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8 investors discuss social gaming’s biggest opportunities
The gaming industry has had plenty of watershed moments in 2020 as consumer entertainment habits have shifted in response to the pandemic. One trend has been the crystallization of MMOs as social entertainment hubs that serve more needs for users than ever before.
Following my survey of gaming-focused investors on trends in the AR/VR world several months ago, I pinged a handful of investors to tap their thoughts on the shifting trends and opportunities in social gaming.
- Hope Cochran, Madrona Venture Group
- Daniel Li, Madrona Venture Group
- Niko Bonatsos, General Catalyst
- Ethan Kurzweil, Bessemer Venture Partners
- Sakib Dadi, Bessemer Venture Partners
- Jacob Mullins, Shasta Ventures
- Alice Lloyd George, Rogue
- Gigi Levy-Weiss, NFX
One thing that most investors expressed excitement around was the widening entertainment ambitions of social platforms, as concerts and movie screenings find homes on gaming platforms like Fortnite.
While evolving free-to-play mechanics continue to elevate the experience of single-player titles into something more living and breathing, platforms like Roblox have found areas for growth that seem more unique, developing into destinations for users to communicate and share.
“It’s where culture is created,” Madrona’s Daniel Li told TechCrunch.
Not all of the respondents shared the belief that a gaming platform like Fortnite would grow to become the next Facebook. General Catalyst’s Niko Bonatsos pointed to adjacent platforms like Discord or Twitch as the constants that would remain as consumers cycled through different platform ecosystems. Other pointed to the the still-disjointed experience switching between mobile and desktop experiences as a yet-to-be-solved stumbling block.
Building the metaverse and building a popular casual mobile game are two different things. Most investors I talked with emphasized how much the pace of scaling has accelerated across categories though with breakout hits rising faster than ever while disasters seem to grow evident just as quickly.
“I think that you look at Among Us, and Cyberpunk on the other side, anything can happen much faster and more extreme than it used to be just because of distribution,” Rogue VC’s Alice Lloyd George told TechCrunch.
Read below for the full answers; some responses have been edited for length and clarity.
Hope Cochran and Daniel Li, Madrona Venture Group
The idea that the next big social network will be an MMO seems to be a trendy take in the VC world, what are the roadblocks to this actually happening?
Daniel Li: Hope and I were trading some notes and part of our thesis is that gaming is the future of social and for Gen Z, gaming is replacing not just old games, but it’s replacing TV and Netflix. So instead of going to watch music videos on YouTube, you’re going to a concert in Roblox and that’s a social experience with your friend … instead of going to the mall, now you’re in Roblox. It’s where kids are hanging out and it’s where culture is created.
Hope Cochran: And in COVID, it’s the only place where they can hang out and I think the gaming industry has done a really fabulous job creating another social engagement that we need right now. I don’t want to focus too much on kids, but parents are becoming more accepting of their kids in the games because there is this social engagement and, for instance, I can see that my child is upstairs connecting with his four best friends. They log in together and they play. They normally might be out on a soccer field but they can’t right now so I think parents are becoming a little more comfortable saying, “Oh, he’s playing with his friends.”
Gaming has seemingly become a more “mainstream” area for investment, as someone who has been in the space a bit, what’s different about investing in the gaming sector?
HC: It’s very hard to find that balance between creative or understanding what might become a hit and a real business mind. So my experience has been that when you look into a gaming company as an investor, it’s actually more driven by math, stats and analytics, and then you have a core team who has the creative juices, so I try to look for that kind of dynamic.
So, who is developing what the users will love and who is analyzing it and how are they responding to what the users are loving. I do think there’s a point where a team develops a game and it’s mostly a creative process but then you have to kind of toggle to the analytics. It’s where the mathematicians meet the magicians and there needs to be a combination of that within every game.
What’s different about how popular games and MMOs are scaling these days? Have you seen any interesting growth hacks or strategies that seem promising?
DL: I think there are more and more of these cultural memes that just seem to come out of nowhere, like Among Us kind of just sat there for two years and streamers started picking it up and now it’s super popular. I’d say for nearly all of those, they’re going to be a social category of games, you don’t see a game like Cyberpunk come out of nowhere without any marketing dollars behind it.
