Some cracks are showing in Facebook’s virtual reality armor

Facebook CEO Mark Zuckerberg believes that VR represents the next era of computing in which people can interact and play games with each other in colorful, digital worlds. Zuckerberg has poured billons of dollars into VR initiatives over the past few years, including buying VR headset maker Oculus in 2014 for $2 billion. Oculus has since become the cornerstone of Facebook’s VR ambitions, which have also included funding and purchasing numerous VR studios in order to ensure that there are plenty of VR games for people to play. Even in VR, it turns out, content is king.

At some point, Facebook needs its Oculus VR unit to generate some serious cash. The company doesn’t reveal specific sales figures for its Oculus unit, but it’s almost certainly unprofitable, given the low cost of its VR headsets relative to competitors. Like other tech giants including Amazon and Google, Facebook seems willing to lose money on hardware products in order to eventually make up the difference by other means.

Most recently, Facebook has begun testing online advertisements for Oculus users, which makes sense considering the company’s business is powered by online ads. But not every VR user seems happy about the prospect of online advertisements possibly interrupting their play. 

Resolution Games said last week amid uproar from its customers that it would abandon the testing of Facebook’s online ads for its VR shooter Blaston. Gamers seemed particularly peeved that they would potentially see commercials in a VR game that they paid $9.99 to play. The publisher said that it’s “looking to see if it is feasible to move this small, temporary test to our free game, Bait! sometime in the future.”

This is a big blow to Facebook. As The Financial Times reported, Resolution Games was Facebook’s first VR advertising partner and the publisher deserted the new VR ad testing project “less than a week after it was announced.”

After years of data privacy blunders that have dinged Facebook’s reputation, gamers may be more skeptical of Facebook’s attempts to worm its online ad business into VR. If that’s the case, it could cause third-party publishers to think twice about signing up for an online advertising deal. 

Of course, this is still — in Silicon Valley speak — “early days” for Facebook’s VR efforts, and just because one publisher pulled out of an advertising test doesn’t mean every publisher will. But it’s not a good sign, and it underscores the fact that Facebook needs to think carefully about its plans to monetize its VR business without upsetting users. 

For Facebook, VR isn’t just a game after all.

Jonathan Vanian 
@JonathanVanian
jonathan.vanian@fortune.com

NEWSWORTHY

Facebook scores a big win. Facebook has successfully won the dismissal of two antitrust cases brought forth by the U.S. Federal Trade Commission and a coalition of state attorneys, Bloomberg News reported. It's a big win for Facebook, which has "escaped—at least for now—the most significant regulatory threat to its business to emerge out of the wider crackdown on U.S. technology giants.

From the report: The decision delivers a blow to the FTC and the states, which claimed Facebook violated antitrust laws by buying photo-sharing app Instagram and messaging service WhatsApp in order to cut off emerging competitive threats and protect its monopoly.

Big trouble in not-so-little China. Chinese authorities said that Tesla is recalling 285,000 electric vehicles in the country because of problems with the cars’ cruise control feature, ABC News reported. The Chinese regulators said that “that under certain conditions drivers could accidentally activate cruise control,” which could potentially cause a crash “in extreme cases,” the report detailed. Tesla plans to upgrade the cruise-control software remotely, the report said.

The revamped Windows is ready to be tested. Microsoft debuted on Monday its Windows 11 preview build, a test version of the company’s upcoming Windows 11 operating system, to be formally released this holiday season. The test version includes some of the features Microsoft has previously shared about Windows 11, including the addition of rounded corners around apps, the Start button now being placed in the bottom center of the screen, and a new dark/light mode, as The Verge reported. But, the test version will not contain a bundled version of the Microsoft Teams chat software and users will not be able to access Android apps via the Windows online store.

Energy reality. The data centers operated by tech giants like Amazon, Alibaba, Facebook, and Google are more energy efficient than what people may believe, according to an analysis published in the scientific journal Joule. The authors said that research describing major energy consumption problems with these data centers are often exaggerated and do not take in account the fast-paced rise in computing techniques that help the facilities be more power efficient, according to a The New York Times report about the analysis. Still, the rise of Bitcoin and its impact on energy is worth researching, because “Much is unknown about cryptocurrency mining and its energy consumption,” the Times report said.

Toshiba’s pesky problem with shareholder activists. Japanese tech and industrial giant Toshiba is facing a shareholder revolt led by “foreign activist investors” who object to the company’s plan to retain two outside directors tasked with overseeing its management, The Japan Times reported. This is a big deal because it underscores a “sign of emerging shareholder activism in Japan,” and it follows a related independent probe that discovered that Toshiba sought help from the government “to prevent foreign activist shareholders from influencing the board,” the report said.

FOOD FOR THOUGHT

It's Microsoft versus Apple all over again. The Wall Street Journal published an interesting analysis of the epic business battle between Microsoft and Apple as it relates to the modern era. Unlike Microsoft from the 1990s, Apple, alongside companies like Facebook and Google, is in the regulatory hot seat over alleged anti-competitive business practices.

The two companies are also still trading barbs, with Apple accusing Microsoft of "being the puppet master" in its legal case involving Epic Games, while "Microsoft has blamed Apple for restricting its ability to reach users with its own videogame service," the report said.

From the report: Apple and Microsoft are the oldest of the modern tech titans, founded back in the mid-1970s. As young men, Messrs. Jobs and Gates feuded for years. Mr. Jobs at one point accused Microsoft of stealing Apple’s ideas and having a poorly designed product. They publicly called a truce around 1997 soon after Mr. Jobs returned to run the company he helped create. That year Mr. Gates invested $150 million in Apple, giving a badly needed cash infusion and lifeline for Mr. Jobs’s second act.

IN CASE YOU MISSED IT

As regulatory scrutiny intensifies, crypto exchange Binance jumps on the NFT bandwagon by Christiaan Hetzner

Ad-tech shares soar as Google delays major Chrome privacy push by David Meyer

Musk crowned the Tesla Model S Plaid the speediest ever—Here’s why the Germans say not so fast by Christiaan Hetzner

A Tesla ‘recall’ applies to nearly every car the company has sold in China by Eamon Barrett

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BEFORE YOU GO

The abrupt end of a civilization. Fry's Electronics was once one of the most popular stores where people could buy goods like computers and printers, hence the word "electronics" in the company's name. But after four decades of business, the company shut down this past February, closing all of its stores "as a result of changes in the retail industry and the challenges posed by the Covid-19 pandemic.”

Now, The San Jose Mercury Newsreported that the city of San Jose may bulldoze a now-closed Fry’s Electronics store to make way for new office towers that are part of a new tech campus. The construction project would "sprout at 550 E. Brokaw Road, which for years served as the corporate headquarters of Fry’s Electronics and most visibly, a Fry’s superstore with a theme akin to a Mayan temple," the report said.

That's right, a Fry's superstore that resembles a "Mayan temple" will be destroyed to make way for new tech companies. It truly is symbolic of the destruction of a once-mighty empire.