Sales of Facebook’s Oculus VR headsets and Portal smart speaker are tanking

Rob Price/BI

Facebook’s Q1 2019 financials show that sales of its smart speaker Portal and its Oculus virtual reality hardware fell year-on-year.
The sales decline was particularly drastic from the holiday quarter, when more people bought the smart speaker and the headset for Christmas.
Facebook doesn’t sound like it is abandoning its hardware plays, but the declining sales figures show it’s hard for the company to come up with new ways of making money.
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Facebook probably shouldn’t pivot to being a hardware business any time soon.

The social media company announced its financials for the first three months of 2019 on Wednesday evening, and there was one nugget that suggested sales of its Portal smart speaker and Oculus headset aren’t doing too well.

Rob Price/Business Insider

Facebook doesn’t state revenue for the Oculus division or for the Portal speaker, instead lumping both into the category of "Payments and other fees."

According to chief financial officer Dave Wehner, revenue from that arm of the business was just $165 million, or less than 2% of Facebook’s overall revenue for the quarter of $15.1 billion. That marked a decline of 4% year on year and a whopping 40% from the holiday quarter.

Wehner’s explanation was that more people were buying Oculus headsets and Portal speakers as Christmas gifts: "Payments and other fees revenue was $165 million, down 4% year-over-year and down 40% from Q4, which benefited from holiday sales of Oculus and Portal," he told analysts on Wednesday.

Perhaps tellingly, Oculus wasn’t mentioned at any other point during Facebook executives’ earnings call with analysts. This seems odd, given CEO Mark Zuckerberg was convinced just a few years ago that virtual reality would be the next major computing platform.

Portal was mentioned one other time during the call, when one analyst asked about what Facebook might be up to with voice assistants. The company is working on its own rival to Siri and Alexa, according to CNBC.

Facebook’s Portal speaker does obey voice commands but doesn’t come with its own proprietary assistant. Instead it integrates Amazon’s Alexa.

Zuckerberg said the Portal speaker had been useful in terms of scouting out demand for voice products.

Here’s what he said: "Most of what we build — one of the things that’s different about Facebook and social products is more of it is about people interacting with each other than just people interacting with us, right? And so we’re certainly very focused on things like video calling and voice calling and ways that people can communicate with voice.

"We have worked on some voice products on Portal; that’s an important way that people interact. And having Portal out in the market has been very valuable in terms of seeing how people want to use that and for – so our teams can have a real target to shoot at and iterate on and continue improving week over week. That’s been a meaningful improvement. But in all of these different ways, voice and how people interact with each other and eventually building products that allow people to interface with our products through that, we’re quite focused on this."

Given Facebook is about to give its Oculus division its own multimillion-dollar building near San Francisco, it doesn’t look the company will be abandoning virtual reality any time soon. Likewise, rumours of a voice assistant means it makes sense to try and iterate on the Portal speaker.

But the declining sales figures shows that it’s tough for Facebook to come up with new ways to make money outside of its core ads business.

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