Meta Platforms, Inc. (META) Earnings Call Transcript & Summary

It is my pleasure to welcome you once again to Meta Connect. Thank you, our passionate community of creators and developers, for joining us today as we celebrate a year of innovation and take a look at all of what lies ahead for all of us. I'm Melinda Davenport, Internal Comms Director at Meta, and I'm honored to help guide you through all the exciting announcements, sessions and speakers still to come today. So stay tuned for our Developers State of the Union and nearly 30 technical sessions covering the topics you care about most. Plus, Reality Labs Consulting Chief Technology Officer, John Carmack, will share his unscripted thoughts on the future of technology. You definitely don't want to miss a minute. This is also the first time you can experience Connect from inside Horizon Worlds. Many of you have been watching right now from Meta Square. Hello to everyone in the Metaverse. And to everyone else, you can always grab your Meta Quest 2, jump in and start exploring for yourself. Because today is all about this community, everyone watching, building, creating, discovering, collaborating and innovating together. Now in the spirit of collaboration, I invited one of your very own to join me. She is a creator whose viral hits have racked up 500 million views and counting. Her ingenious step-by-step tutorials have caught the attention of several Hollywood powerhouses, and she often collabs with iconic global brands. And that wasn't enough. She is one of Inc's 30 under 30, thank you very much. So please help me welcome award-winning director and one of the star creators featured in today's keynote, Karen X. Cheng. Hi Karen, we're so excited that you're here.

Hi Melinda, thank you so much for that. I am so excited to be here today and spend the day learning with this creative community of builders. So for my cameo in the keynote, I actually got to try out the Meta Quest Pro, and it was just such a surreal feeling, like putting on the headset and then being able to also see my physical space. It's just -- It's mind blowing how far this tech has come.

Oh, I so agree -- totally agree with you, and it's so awesome to be amongst people like you who are actually using and doing these things on our platform. It's very, very cool. And before we get to other things, you have to tell me. How did you get started in all of this?

Yes. So I got started really just shooting and editing everything by myself. But after about a year, I noticed I hit the limit of my own technical abilities and what I could do by myself, so I started reaching out to this community and to other Instagram creators to collaborate, and that's when it really clicked, you know. When you can tap into the talents of others, it's almost like you get to try on their superpowers and then create something far beyond what either one of you could have done on your own. And I feel the same way about new technology. I've really been interested in 3 areas this past year. So artificial intelligence, virtual reality and augmented reality, and I know a lot of people watching today, who are just constantly pushing the boundaries of these technologies. I really think that in the next few years, with more tools like Meta Quest Pro, we're going to revolutionize how creatives work, and we're just going to empower so many people who never even consider themselves artists to create amazing art. And I really can't wait to hear what's new in AI from the Reality Labs team coming up later today.

It's very cool. It's really awesome also hearing about how this is changing your everyday work, and I know I speak for everyone watching, we definitely cannot wait to see what you work on next. And that's really the goal of today, too, is to focus on how our incredible community combined with emerging technology can create magic.

Yes. So let's talk about what's next.

So exciting. Absolutely. And just minutes away is the Developer State of the Union. Whether you are a new developer or a seasoned pro, you just cannot miss this unique opportunity to spend some quality time with our Reality Labs team. You'll also get the very first look at brand new and updated tools that can help you take action now and set up your business for success in the future. So please join me in welcoming the team of innovators who, in close partnership with all of you, are enabling the creativity of today and shaping the social experiences of tomorrow. Here is Director of Metaverse Content Applications, Anand Dass; Director of Product, VR, Yardley Pohl; and Director of Content Ecosystems, Chris Pruett.