So I do think one of those new channels is getting influencers to talk about your games, and typically I think for those it’s not actually the big influencers picking it up, it’s a whole bunch of small influencers all starting to play a game and have it start to build up steam that way. It’s more likely the Call of Duty’s that can hire the big streamers and pay them millions of bucks to play a new game, but I don’t think there’s a new to go-to-market for smaller studios around that.
How can MMOs, which feel like fundamentally active experiences, provide a better passive experience for users that may be more interested in the community than playing a first-person shooter or battle royale? How do games become more approachable to a wider audience?
DL: A lot of people are saying these single-player games aren’t really fun games anymore, they’re just like cinematic experiences. Like playing Cyberpunk for 60 hours versus binge-watching three TV series, it’s definitely a different experience. The thing that’s actually more interesting here is the virtual events that are happening inside these games. Thinking about what the next Twitch looks like, it’s probably some kind of experience where you’re inside the game doing something more passive.
Niko Bonatsos, General Catalyst
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Google and Snap in talks to invest in India’s ShareChat
ShareChat, an Indian social network that added Twitter as an investor in 2019, may soon receive the backing of two more American firms.
The Bangalore-based startup is in advanced stages of talks to raise money from Google and Snap, as well as several existing investors, including Twitter, three sources familiar with the matter told TechCrunch.
The new financing round — a Series E — is slated to be larger than $200 million, with Google alone financing more than $100 million of it, four sources said, requesting anonymity as the talks are private. The round values ShareChat at more than $1 billion, two of the sources said.
ShareChat, Google and Snap did not immediately respond to a request for comment. ShareChat has raised about $264 million to date and was valued at nearly $700 million last year.
The terms of the deal could change and the talks may not materialize into an investment, the sources cautioned. Local TV channel ET Now reported last year that Google was in talks to acquire ShareChat.
ShareChat’s marquee and eponymous app caters to users in 15 Indian languages and has a large following in small Indian cities and towns. Twitter and Snap, on the other hand, are struggling to gain users beyond urban cities in the world’s second-largest internet market. Both Twitter and Snapchat have about 50 million monthly active users in India, according to a popular mobile insight firm.
In an interview with TechCrunch last year, Ankush Sachdeva, co-founder and chief executive of ShareChat, said the app was growing “exponentially” and that users were spending, on average, more than 30 minutes on the app each day.
If the deal goes through, it would be the first investment from Snapchat’s parent company into an Indian startup. Google, on the other hand, has been on a spree of late. The Android-maker last month invested in DailyHunt and InMobi’s Glance, both of which operate short-video apps.
Like the two, ShareChat also operates a short-video app. Its app, called Moj, had amassed more than 80 million monthly active users as of September last year, the startup said at the time. Several of these short videos apps, as well as Times Internet’s MX TakaTak (operated by MX Player), have witnessed an accelerated growth in recent quarters thanks in part to New Delhi banning ByteDance’s TikTok and hundreds of other Chinese apps mid-last year.
Last year, Google announced that it plans to invest $10 billion in India over the course of five to seven years. Days later, the company invested $4.5 billion in Indian telecom giant Jio Platforms. Google and Facebook, which invested $5.7 billion in Jio Platforms last year, reach more than 400 million users in the country.
Google, Facebook, ShareChat, DailyHunt and Glance generate most of their revenue through ads. About 85% of the ad market in India is currently commanded by Facebook and Google, analysts at Bank of America wrote in a report to clients last year. “We estimate this market to be $10 billion by 2024 and see room for Facebook to increase its market-share by 4 percentage points in 4 years led by partnership with Jio. We estimate Facebook may have $4.7 billion revenues by 2024,” they wrote in the equity research report, obtained by TechCrunch.
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Goodbye Flash, goodbye FarmVille
While much of what made 2020 such an absolute nightmare will still be with us on January 1 (sorry!), we will really, truly be leaving Adobe Flash and FarmVille behind as we enter the new year.
The end of Flash has been a long time coming. The plugin, which was first released in 1996 and once supported a broad swath online content, has become increasingly irrelevant in a smartphone-centric world: iPhones never supported Flash, and it’s been just over 10 years since Apple’s then-CEO Steve Jobs published an open letter outlining the technology’s shortcomings.
