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Insights From The Entrepreneur Who Sold His VR Startup To Facebook.

Michael was the owner and COO of OmniVirt, a VR advertising startup, acquired by Facebook (2020). Before that, Michael was the head of content at YouTube and now is working with Madison Square Garden’s Sphere, creating the world’s highest resolution LED screen.

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10 years ago, when you weren’t streaming 4K videos on 4G, videos of grainy skateboarding dogs and cats playing the piano were going viral on YouTube. This will never monetise, many thought. YouTube at this time were trying YouTube Brand Channels, being charged $500,000 to own Youtube.com/Pepsi. It looked great. But no body went there.

Then emerged YouTube True View Ads. Everything changed.

The pioneer of True View Ads, Michael Rucker, believes VR is at a similar inflection point.

From defining content strategies at YouTube in its formative years, navigating the choppy waters of VR startup OmniVirt, and now spearheading Madison Square Garden’s Sphere project, Michael’s journey is an exhilarating ride through technological evolution.

He’s helped shape the world of online video, challenged advertising norms with VR, and is now redefining live entertainment. As we delve into his story, you’ll discover why brands were willing to bet big on VR and how VR companies survived when the Metaverse was ‘hot and not’. Moreover, you’ll get an insider’s view of how Rucker and his team are building the world’s highest resolution LED screen and what the future of live entertainment might look like.

This article will breakdown his talking-points and more.

This is a front-row ticket will reveal the lessons learned, the strategies deployed, and the understanding of timing crucial in the sale of OmniVirt to Meta.

“The first time I put on an HTC Vive, I was blown away by the experience,” Rucker recalls, “In my mind, it’s not an ‘if’, it’s a ‘when’.”

But, like any emergent technology, VR faces its own set of challenges. The initial high cost of production has somewhat pigeonholed VR into the realm of gaming and technology enthusiasts. But Michael is quick to draw parallels from the past to illustrate why this is a temporary hurdle.

Much like YouTube.com/Pepsi, from earlier, there is a standalone Volvo VR app, or a standalone Warner Bros VR experience. It may looks amazing, or be a great demo, but it is not — in the long run — what will monetise in VR.

As the Head of Content Strategy at YouTube, Michael’s time at YouTube, from 2009 to 2016, was spent defining content strategy, improving talent discovery, and driving the platform’s marketing and commercialisation activity. Moving YouTube.com/Pepsi, into something more meaningful and trackable, is ultimately, a similar path VR must take.

Pre-YouTube, getting video created and distributed was difficult, with high production costs and walled platforms. Now, any one with a smart phone can be a star over night, with YouTube making it virtually cost-free and remarkably simple for anyone to create and disseminate videos.

While the current cost of production might limit VR to gamers and enthusiasts, Michael believes that production costs will eventually decrease, much like the transition from TV to YouTube.

From here, he envisions VR making inroads beyond gaming and enterprise.

YouTube in 2007

“It’s early days for VR,” he says, “and the early days of YouTube were 4x3 pixelated video. You would have never seen it disrupting TV the way it has. So, look how far that has come; we cannot forget how quickly things change.”

“At each transition — from desktop, to mobile, now mobile to virtual reality — both brands, and publishers have to figure out how best to distribute their content on that platform.”

Over time, YouTube has carved its niche in the world of advertising. The platform’s unique attributes — its potential for immediate feedback and two-way communication — have not just facilitated content creators but empowered them. They’ve been able to construct unique IP, moving from mere content creators to industry stars. This ability to scale within and beyond the YouTube platform has been transformative. A characteristic Rucker believes VR could mimic.

As VR technology continues to advance, it has potential to create immersive experiences merging education, training, socialising, and more. The beauty of VR, much like YouTube, lies in its malleability — its potential to mold and adapt to various forms of content creation and distribution, in turn, fostering an entirely new realm of unique IP.

In essence, Rucker’s vision positions VR as not merely the next platform but as a transformative force that could fundamentally change the way we create, consume, and interact with digital content, just like YouTube once did.

