The top 3 reasons why Zuck is killing Apple in the Mixed Reality race.

Apple sold only 370,000 VisionPro headsets-- much fewer than it expected. Meanwhile, Meta Ray-Bans are the top-selling product in 60% of Ray-Ban stores. The outcome of their AR/VR products couldn't be more different, even though they both have as much awareness as you could possible buy.

There are 3 reasons:

1. Price.
2. Killer feature vs cool product.
3. Destination vs always-on.

Check this episode out if you want to understand the where mixed reality is going and what you need to do to make sure your product takes off.

Transcript

Pablo Srugo (00:00.6)
So just read an article on the information that says that Apple sharply scales back production of Vision Pro. It turns out that in three quarters, they sold about 370,000 Vision Pros. They might sell another 50,000 in the next quarter. And so in total, we're talking about sales of under 500,000 in the first year, probably closer to 400,000. By comparison, Meta sold 6 million Quest 2s and 3 million Quest 3s in the first three quarters of each respective product.

And at the same time as this article comes out on the information, TechCrunch has an article that says that Meta smart glasses outsell traditional Ray-Bans in 60 % of all Ray-Ban stores. So Meta's Ray-Bans are the top selling product in 60 % of Ray-Ban stores. They're literally flying off the shelf. If you go to Ray-Ban.com, the first thing that the thing that takes over the entire homepage is Meta's Ray-Bans. We don't know how many of these Meta Ray-Ban glasses are actually sold.

but there's clearly a huge difference between Apple literally scaling back production, which means they thought they would sell more than they actually sold. And so I started thinking about why that is and what kind of lessons generalized to other startups. Obviously the first one and the obvious one is price matters. So, you know, the vision pro is thousands of dollars, $3,500 to be precise. And the Ray-Bans are hundreds of dollars. So obviously that alone is going to drive huge impact. But if you think back to like the iPhone launch, the iPhone did 6 million sales in its first year.

And it was an expensive phone. was like 500 or so dollars, but normal phones at that point were $200. In many cases, you'd get free phones with new plans and yet the iPhone absolutely crushed. So what happened with the vision pro and apple today has such a huge brand, so much distribution. They have everything going from them in terms of tailwinds. The vision pro itself got so much hype when it came out, everybody knew about it. And I think there's three things you can pull out of it. The first one is this idea of like a killer feature.

If you think about the iPhone, when it first came out, it didn't have apps, but the first killer feature was the versatility of the screen, like the multi-touch, right? And specifically when you paired that with the browser, you all of a sudden, at a time when the internet was becoming more and more more important, when you tried to use a browser with a Blackberry or another type of like Nokia or whatever phone with the normal keyboard, it was a terrible experience. It was basically not usable. So you literally could not browse the internet really.

Pablo Srugo (02:25.814)
on your phone. When the iPhone comes out with its multi-touch display, the ability to zoom in and all these sort of things, the browser all of a sudden worked. It worked on mobile and that was a killer feature. The next thing that happened obviously a year later is when the apps come out, that then became the driving force that pulled so many people into the iPhone ecosystem. But the point is there was a clear reason to go and get the iPhone. And I think the same thing is happening with the Meta Ray Bans. There's a clear reason, even though it's nation-specific,

and the first version is really just about taking pictures and videos. It's pretty good to take pictures and videos with the newest generation of the Meta Ray Bans. On top of that, now of course with AI, it has this very compelling use case where you can look at something, ask about it, and you kind of have this always on AI going on. And that just becomes a very compelling reason to get the product. The Vision Pro, on the other hand, is an extraordinary

product when you look at it and you look at the amount of technology that is in it, the capabilities that it has, the pass through and all these sort of things. And yet what do you really need it for? Besides the fact that it's a very cool gadget and there are a couple of experiences that I've heard of like, I haven't used it yet, but you know, like watching movies and these sorts of things. But is that really your reason to go out and get this product? It doesn't really have that killer feature. It becomes this like high level, like computing new computing paradigm. That's really cool.

but there's no clear product market fit. And there you see like just how important product market fit is even to the largest of companies in the world. And I, and you know, I translate that to so many founders in the early stages thinking that their product is so great and only if everybody knew about it, like if there was a way to just drive awareness, if more people would find out, then things would really work out. And here's a core example of when that doesn't work. Like Apple had as much as awareness as you could possibly imagine. You will never have 1%.

of that level of awareness. And yet it wasn't enough to sell more than a few hundred thousand units, which is nothing to a company like Apple. And the point is the same. You can't just build the product, technology, add features and expect that's going to resonate. The things that resonate are killer features, are single use case, are single reasons for why it's a must have, why somebody needs to buy or use that thing. That's the first difference between