Adobe has been planning for the end, announcing in 2017 that it would phase out Flash by the end of this year. Most web browsers have already stopped supporting Flash, and today is the official end date, with Adobe ending support itself — although there’s still one last “death of Flash” milestone on January 12, when the company will begin to block Flash content from playing.
In related news, Zynga announced recently that the end of Flash would also mean the end of FarmVille, since the game relies on the Flash plugin.
Like Flash, FarmVille feels like a remnant of a bygone internet era (a fact that makes me feel incredibly old, since I wrote plenty of words about both of them at the beginning of my career). Launched in 2009, FarmVille’s popularity paved the way for the ascendance of Zynga and of Facebook gaming, but both Zynga and gaming have largely moved on.
The company’s co-founder and former CEO Mark Pincus commemorated the occasion with a series of tweets outlining the game’s early development (spurred by the acquisition of startup MyMiniLife).
“FarmVille demonstrated that a game could be a living, always-on service that could deliver daily surprise and delight, similar to a favorite TV series,” Pincus wrote. “Games could also connect groups of people and bring them closer together.”
And just in case there are any FarmVille fans reading this story, don’t worry: you can still play FarmVille 2: Tropic Escape, FarmVille 2: Country Escape right now, and FarmVille 3 is still coming to mobile. Today is just the final day for the original game.
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Google pilots a search feature that aggregates short-form videos from TikTok and Instagram
Google is testing a new feature that will surface Instagram and TikTok videos in their own dedicated carousel in the Google app for mobile devices — a move that could help the company retain users in search of social video entertainment from fully leaving Google’s platform. The feature itself expands on a test launched earlier this year, where Google had first introduced a carousel of “Short Videos” within Google Discover — the personalized feed found in the Google mobile app and to the left of the home screen on some Android devices.
To be clear, this “Short Videos” carousel is different from Google’s Stories, which rolled out in October 2020 to the Google Search app for iOS and Android. Those “Stories” — previously known as “AMP Stories” — consist of short-form video content created by Google’s online publishing partners like Forbes, USA Today, Vice, Now This, Bustle, Thrillist and others.
Meanwhile, the “Short Videos” carousel had been focused on aggregating social video from other platforms, including Google’s own short-form video project Tangi, Indian TikTok competitor Trell, as well as Google’s own video platform, YouTube — which has also been experimenting with short-form content as of late.
The expansion to include Instagram and TikTok content in this carousel was first reported by Search Engine Roundtable (via Brian Freiesleben’s tweet). They were able to access the feature by searching for “packers” in the Google app then scrolling down the page.
We were able to replicate this, as well. (See below image.)
Image Credits: screenshot of Google search results
We found the Short Videos carousel appears when you scroll past the Google Knowledge Base box for the Green Bay Packers, followed by the the scores, Top Stories, Twitter results, Top Results, Images, Videos and other content, like a listing of the players, standings and more.
Both Instagram and TikTok videos were available in the Short Videos row. When clicked, you’re taken to the web version of the social platform — not the native mobile app, even if it’s installed on your device. The end result is that Google users are more likely to remain on Google, as all it takes is a tap on the back arrow to return to the search results after watching the video.
Google has been indexing video content for years and partnered with Twitter on 2015 to index search results. It’s not clear to what extent it has any formal relationship with Facebook/Instagram or TikTok, however. (If those companies comment, we’ll update.)
Google declined to formally comment or further detail its plans, but a company spokesperson confirmed to TechCrunch the feature was currently being piloted on mobile devices. They clarified that means it’s a limited, early-stage feature. In other words, you won’t find the video carousel on every search query just yet. But over time, as Google scales the product, it could become an interesting tool for indexing and surfacing top video content from social media — unless, of course, the platforms choose to block Google from doing so.
The feature is currently available in a limited way on the Google app for mobile devices and on the mobile web, the company said.
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How Niantic evolved Pokémon GO for the year no one could go anywhere
Pokémon GO was created to encourage players to explore the world while coordinating impromptu large group gatherings — activities we’ve all been encouraged to avoid since the pandemic began.
And yet, analysts estimate that 2020 was Pokémon GO’s highest-earning year yet.
By twisting some knobs and tweaking variables, Pokémon GO became much easier to play without leaving the house.
Niantic’s approach to 2020 was full of carefully considered changes, and I’ve highlighted many of their key decisions below.
