off it. I would not bet against it and if i'm getting it for free then why not. The way FB is valued right now, it is cheap on its base advertising business and the upside from transactions whether on FB e-commerce or via WhatsApp payments/commerce or AR/VR social experiences/gaming etc are mostly unpaid or cheap call options, you get for free.

 

I guess we agree on FB and let's leave it at that. Have fun.  8)

[fareastwarriors]

The problem I see as "value investors" is we always just want the "core business."

 

Well, it's not possible. When we buy a public company stock, we buy everything, including "other bets," science experiments, wasteful spending, moon shots, and etc, etc. 

[Casey]

The problem I see as "value investors" is we always just want the "core business."

 

Well, it's not possible. When we buy a public company stock, we buy everything, including "other bets," science experiments, wasteful spending, moon shots, and etc, etc.

 

Just another person's opinion, but I think the VR/AR moonshot-y stuff is going to be big. Reminds me of Apple watch when it was starting out.

 

More concerned about the brand sentiment blocking acquisitions and leading to regulation.

[Spekulatius]

Realwear gear strikes me as relatively crude as it is not seamless - it has its own miniscreen and is connected to a helmet. I am certain similar setups have been around for military for a while.

I can see it being useful for difficult working environments and I guess that’s why some companies are buying this. My bigger concern from an investment perspective is what are going to be the margins on stuff like this? They are pot. similar to consumer electronics or is there any high margin software attached to it?

 

I am pretty sure AR/VR has a future but it has to be bright in a way that doesn’t look intrusive. Not many people wil use an VR Headset that looks like a fish tank strapped on you head, not even for gaming. The 3d TV‘s failed because you had to use bulky classes for example amongst other things.

 

FWIW, Zoominfo revenue data aren’t very reliable but I guess it is better than nothing.

[Jurgis]

Realwear gear strikes me as relatively crude as it is not seamless - it has its own miniscreen and is connected to a helmet. I am certain similar setups have been around for military for a while.

I can see it being useful for difficult working environments and I guess that’s why some companies are buying this. My bigger concern from an investment perspective is what are going to be the margins on stuff like this? They are pot. similar to consumer electronics or is there any high margin software attached to it?

 

There is high margin software: for any vertical domain companies would have to (re)implement their domain software for the glasses/AR/VR platform.

There has to be the base software: OS - likely stock: Android or QNX (hey BB bulls), UI stack: audio/touch input + the glasses/helmet format video output. Networking is likely stock though there might be some low-power innovations needed.

 

In the future there may be a single platform providing base+UI+standard components similar to Android for phones. Whoever controlled that could ultimately charge for app store/etc. Right now, I think companies already provide some version of base+UI+stdcomp but it's different for each company, so the monetization might be meager'ish. Right now companies are more likely to (over)charge for HW+devkitSW. Companies may provide services for verticals to implement or consult to implement vertical SW on their platform. That's a source of revenue, but possibly not very high margin.

More or less think about it like mobile phones pre iPhone/Android.

 

I am pretty sure AR/VR has a future but it has to be bright in a way that doesn’t look intrusive. Not many people wil use an VR Headset that looks like a fish tank strapped on you head, not even for gaming. The 3d TV‘s failed because you had to use bulky classes for example amongst other things.

 

We probably should move this discussion from FB thread...

 

I'd say that side-glasses (what RealWear has), AR solutions and VR solutions each have quite different opportunities and issues:

- Side-glasses cannot really achieve combination of real and virtual world. For that you need a display that overlays full or most of your FoV. OTOH side-glasses clearly (pun intended  8)) can be useful in vertical domains without providing AR.

- AR is possibly closer to reality (pun intended  8)) as long as virtual can be projected on real glasses in front of your eyes without causing focusing issues and eyestrain. Maybe closest to your 3D TV comparison in various ways: i.e. needs glasses, issues with focusing and eyestrain. May not need helmet (already).

Edit: the easiest (? ) AR IMO is car windshields. It's a huge display-like surface. It covers user's FoV already. There are way less issues with focusing and eyestrain since it's some distance in front of user. There are almost no issues with power, computation, etc., since it the car is big and heavy and has power/computation already.

