PICO Stops Burning Money for Expansion, Team Size Significantly Shrinks

ByteDance‘s VR business PICO is gradually shrinking its front line this year. On the one hand, PICO has lowered its sales target for this year and shifted focus from burning money to expanding the market to deepening user retention. On the other hand, PICO’s team size has also significantly reduced, with multiple rounds of layoffs taking place this year.

A former employee revealed that in February of this year, PICO conducted a relatively large-scale layoff and did not provide internal transfer opportunities. Since then, some employees have had a sense that the situation is not right and have chosen to resign or transfer internally.

The number of PICO employees during its peak period exceeded 2000, but according to a report by The Paper, the current overall number of resignations at PICO is close to half of the peak period. Ren Lifeng, who is responsible for PICO’s content ecosystem business, will also leave at the end of the year. His status in ByteDance’s internal system Feishu is marked as ‘on leave’, and Ren Lifeng’s department is one of the hardest-hit areas for employee resignations at PICO.

According to an insider, the difficulties currently faced by PICO are closely related to its senior management’s strategy. At the beginning of ByteDance’s acquisition, PICO adopted an aggressive approach and set overly ambitious goals without fully considering the overall market environment. With a significant decline in domestic VR sales this year, PICO has also lowered its sales targets and experienced internal strategic fluctuations with constant adjustments.

Last year, PICO made a high-profile release of its consumer-grade VR product, PICO 4/Pro. It not only entered the domestic market but also expanded into overseas markets such as Europe, Japan, South Korea, and Southeast Asia. In order to boost hardware sales, PICO significantly lowered the selling price of the PICO 4, even incurring a loss of around 500 yuan (approximatly ＄68) per device sold. At the same time, the size of the PICO team expanded greatly which resulted in a large number of redundant personnel. The integration between the original PICO team and ByteDance’s team was also not smooth. There were rumors circulating earlier that internal conflicts arose between the ‘Douyin faction’ and ‘PICO faction’ within PICO.

SEE ALSO: ByteDance Denies Shutting Down VR Business of PICO

The expansion dilemma faced by PICO is directly related to the overall market situation of VR. This is not only a problem for PICO alone, but other domestic AR/VR device companies are facing even bleaker conditions than PICO. According to IDC data, in the first half of 2023, China’s AR/VR headsets shipments reached 328,000 units, a year-on-year decline of 44%. PICO occupies 58.7% of this market share, while other brands only have a small fraction compared to PICO.

At the same time, PICO failed to make timely and effective strategic adjustments in response to the current environment. In the VR industry where breakout content is highly needed, PICO’s application and content development have been unsatisfactory. For example, last year PICO lagged behind many competitors in terms of the number of applications.

In September this year, Guo Wenshan, the Head of Game Business at PICO China, stated in an interview with media outlets such as Jiemian News that in terms of absolute numbers, they have already achieved a leading position this year. However, the real pressure faced by PICO comes from its users. Implicitly, he meant that retaining existing users and increasing their engagement is crucial for PICO to truly establish a healthy developer ecosystem. Only by building a richer application ecosystem can PICO attract more new users.

But it depends on ByteDance’s patience with PICO. Recently, there have been media reports stating that the head of PICO went to Singapore to report on their work to ByteDance management and received feedback that ByteDance will gradually abandon the PICO business. However, the person in charge of PICO stated that the company will continue normal operations and continue to strengthen investment in product technology.