Consider this something of an addendum to the Niantic EC-1 I wrote last year, where I outlined things like the company’s beginnings as a side project within Google, how Pokémon Go began as an April Fools’ joke and the company’s aim to build the platform that powers the AR headsets of the future.
Hit the brakes
On a press call outlining an update Niantic shipped in November, the company put it on no uncertain terms: the roadmap they’d followed over the last ten-or-so months was not the one they started the year with. Their original roadmap included a handful of new features that have yet to see the light of day. They declined to say what those features were of course (presumably because they still hope to launch them once the world is less broken) — but they just didn’t make sense to release right now.
Instead, as any potential end date for the pandemic slipped further into the horizon, the team refocused in Q1 2020 on figuring out ways to adapt what already worked and adjust existing gameplay to let players do more while going out less.
Turning the dials
As its name indicates, GO was never meant to be played while sitting at home. John Hanke’s initial vision for Niantic was focused around finding ways to get people outside and playing together; from its very first prototype, Niantic had players running around a city to take over its virtual equivalent block by block. They’d spent nearly a decade building up a database of real-world locations that would act as in-game points meant to encourage exploration and wandering. Years of development effort went into turning Pokémon GO into more and more of a social game, requiring teamwork and sometimes even flash mob-like meetups for its biggest challenges.
Now it all needed to work from the player’s couch.
The earliest changes were those that were easiest for Niantic to make on-the-fly, but they had dramatic impacts on the way the game actually works.
Some of the changes:
- Doubling the players “radius” for interacting with in-game gyms, landmarks that players can temporarily take over for their in-game team, earning occupants a bit of in-game currency based on how long they maintain control. This change let more gym battles happen from the couch.
- Increasing spawn points, generally upping the number of Pokémon you could find at home dramatically.
- Increasing “incense” effectiveness, which allowed players to use a premium item to encourage even more Pokémon to pop up at home. Niantic phased this change out in October, then quietly reintroduced it in late November. Incense would also last twice as long, making it cheaper for players to use.
- Allowing steps taken indoors (read: on treadmills) to count toward in-game distance challenges.
- Players would no longer need to walk long distances to earn entry into the online player-versus-player battle system.
- Your “buddy” Pokémon (a specially designated Pokémon that you can level up Tamagotchi-style for bonus perks) would now bring you more gifts of items you’d need to play. Pre-pandemic, getting these items meant wandering to the nearby “Pokéstop” landmarks.
By twisting some knobs and tweaking variables, Pokémon GO became much easier to play without leaving the house — but, importantly, these changes avoided anything that might break the game while being just as easy to reverse once it became safe to do so.
GO Fest goes virtual
Like this, just … online. Image Credits: Greg Kumparak
Thrown by Niantic every year since 2017, GO Fest is meant to be an ultra-concentrated version of the Pokémon GO experience. Thousands of players cram into one park, coming together to tackle challenges and capture previously unreleased Pokémon.
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Daily Crunch: Telegram prepares to monetize
Telegram will introduce ads, TikTok’s parent company is moving into drug discovery and President Trump continues his battle against Section 230. This is your Daily Crunch for December 23, 2020.
The big story: Telegram prepares to monetize
Telegram founder Pavel Durov said the messaging app will introduce advertising next year on public one-to-many channels. Durov wrote on his Telegram channel the ad platform will be “one that is user-friendly, respects privacy and allows us to cover the costs of server and traffic.”
He also pointed to premium stickers as another way that Telegram could monetize, while emphasizing that existing features will remain free and that he does not support showing ads in private chats.
In addition to discussing the company’s monetization plans, Durov said that Telegram is “approaching” 500 million users.
The tech giants
Nikola’s stock crashes after announcing cancelation of contract with Republic Services for 2,500 garbage trucks — This is the latest deal to unravel for Nikola as it tries to patch up following recent devastating reports.
TikTok parent ByteDance hiring for AI drug discovery team — “We are looking for candidates to join our team and conduct cutting-edge research in drug discovery and manufacturing powered by AI algorithms,” the company said in a job posting.
Startups, funding and venture capital
Chinese autonomous driving startup WeRide bags $200M in funding — The new funding will see WeRide joining hands with Yutong, a 57-year-old company, to make autonomous-driving minibuses and city buses.