Pablo Srugo (04:50.7)
the Ray-Bans and the Vision Pro. The second thing is this idea of a destination versus always on, which is a little specific to VR AR, but in a sense is really about the amount of use that a product gets. You think about Google, Google is something that you use many times a day. Think about like Snapchat or any sort of messaging app. These are apps that you would use many times a day. So that's where it is on, terms of the spectrum of usage. And obviously those products are more compelling. Those products,

there's more opportunity for word of mouth because people tell more people about it. There's more opportunities of people seeing other people using it and there's more opportunities for morality and all those things help growth, help adoption. On the flip side, like I think of startups that try to optimize things like buying a house or optimize things like buying a car and some of them had some level of success, but obviously not to this level. And one of the reasons, one of the challenges that all those sort of things face and I've seen marketplaces also face this sort of promise

How often is this thing used? Like if you only buy a car every seven years, you only buy a house every seven or so years, there's just not that many touch points, there's not that many uses of it, and so it becomes a bit of that destination versus always on. Obviously that's super clear in this VR and AR paradigm, which is the Ray-Bans are something you can wear all the time, and most of the time it's doing actually nothing. It's just on your face like any normal sunglasses. But every now and then you take a picture, you take a video, you'll ask it some AI question. It's always there, it's always on. It's the same reason that smartphones

are so powerful because you bring them everywhere. And so so many different use cases open up so many times other people will see you use the iPhone, let's say. And therefore that is a way of marketing much more than the laptop that you have or even less so than the TV that's in your house and nobody sees that you only turn on at certain specific times. And it's the same thing with VR. Like a lot of people that have bought this Vision Pro

They bought it, they used it a few times, and then it sits on the shelf because you need to remember that, yeah, right, I can watch a movie with it. yeah, right, can use it to do this thing. You've got to sit down, you've got to put it on, you've got to turn it on. It becomes this destination. When you're using it, you're not doing anything else. The last thing that I think Facebook and Meta, should say, did really well is leverage a partnership, but in the right way. So on the last episode this week, we had Peter, the founder of Influential.

Pablo Srugo (07:09.398)
And he talked about partnering with IBM when he was super early. And obviously IBM is a behemoth. It certainly was much more relevant back then as 10 plus years ago. And IBM helped them. had IBM Watson back then and AI wasn't really all that popular. IBM was like trying to be on the cutting edge. So long story short, Influential leveraged IBM to build some AI capabilities into their product. But the main thing that they did is they leveraged IBM's brand and credibility when they went out and sold to customers, they would say that they're like backed by IBM, that they're built on IBM.

And that just helped lubricate those sales. The thing that didn't work is that IBM also pitched them on the idea that their, their salespeople, of which they had, think 300,000 salespeople or so would sell influentials product. And obviously influential got no sales out of that at all. And it became a huge waste of time. And this is what I see really often with early stage founders that sometimes land a partnership or are trying to land a partnership. And they believe that that partnership is going to drive distribution for them.

And that almost never works because the reality is there's kind of an order to these things. have to first, you, you personally need to learn to sell your product. Then you can teach other people in your organization to sell your product. And only then can you really think that you could teach an external organization to sell your product. And it's even more than that. The reality is that partnerships with companies that are much bigger than you, those companies have

No incentive to push your product on top of the million other things that they could be pushing. And so the long story short is you need to create your own demand. And if you go back and you look at how Meta Ray-Ban did the launch, yeah, they partnered with as a little bit like Satica, the makers of Ray-Bans really early on and they did it because they wanted to build a solid product with a lot of credibility. I that's the other thing is that people like Ray-Bans and it's not credibility in the sense of, it's going to work because you know, they're classes.

But it's credibility in the sense that it's a brand that people are already used to wearing on their face. They've already won the kind of fashion battle. And so Metagast to just write that. But the thing they did not depend on as Lorelaxatica for is marketing. They did their own push for a long time. And only now, when you go to RayBan.com, do you see these glasses as kind of front and center because it's proven to be so successful of a product that obviously at this point, as Lorelaxatica and RayBan are like, okay, yeah.

Pablo Srugo (09:33.26)
This is working. Let's push it. At the beginning, they've got their Ray-Bans. They've got a bunch of different models. This is just like one more model for them, obviously, because it's meta. It's more important than if they were to partner with some random startup, but they're only going to do so much. that's my point. They're working with meta and they're still only going to do so much. Imagine what a big company that chooses to partner with you is going to do for you. They're not going to do anything. That's the reality of it. The reality is you have to create your own domain. And only when

the market is clearly responding only when you have clear product market fit is there a chance that partnerships can actually accelerate distribution. But make no mistake, partnerships at best on the distribution marketing side, they're an accelerant. They're never going to be the driving force, the thing that gets you from zero to one. They can get you credibility. They can get you a bunch of other things. They can actually lead to maybe strategic investments and these sort of things that can help out. But they are not going to be the reason that you hit a million or two million in ARR.

If you listen to this episode and the show and you like it, I have a huge favor to ask for you. Well, it's actually a really small favor, but it has huge impact. But whichever app you're listening to this episode on, take it out, go to a product market fit show and leave a review. Please. It's going to help. It's not just going to help me to be clear. It's going to help other founders discover this show because the algorithms, whether it's Spotify, whether it's Apple, whether it's any other podcast player, one of the big things they look at is frequency of reviews.

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