"If VR is not a priority at Facebook, then why should it be a priority for us?" asked Craig Elimeliah, managing director of creative technology at agency VML, which has worked on virtual reality campaigns for brands like Gatorade and NAPA Auto Parts.
Elimeliah says the immediate message from Facebook is that VR is not as hot as it was originally perceived to be, suggesting VR content may no longer be a core priority for Facebook.
Indeed, Facebook's decision comes on the heels of CEO Mark Zuckerberg's speech at the F8 developers conference signalling more of a focus on augmented reality, which can be executed effectively using only a smartphone, for example.
"The barrier to consumption of content through various headsets, and the lack of 360 degree cameras that are readily available to create immersive content, may be why we are not seeing explosive growth," Tom Edwards, chief digital officer at Agency Epsilon.
"The key for any new technology, especially one like VR is to empower the masses to create their own experiences," Edwards said. "This is why we see Facebook shifting towards the camera as the first augmented reality platform, as it's built on behaviors consumers already engage with."
'Remaking stuff for a whole new world'
Facebook's California-based studio was meant to create films and video content for its clunky Oculus virtual reality headset. The idea was it would inspire Hollywood companies to do the same thing, and Facebook put up $250 million to help it achieve its goals last year. The investment spurred a fresh look at things like the 2016 NBA Finals and creative shorts such as "Through the Ages."
Facebook said it will use $50 million from its budget to exclusively fund non-gaming, experiential VR content.
Not every marketer assumed this signals the end for virtual reality.
"For me the move is less about Facebook's belief in VR as a compelling creative canvas that can make immersive experiences and more about Facebook's desire to be a thin interface that connects people with what they love from each other and from other companies," said Tom Goodwin, exec VP and head of innovation at Zenith, a part of Publicis Media.
Taking traditional movies and projecting them with VR simply isn't going to cut it if VR is to really take off, Goodwin said. "It's about remaking stuff for a whole new world, not applying the same assumptions of the past," he said. "We will likely also see more adoption of it in the business landscape, everything from training to surgery, to on site engineers being helped remotely."
'We'll get there at some point'
Johannes Saam, senior creative developer at VR studio Framestore, said Facebook's news signals it trusts the community to be creative and innovative. "Facebook can focus on other initiatives instead of creating entertainment content, which makes room for others to fill that void," Saam said.
Framestore has created tongue-and-cheek VR campaigns for brands like Chik-fil-A, but has also ventured into making social content to hospitalized children get through serious illnesses.
"What's holding VR back is the price of hardware and ease of use," Saam said. "It's still expensive and needs to be carefully set up. Social VR is something that will create a larger demand for lots of people."
And as of now, the demand just isn't there: Forty-two percent of U.S. online adults have never heard about VR headsets and an additional 46% said they don't see a use for VR in their lives, according to a recent report by Forrester Research. And only 8% of marketers are using VR in their ad campaigns.
"It's important to remember that the technology has leaped over the last year, but expectations have been so high that we're slow to catch up to the expectations of VR as a transformative channel with endless possibilities," said Samantha Merlivat, an analyst at Forrester Research. "To date, VR is a niche channel, with limited possibilities. We will probably get there at some point, but 2017 isn't it.""