Voyager Space Holdings to acquire majority stake in commercial space leader Nanoracks — Nanoracks provided the Bishop Airlock that was installed on the International Space Station.
Honk introduces a real-time, ephemeral messaging app aimed at Gen Z — Instead of sending texts off into the void and hoping for a response, friends on Honk communicate via messages that are shown live as you type.
Advice and analysis from Extra Crunch
Dear Sophie: What’s ahead for US immigration in 2021? — Sophie Alcorn weighs in on what’s next for U.S. visas and green cards.
Looking ahead after 2020’s epic M&A spree — This year, four deals involving chip companies totaled over $100 billion on their own.
Heading into 2021: Venture fundraising, liquidity and the everything bubble — Alex Wilhelm’s final column of the year.
(Extra Crunch is our membership program, which aims to democratize information about startups. You can sign up here.)
Everything else
Trump vetoes major defense bill, citing Section 230 — President Trump has vetoed the $740 million National Defense Authorization Act, a major bill that allocates military funds each year.
XRP cryptocurrency crashes following announcement of SEC suit against Ripple — The XRP token’s value has declined more than 42% in the past 24 hours.
TaskRabbit is resetting customer passwords after finding ‘suspicious activity’ on its network — The company later confirmed the activity was a credential stuffing attack, where existing sets of exposed or breached usernames and passwords are matched against different websites to access accounts.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.
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Unfold launches lightweight, link-centric profiles called Bio Sites
Unfold, the social media startup acquired by Squarespace last year, is launching a new tool for users to share all the links that are important to them.
This is the first step Unfold has taken beyond its story-format authoring tools. Co-founder Andy McCune told me that the team has a bigger vision now — just as Squarespace has become “the all-in-one platform for your web presence,” Unfold aims to become “the all-in-one platform for your social presence.”
“We’re both playing in very saturated spaces with a lot of competitors,” McCune said. “We both stand out because we appeal to the person that cares about design. That’s always been the North Star.”
In the case of the new Bio Sites, he said one of the goals is to help Unfold users — whether they’re individuals or large brands — become less reliant on a single social media platform. After all, he noted that when you build a following on Instagram, you’re building on “borrowed territory,” and “you don’t really own your audience.”
Image Credits: Unfold
By creating a simple profile that highlights the links of your choice, then by linking your Instagram and other social profiles to your Bio Site, you can then point audiences to other channels where you have more control — or at least diversify the platforms that you’re relying on.
McCune and his co-founder Alfonso Cobo aren’t the first ones to think of this idea. For example, Linktree raised funding earlier this year, and there are other startups creating similar products. But Cobo said Bio Sites benefit from Unfold’s design-centric approach, allowing users to create simple profiles that aren’t just functional, but also look great and reflect their personality.
Cobo also noted that Bio Sites are created from the Unfold native app — it’s launching on Android today, with plans for iOS in January. The feature will be available to all Unfold users, including free users, but subscribers to the premium Unfold+ and Unfold for Brands tiers get additional features like custom URLs.
“We’re really going to be expanding in the next few weeks with presence and expressibility tools to help users stand out in different ways,” Cobo said. “We’re also very interested in commerce and will be exploring that route in the future, too.”
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Daily Crunch: Discord raises $100M
Discord announces a big funding round, Google gets European approval to acquire Fitbit and Twitter launches a new voice-based feature. This is your Daily Crunch for December 17, 2020.
Discord raises $100M
The popular gaming chat platform confirmed today that it has raised $100 million and also announced that it has 140 million monthly active users, twice as many as a year ago.
“We are humbled and honored by the growth we’ve seen among so many incredible and diverse communities that have made Discord their place to hang out,” said CEO Jason Citron in a statement. “As we look to 2021, we are excited about what we have in store and plan to use this funding to help make Discord even better — both for our free service and our Nitro subscribers.”
The confirmation comes after TechCrunch reported that the company was raising up to $140 million at a valuation that could be as high as $7 billion.
The tech giants
Europe clears Google-Fitbit with a ten-year ban on using health data for ads — Under the terms of the EU’s clearance for the deal, Google has committed to not use Fitbit user data in the European Economic Area for ad targeting purposes for a 10-year period.
