This story is the final part of a four-part series that delves into the factors leading to ByteDance’s decision to scale back Pico, its virtual reality business. The third part examines ByteDance’s gradual change in stance toward Pico’s potential and how it is overhauling the business. Read it here.
The VR industry, in its perpetual pursuit of innovation, grapples with uncertainties marked by constant exploration and iteration. Amid strategic shifts, inevitable alterations in personnel and team configurations ensue.
The term “factional integration” has become a common refrain among Pico employees who engaged with 36Kr. Multiple internal sources hint at the existence of two factions within Pico: the “Pico faction,” comprising original employees, and the “Byte faction,” consisting of those transferred from ByteDance to Pico.
As Pico transitions its content focus from games to live video, the influence of senior executives from the “Byte faction” has surged, posing challenges for “Pico faction” employees within the evolving evaluation system. This shift has resulted in a significant exodus throughout 2022.
The disparities in development stages and business characteristics give rise to mutual misunderstandings between the factions. Pico, initially a hardware startup, favored a flat structure, leading the “Pico faction” to lean toward faster, simpler approaches. Conversely, ByteDance, a massive company, prioritized process safety over speed.
Employees within the “Pico faction” lament the complexity introduced post-acquisition, with complaints about extensive audits, document writing, inter-departmental communication, and blame games. The toll on wellbeing is exemplified by a reported case of a “Pico faction” employee requiring emergency treatment due to elevated blood pressure after prolonged hours and stress.
On the other hand, criticism from the “Byte faction” points to perceived crudeness within the “Pico faction,” emphasizing the need for precision and correctness in decision-making. “What’s the daily active users of your original Pico product? My Byte product has tens of millions of daily active users. I don’t need a quick response, but I have to ensure that every decision is correct, rethinking and demonstrating it repeatedly,” said Li Ming, an employee in the “Byte faction”.
This clash of cultures reflects the differing pace preferences between the two factions.
The ascendancy of managers from the “Byte faction”, rooted in an internet background, brings new challenges. As a hardware company, Pico oversaw a steady pace of iterations, but with new managers taking over, this momentum was eventually lost.
Chen Yong, an employee from Pico’s hardware department, said that ByteDance was almost tailing Meta in its footsteps, even timing product releases specifically before the Meta Quest Pro.
According to Chen, the loss of confidence among Pico’s upper management was potentially triggered by the rushed release of Pico 4, which has been perceived as a contributory factor of its failure.
On one hand, Pico 4 was launched shortly after a price war with Pico Neo 3, the latter, boasting better sales, had already fulfilled a certain consumption potential and piqued curiosity among buyers due to the extended replacement cycle typical in the VR market.
On the other hand, the swift release of Pico 4 resulted in a myriad of issues, including streaming problems, clarity issues, battery life concerns, and software update complications. According to a mid-level Pico employee, these challenges contributed to a high return rate of 30% from sales channels.
“Executives from content companies are well-versed in the logic of ‘launch now, iterate later,’ but this isn’t suitable for the stable and gradual pace required in the hardware industry,” said Chen, alluding to the mismatch of capabilities between the “Byte faction” and the requirements of Pico.
Despite this, Pico’s substantial investment across content, marketing, channels, and hardware underscores its significance in the Chinese VR landscape.
As major internet factories reassess priorities in a global economic downturn, Pico faces scrutiny. The dwindling patience of these major players signals a broader trend seen in the collective withdrawal of domestic content companies from the VR landscape in 2023. Tencent’x extended reality business department faced massive layoffs and eventually dissolved. iQiyi Smart changed CEOs for the first time since its establishment amidst financial issues. The XR lab of Alibaba Group’s Damo Academy and Kuaishou’s VR panoramic video business have quietly dissolved as well.
The VR industry’s upheavals in 2023 signal a necessary downturn and adjustment. The once prevailing notion of achieving miracles with sheer strength in the internet industry proves unsuitable in the VR domain, particularly in China.
Apple’s entry into the mixed reality space with the Vision Pro—a headset that allows viewing of the outside world and is no longer closed off—has also introduced a new variable. Meta apprentices, AR, and VR companies are now pivoting toward Apple’s model, acknowledging a potential shift from VR to AR in the near future.
“AR will likely surpass VR next year, this is not a suspense. It’s just a pity that the ‘defeats’ of a few big players this year has brought negative emotions to the industry. Both the industry and its ecosystem partners need to endure,” said Misa Zhu, founder of Rokid.
Huang Feng, founder of Playdream, added that while paying homage to Meta and Pico for advancing the industry, the next step will be to learn from Apple and Huawei.
According to 36Kr, Pico, despite scaling back, has retained a team exploring MR to investigate how to align with Apple’s Vision Pro.
Ultimately, Pico’s withdrawal doesn’t mean it is the end of the road. While it may mark the conclusion of the Chinese VR industry’s emulation of the Meta route, indicating a transition is underway, the actual battle has yet to truly commence.
Note: Some employee names may have been changed to protect their identities.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Qiu Xiaofen for 36Kr.