Welcome to the Connect Developer State of the Union. This session is designed to give you, developers, a view into our current state of our platform, cover major updates and upcoming features that are relevant to you as well as to builders working in Meta Horizon Worlds. Now I'm going to talk about the state of our VR ecosystem. After which, Yardley Pohl will discuss new features, technologies and improvements we've made for developers in the last year. And finally, Anand Dass will cover our efforts to push VR forward as a platform for work, creator tools, fitness and learning. Later today, there are many more sessions on specific topics devoted to all aspects of developing for the Metaverse, so please stay tuned. Now usually, when Connect comes around, I get up here and I talk about how the Meta Quest platform is developing into a viable ecosystem for developers. And I show some graphs and I talk about how well the market is doing, and I talk about some trends, and I'm going to do that today also. I think that's important, like, developers need this information to operate their business. But this year, I kind of wanted to do something a little bit different. I want to take a step back and just look at how far we've come. I took over the management of third-party VR content at Meta in 2018. And when I did that, I had one goal: To produce an ecosystem that produces great software for our customers. I ran an independent game studio for several years, and what I learned is that there are some platforms that go to really great links to ensure that -- their success of their developers, and then there are other platforms that don't do that. Our team's goal was to build a software ecosystem on Meta Quest that makes the business decision, to build software for VR, just one that was very obvious. I wanted to build a platform that my former studio would have wanted to ship to. And I think that developers don't have a reason to support any platform unless it's profitable for them. And so our team, we focused on user trust and revenue generation as our North Star goals. Well, fast forward to earlier this year. We made an announcement of a major milestone, which is that sales of VR titles in the Quest store have surpassed $1 billion. That's a lot of money. And when I talk to developers, particularly developers, who aren't currently building for VR, they're universally surprised that we've grown our platform so significantly. Actually, I think that Quest has grown so fast since 2019 that there's many folks out there, who haven't realized that VR is no longer an enthusiast niche product. The best news is our growth is accelerating. We've now surpassed $1.5 billion, and these numbers are material to companies at any scale, and they translate directly to developer profit. In our quest to create a viable VR ecosystem, we've ended up building one of the largest publishing programs for independent games in the entire world, and we've done it by working very closely with developers and sometimes funding the titles that they're building. We've helped fund hundreds of games and apps that are in active development today, like hundreds of games. That's an incredible pipeline of titles, particularly for a platform that's as young as ours. And we know that there are thousands of developers out there that we don't have a direct engagement with that are building for Quest and the Quest platform. I mean, just looking back over the last 12 months, we've been able to launch some fantastic titles like Resident Evil 4, Blade & Sorcery, Red Matter 2, Moss: Book II, The Tale of Onogoro, After the Fall, Medal of Honor: Above and Beyond, Zenith: The Last City, Green Hell, Demeo, and there are a ton more coming soon, including Ghostbusters, The Walking Dead: Saints & Sinners Chapter 2, as well as, Behemoth, just to name a few. And look, it's not just video games either. Fitness apps like Les Mills BodyCombat and productivity apps like Arkio have also found a home on our platform. What I'm trying to say here is that the Quest platform is growing really rapidly, and it's already returning material revenue to VR developers. And that's translating directly into higher quality software for our audience. The platform we have today is exactly the type of platform I wish I could have shipped to when I ran my own studio. But to quote the great, LeVar Burton, you don't have to take my word for it. Let's take a look at the numbers. Of over 400 apps on the Quest store, roughly 1 in 3 are making revenue in the millions today. 33 titles have made over $10 million in gross revenue, which is up 11 since February, and the number of apps that have made over $5 million in gross revenue has doubled since last year, up to 55. Walking Dead is a great example. Walking Dead has surpassed $50 million in revenue on Quest alone, and that's nearly double the revenue on all of the other platforms it ships on. And it's not just that developers are finding success on our platform, they're actually finding it really quickly. I can give you some examples, Resident Evil 4 and Zenith: The Last City. The first is a classic. It's one of the best games ever made, it's one of my personal favorites. It was completely rebuilt for VR. And the other is like a brand-new title from a small independent team. Both of these titles made their first $1 million of revenue on the Quest store in less than 24 hours. Actually, Resident Evil was able to double that number by the end of their first day of sales. But like Blade and Sorcery hit $1 million milestone in 2 days since its -- from its launch. And then we have some devs that have done it in as little as 3 days as well. As our ecosystem for professional developer students has expanded, so has the community of small, independent developers. The broader community of developers is absolutely critical to push innovation and experimentation forward on our platform. We're seeing incredible innovation from developers, who are shipping on App Lab, both in content and in business model. There are over 2,000 apps shipped on App Lab so far, and we consider this a huge success. And we've continued to invest in improving the experience for developers, who are shipping to App Lab. So I'm happy to say that the average turnaround time from submission to response is now less than 3 days. Now I know that there are some of you out there, who are wondering, okay, I hear you about this game stuff, but what does that have to do with the Metaverse? And I think to answer that question is that, as we've seen over the last several years, is games and game developers that are pioneering the principles and core technologies that ground the Metaverse. Now the goal of a truly social, persistent, co-present experience, I mean, that's going to be achieved by games first. And so this innovative work is absolutely critical to our long-term mission. We're also constantly delivering new technology to our headsets, whether that's pass-through MR, hand tracking, or as you heard about this morning, face and eye tracking. The developers that write the rule book for these new features are going to be, again, the small independent developers that can move really quickly and feel out the grammar of new technology, and they often will discover things that we've never even considered. Just take a look at how the developer of Cubism has been using our presence platform, or how Magic Keys is making it easier to learn the piano with MR. I mean, these are really cool on Quest 2, even in black and white, but they're going to absolutely shine with color pass-through on Meta Quest Pro. It's developers like these that are teaching us and to you and the rest of the world what this technology can do. Of course, we are continuing to develop Meta Horizon Worlds and continuing to invest in growing the amazing community of technical builders and -- that are designing immersive worlds, and we're seeing incredible innovation from this group, like, it's a very early builder community. But as we said many times, we're at the beginning of a journey. And the technology that we're discussing today, both with the announcement of the Meta Quest Pro and through all of the sessions that we're going to show today, it's foundational to the future of the Metaverse and for you, who are joining us in its creation. The Meta Quest platform, well, we feel great about how strong it's become. And we are continuing to invest in making it even better. Now to detail some of the new features in the Meta Quest Pro as well as great new tech we're building for you, please let me introduce Yardley Pohl.