Twitter launches its voice-based ‘Spaces’ social networking feature into beta testing — During this initial testing period, the product will be limited to select individuals, largely from underrepresented backgrounds, Twitter says.
Google slammed for ‘monopoly power’ in new antitrust lawsuit from 35 states — Compared to the Texas-led suit against Google announced yesterday, the second lawsuit represents a broader coalition of 35 states.
Startups, funding and venture capital
Coinbase files to go public confidentially and we’re hyped — To be clear, I don’t consider myself part of the “we” that’s hyped, but Alex Wilhelm definitely is.
Spryker raises $130M at a $500M+ valuation to provide B2Bs with agile e-commerce tools — Spryker offers a platform to bring a company’s inventory online, as well as tools to analyze and measure how that inventory is selling and where.
Health insurer Oscar adds another $140M in what’s likely a pre-IPO round — The new capital means that Oscar has raised what would be the equivalent of $1 million a day for the entirety of 2020.
Advice and analysis from Extra Crunch
Virgin Orbit, Relativity Space and Astra dish on the economics and efficiencies of space launches — Relativity Space CEO Tim Ellis, Astra CEO Chris Kemp and Virgin Orbit’s VOX Space President Mandy Vaughn all joined us at TC Sessions: Space to discuss their approaches to the small spacecraft launch market.
Just how bad is that hack that hit US government agencies? — Spoiler: It’s a nightmare scenario.
2020’s top 10 enterprise M&A deals totaled a staggering $165B — It was a blockbuster year for enterprise M&A.
(Extra Crunch is our membership program, which aims to democratize information about startups. You can sign up here.)
Everything else
HBO Max finally lands on Roku devices — “Finally” gets overused in headlines, but it absolutely applies here.
You can now securely submit tips to TechCrunch using SecureDrop — We’re making it easier and more secure for you to contact TechCrunch reporters and editors.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.
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Twitter taps AWS for its latest foray into the public cloud
Twitter has a lot going on, and it’s not always easy to manage that kind of scale on your own. Today, Amazon announced that Twitter has signed a multi-year agreement with AWS to run its real-time timelines. It’s a major win for Amazon’s cloud arm.
While the companies have worked together in some capacity for over a decade, this marks the first time that Twitter is tapping AWS to help run its core timelines.
“This expansion onto AWS marks the first time that Twitter is leveraging the public cloud to scale their real-time service. Twitter will rely on the breadth and depth of AWS, including capabilities in compute, containers, storage and security, to reliably deliver the real-time service with the lowest latency, while continuing to develop and deploy new features to improve how people use Twitter,” the company explained in the announcement.
Parag Agrawal, chief technology officer at Twitter, sees this as a way to expand and improve the company’s real-time offerings by taking advantage of AWS’s network of data centers to deliver content closer to the user. “The collaboration with AWS will improve performance for people who use Twitter by enabling us to serve Tweets from data centers closer to our customers at the same time as we leverage the Arm-based architecture of AWS Graviton2 instances. In addition to helping us scale our infrastructure, this work with AWS enables us to ship features faster as we apply AWS’s diverse and growing portfolio of services,” Agrawal said in a statement.
It’s worth noting that Twitter also has a relationship with Google Cloud. In 2018, it announced it was moving its Hadoop clusters to GCP.
This announcement could be considered a case of the rich getting richer as AWS is the leader in the cloud infrastructure market by far, with around 33% market share. Microsoft is in second with around 18% and Google is in third with 9%, according to Synergy Research. In its most recent earnings report, Amazon reported $11.6 billion in AWS revenue, putting it on a run rate of over $46 billion.
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Facebook hit with antitrust probe for tying Oculus use to Facebook accounts
Facebook’s bad week just got worse: It’s being investigated in Germany for linking usage of its VR product, Oculus, to having a Facebook account.
The tech giant raised the hackles of the VR community this summer when it announced it would be merging users of the latest Oculus kit onto a single Facebook account — and would end support for existing Oculus account users by 2023.
New users were immediately required to have a Facebook account in order to log in and access content for the virtual reality kit.
In August Facebook also announced that it was changing the name of the VR business it acquired back in 2014 for around $2 billion — and had allowed to operate separately — to “Facebook Reality Labs“, signalling the assimilation of Oculus into its wider social empire.
(Related: The last of Oculus’ original co-founders left the company last year.)