Did anyone ask Elon why he's not doing windshield based AR displays? Serious question.  ::)

- Full VR has further issues with vertigo and overall dissonance between virtual and real world. E.g. do you have to turn around physically to see what's behind you in VR? https://www.seedinvest.com/virtuix/series.a.2 is trying to solve some parts of VR issues, but does not solve other parts.

- All of them may still have issues with miniaturization, display resolution, near-eye displays, computational power, UI.

[orthopa]

I have been looking more deeply at FB too. Ex cash its very reasonably priced. It seems like a lot of the buyback in past years has gone to share compensation. A new buyback was announced but wont love if 25B goes towards just fighting share compensation.

 

Im no where near tech savvy enough to argue for or against VR but dont mind getting it along with the core advertising business at these prices.

[KCLarkin]

Is VR the bear case for Facebook?

https://mobiledevmemo.com/is-vr-ar-the-bear-case-for-facebook/

 

Given Betteridge's Law, the answer is No. But this article does give an overview of the strategic imperative to own the next platform. The two most important questions are unanswerable:

1. Is VR/AR really the next computing platform

2. Will FB win?

 

[Jurgis]

1. Is VR/AR really the next computing platform

 

This one is easy. The answer is "Yes".

 

Ultimately, the right way to feed data painlessly into human visual input should be as direct and as hands-off as possible. So ultimately it is glasses, on-eye input (contact lenses???), or jacking directly into eyes or optic nerves or visual cortex. All the external displays that need to be carried somehow are crutches.

Of course, the next next platform is just feed everything directly to the brain.

And the next next next platform is to replace the brain.

 

Although I am super tech bull long term, I think it is going to take way longer than people expect.

That's why I'm negative short/medium term.

 

I agree that the second question is currently not answerable. There's some probability that FB will win. But I won't go above ~35% or so. Perhaps even lower.

[Jurgis]

BTW, FinTwit are mostly hugely positive about FB AR/VR future. FWIW.  8)

 

Seedinvest has another AR company now https://www.seedinvest.com/innovega/series.a 54M pre-money. Requires both contact lenses and glasses for AR. I'm skeptical but FYI.

[KCLarkin]

Anyone at >10%? I'm at 10% now, but starting to feel that is undersized.

[Krapdivad]

Li Lu reduced his position in FB by 27% in Q4 2020 when FB was around $250 - $290.

This has given me pause by jumping in with both feet.

 

Not quite sure if he realized a mistake in his positioning size, his thesis, or if he found a better opportunity.

Based on FB's marketcap of $800B we don't have as much potential to get outsized returns. Any thoughts?

 

The quick rise of apps like Clubhouse, the persistence of Snapchat, dominance of Roblox (with the younger generation), and the start of monetization of Twitter shows that FB has to constantly fend off competitors for engagement. I feel like among the FAANG stocks Facebook is the most beaten down and undervalued. It will be challenging for them to grow at the same rate that we've been used to.

 

However I still like that they are a "spawner" that consistently is looking for new ways to expand their business.

 

[KCLarkin]

Li Lu reduced his position in FB by 27% in Q4 2020 when FB was around $250 - $290.

This has given me pause by jumping in with both feet.

 

Not quite sure if he realized a mistake in his positioning size, his thesis, or if he found a better opportunity.

Based on FB's marketcap of $800B we don't have as much potential to get outsized returns. Any thoughts?

 

The quick rise of apps like Clubhouse, the persistence of Snapchat, dominance of Roblox (with the younger generation), and the start of monetization of Twitter shows that FB has to constantly fend off competitors for engagement. I feel like among the FAANG stocks Facebook is the most beaten down and undervalued. It will be challenging for them to grow at the same rate that we've been used to.

 

However I still like that they are a "spawner" that consistently is looking for new ways to expand their business.

 

I'm going to post my own thoughts, but a couple specific comments:

1. Price continues to rebound, so I've lost some of my enthusiasm.

2. Li Lu is a much better investor than me, so his investable universe is much larger. He bought Apple with the proceeds, which I don't find attractive at current prices.

3. Facebook's market cap is 800B, but they were only 46th in the Fortune 500 last year. Plenty of room to grow.

4. Re: outsized returns for large caps.  In 2016, Apple was the largest company in the world. It's returned 38% per year over the last five years. AAPL was deep value back then, so definitely a different situation. MSFT had similar numbers. Facebook and Google underperformed the QQQ, despite very strong growth.