Thanks, Chris. In today's keynote, you heard Mark and Angela talk about our latest VR device, Meta Quest Pro. This is a start of our pro line and a major step towards VR expanding from a gaming device towards a general computer. Developers can build new types of apps and experiences that take advantage of Meta Quest Pro's unique capabilities, such as color pass-through, sensors to support more natural avatar expressions, and more extensive multitasking capabilities. We'll have a number of sessions covering Meta Quest Pro today, starting with our Meta Quest Pro and Presence Platform overview session. Apart from Meta Quest Pro, we announced 2 new ways for users to interact with your app. First is the Meta Quest Touch Pro controllers. These premium controllers are self tracked, meaning you can support a variety of new movements in your app regardless of where the headset rear is looking. They also support brand-new TrueTouch haptics, unlocking new ways to provide user feedback. Now, if your user doesn't have a controller in their hands, you can take advantage of the hand-tracking API. This improved API brings step change improvements in tracking continuity, gesture support, movement and performance. A year ago, we announced the Presence Platform, which is a collection of machine perception capabilities that will help power the Metaverse. And since then, we've seen hundreds of developers building experiences leveraging our platform. This year, Presence Platform has added more capabilities for mixed reality, enhanced interaction with hands and voice, and is adding a new pillar for social presence with the launch of Movement SDK. We're also bringing presence platform capabilities like pass-through, mixed reality, scene understanding and anchors to web developers through WebXR. We're committed to bringing the capabilities that make it easier for you to develop and ship more immersive experiences at scale. As VR moves towards general computing, it's important to support a variety of use cases. Today, we're excited to share that Microsoft is bringing VR versions of Teams and Windows 365 to the Meta Quest store for productivity users. Quest also supports progressive web apps with rich 2D multitasking capabilities, so you can easily access the top productivity, communication and entertainment apps in your life while in VR. New for Meta Quest Pro, you'll be able to open up 2D apps in an overlay without leaving the VR destination you're in, thanks to an expanded 12 gigabytes of RAM. This makes bringing your 2D apps to VR even more valuable. Over the last year, developers have added a number of Progressive Web Apps or PWAs to the Meta Quest store and even more are on their way like Dropbox, LastPass, Coursera and Peacock. Building PWAs for Quest is now even easier than before, thanks to our partnership with Microsoft to add Quest support to their popular PWA builder developer tool. We're excited to see what you do with the new capabilities and what you can build with them. Now, I want to share some updates from the overall Meta Quest platform. Our teams are listening to your feedback to help drive our road map and priorities, so please keep it coming. We're creating new ways to help you, one, build apps faster; two, realize your apps potential; and three, find new ways to make money and grow your business on the Meta Quest platform. We'll start with building faster. We know there's a lot to do to build a great app, and we want to help you maximize your time making your app amazing versus just making it work. First, Meta Quest Developer Hub. The product formally known as the Oculus Developer Hub is getting several new features that will make switching between your engine and your headset much easier. We're launching input forwarding to minimize the time you have to put on your headset to test a change. You'll be able to control your Quest with a mouse and a keyboard and see the results on your PC via casting. We're also releasing scriptable testing to help automate parts of your workflow. For example, with scripts, you can factor reset your device and sign in with a new test user and disable system features that could impact your test, all without human intervention. Next, for Unity developers, we're making improvements to your Unity plug-in. We'll be offering distribution via package manager to simplify and streamline the installation and update process. Finally, we'll be launching our Meta XR stimulator in early 2023 which simulates our XR devices and features on an API level, allowing for fast