In recent years Facebook has been pushing to add a “social layer” to the VR platform — but the heavy-handed requirement for Oculus users to have a Facebook account has not proved popular with gamers.
Now antitrust authorities are taking an interest in the move.
Germany’s Federal Cartel Office (aka, the Bundeskartellamt) said today that it’s instigated abuse proceedings against Facebook to examine the linkage between Oculus VR products and its eponymous social network.
In a statement, its president, Andreas Mundt, said:
In the future, the use of the new Oculus glasses requires the user to also have a Facebook account. Linking virtual reality products and the group’s social network in this way could constitute a prohibited abuse of dominance by Facebook. With its social network Facebook holds a dominant position in Germany and is also already an important player in the emerging but growing VR (virtual reality) market. We intend to examine whether and to what extent this tying arrangement will affect competition in both areas of activity.
The FCO has another “abuse of dominance proceeding” ongoing against Facebook — related to how it combines user data for ad profiling in a privacy-hostile way, which the authority contends is an abuse of Facebook’s market dominance.
That case is seen as highly innovative in how it combines privacy and antitrust concerns so is being closely watched.
The latest FCO proceeding against Facebook comes at an awkward time for the tech giant, which has been hit with a massive antitrust lawsuit from 46 U.S. States — accusing it of suppressing competition through monopolistic business practices.
As antitrust regulators have stepped up their scrutiny of Zuckerberg’s empire in recent years, Facebook has responded aggressively: Announcing a plan to consolidate its messaging products onto a single technical backend, as well as adding Facebook branding to its acquisitions — in an apparent bid to make it harder for competition regulators to order a break up.
Facebook’s PR has also sought to cloak the “single backend” move by claiming it will increase user privacy.
Yet the states’ antitrust case against the company includes filings that show a Facebook executive discussing using moments of perceived increased competition for its business as an opportunity to decrease user privacy.
So, uh, awkward….
Reached for comment on the FCO Oculus proceeding, a Facebook spokesperson sent us this statement: “While Oculus devices are not currently available for sale in Germany, we will cooperate fully with the Bundeskartellamt and are confident we can demonstrate that there is no basis to the investigation.”
The tech giant has used a series of legal tactics to block the FCO’s earlier order against “superprofiling” users.
Last year Facebook successfully applied to block the order banning it from combining user data. However, Germany’s Federal Court of Justice reversed the decision of the Higher Regional Court — confirming the FCO’s order.
Although, the hearing on the main proceeding is still pending at the Düsseldorf Higher Regional Court — currently scheduled for March 26, 2021 (after being postponed from a date in November).
Facebook also responded to the Federal Court of Justice ruling by filing another emergency appeal against the FCO’s order — succeeding for a second time in blocking the order against combining user data.
The FCO says it does not have a route to appeal this preliminary block on points of law — meaning it’s had to lodge a complaint with the Federal Court of Justice, which it did on December 2.
In a statement, Mundt criticized Facebook for resorting to “legal remedies” to block the order, which he said is delaying relief for consumers and competitors vis-à-vis Facebook’s abusive practices.
“The fact that Facebook has resorted to various legal remedies is not surprising in view of the significance which our proceedings have for the group’s business model. Nevertheless, the resulting delay in proceedings is of course regrettable for competition and consumers,” he said.
“This is the second time that the Higher Regional Court has preliminarily granted an emergency appeal filed by Facebook. The deadline imposed on Facebook for implementing our demands has again been suspended. As in our view the reasons for this are not sustainable, we have immediately filed a complaint with the Federal Court of Justice. We want the clock to be ticking again for Facebook.”
Facebook using courts to block attempts to hold its business model accountable for violating regional laws is par for the course in Europe.
The tech giant has recently succeeded in blocking a preliminary order from Ireland’s Data Protection Commission to suspend personal data transfers to the U.S. by applying for a judicial review of the regulator’s process, for example.
It also sought to block Irish courts from referring the Schrems II case, which underpins that decision, to the CJEU in the first place — though it did not succeed.
In public remarks in September, Facebook VP Nick Clegg claimed it’s taking that legal action not to defend its own business model but to “try to send a signal that this is a really big issue for the whole European economy, for all small and large companies that rely on data transfers” — which he suggested would be “absolutely disastrous” for the EU as a whole.
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