iteration when developing Quest Apps. Learn more about how you can build faster in a later session called VR Development at the Speed of Light. Next, let's talk about new ways to realize your apps potential. We want to help build a performance and fun experience that's well attuned to your audience. Last year, we launched a Meta Avatars SDK for Unity to simplify development for you. And since then, the number of apps with Meta Avatars has tripled. And now with the release of Meta Quest Pro, you can use the Meta Avatars SDK to leverage the full eye and face tracking capabilities of the hardware by bringing personality to VR with Avatars that mimmick users' natural facial expressions, we think that more people will fill more present than ever in your apps. We have many sessions dedicated to Meta Avatars SDK. So if you want to hear directly from any of those devs who are successfully integrating the SDK, check out those sessions. Now we know that you want to squeeze every job of compute out of our hardware. So we've improved our performance tools like adding support for SimplePerf and Vulcan shader stats to Renderdoc. Now you can really level up the immersiveness of your games by optimizing graphics, compute and memory. Apps like Red Matter 2 have already used these capabilities to deliver stunning graphics on a stand-alone headset. Everyone loves playing games in VR with family and friends. And so we're improving multiplayer services to help you engage with your communities. Destinations are a great way to highlight fresh relevant experiences on the platform. So we're adding them in more services such as Explore and look out for the new app-to-app travel API at the end of this year so that users can travel from one store app to another, allowing you to cross-promote between apps. Lastly, we're shipping a new multiplayer demo and update to shared spaces. Find out more in a session bringing people together later today. Now I know you've all been waiting for this part. Once you've built a great app that delights your users, we want to make sure you have the means to effectively market it and help grow your business. We want you to succeed. We've unlocked a variety of new self-serve promotional and sales tools to help you to do just that. Here are the 4 tools. First is A/B testing, which is recently launched and has already helped developers drive double-digit improvements to the conversion rate on their app store page. You can test new trailers, key art and descriptions. We're also adding new testable options like keywords, screenshots and immersive assets. These only take a few minutes to set up. You also now have an option to automatically test new changes to your product details page. Next is Try Before You Buy. A new way for you to offer a free time-bound trial to users before they pay. We're testing this feature right now and seeing really promising signs. We'll continue to iterate on the product such as allowing you to choose how long the trial lasts and A/B testing it with your audience. Third, we've heard you ask for more flexibility around when and how you offer sales and bundles. And we'll soon be making them self-service. You'll be able to propose sales for your apps via the developer dashboard. Finally, immersive promotions are new assets, allowing you to add depth to your store landing page promos and on your apps product details page. You can use these assets to highlight your app's aesthetics as it appears in headset and ultimately drive more purchases for your app. We're also launching more ways to monetize your IP. Meta Avatar store that launched on Facebook, Instagram and Messenger in June will be coming to VR later this year. The store will be available to people on Quest Home and in third-party applications that integrated with Meta Avatars and an entry point to our Avatar editor. Over time, we plan to release creator tools so that you can design custom Avatar items and sell them. Lastly, you told us that reviews on the store are really important to how you show up to your customers and that they reflect the latest and greatest updates from your app. So this fall, we'll be making improvements to reviews and updates ensuring that recent reviews are more prominent. You can learn more about these areas in our session on Marketing your Meta Quest app. We appreciate your feedback and ongoing partnership to help us deliver products that are most vital for you and your business. And now to discuss new opportunities for app developers on Meta Quest. Please welcome Anand Dass.