OmniVirt promised to help publishers and advertisers unlock the potential of virtual reality. It was a tech solution to help publishers explore 360 and immersive content.

This was the first step ad-supported VR experiences.

While it wasn’t the only startup focusing on VR/360-degree ads (with companies such as Immersv and VirtualSky also in the market), OmniVirt, under the leadership of Michael, differentiated itself by offering a 360-degree ad experience in the mobile browser. This meant that users didn’t need to invest in an expensive headset or download a separate app.

For instance, GE executed a campaign using OmniVirt technology on the New York Times website. OmniVirt-powered Infiniti ads could also be spotted on the NYT front page. Initially, these appeared like standard banner ads, but upon tapping or clicking, viewers could start exploring a 360-degree video.

This approach, while perhaps not as exhilarating as a full-on VR experience, broadened the audience reach for advertisers using 360 content, according to Rucker. Other publishers that partnered with OmniVirt included Vice, AOL (which owned TechCrunch), the Wall Street Journal, and Twitter.

OmniVirt attracted a growing roster of high-profile clients and publishers. Brands and publishers alike recognized the value of OmniVirt’s technology in creating engaging, immersive ad experiences that captivated audiences and drove higher levels of interaction.

OmniVirt’s unique solution was well received by brands, helping validate their problem-solving approach through sales. However, achieving a viral loop remained a struggle. Many clients, while keen to invest in innovative experiences, didn’t consistently return for more. Michael recalls a $400,000 contract with LG, but the company didn’t come back to buy from them again.

Despite this, by the end of 2019, OmniVirt had reached a million in revenue. For Michael, however, the question of whether they were a platform or an agency persisted.

As a platform, OmniVirt leveraged cutting-edge technology and had a scalable model, but in actuality consistently performed a service-oriented role, crafting unique 360 ad campaigns for clients.

Michael (L) and Brad (R) Co-Founders of OmniVirt on Day 1 at Facebook.

“Metrics help you get validation as a startup,” Michael asserts. Without the traditional performance reviews that come with typical jobs, startups must find other means of assessment and course-correction. “What are the metrics that matter?” Michael muses, reflecting on his learnings with OmniVirt.

For OmniVirt, Michael say the initial litmus test was simple: “Will customers pay for this thing?” Revenue thus became their key metric, a straightforward approach that made sense in the early days. However, the challenges soon manifested. OmniVirt found itself lodged within clients’ ‘innovation budgets,’ a space that facilitated initial engagement but posed difficulties for retention.

“We had really big brands working with us, paying us a lot of money. This was an amazing feeling for a company at our stage,” Michael recalls. However, the elation was short-lived as brands failed to return for more services, a stark reality that was starkly demoralizing. The conundrum of churn unraveled the dream of a smooth journey from $1 million to $10 million to $100 million. The ‘Number Go Up’ strategy had a glaring blind spot, and other metrics like Customer Retention proved more significant.

“When they wouldn’t come back it was demoralising and felt like we weren’t working on right thing… We were a Metaverse monetisation company, so when Metaverse was hot, so were we, and it goes from hot to cold.” This is where focusing on the right metric can keep you certain you are working on the right things.

What OmniVirt was good at was building products, testing it, and seeing what worked. Trying 360 Video, 3D banner ads, AR and VR to find what worked with their customers. These were the choices OmniVirt could control.

This approach led to OmniVirt’s profitability and kept them afloat. They began forging relationships with the giants of the space, including Facebook, early in their journey. “We [Brad too] were ad-men, and with the metaverse element, the alignment with Facebook was apparent early on,” Michael remarks. The relationship with Facebook became instrumental when unforeseen challenges emerged.

In March 2020, just before the onslaught of Covid, nearly 70% of OmniVirt’s clients were in the travel industry. As Covid hit and the tourism sector went into hibernation, OmniVirt’s landscape drastically changed. However, their ongoing relationship with Facebook, a company with the resilience to withstand the storm of Covid, led to a timely acquisition. “The timing of the sale couldn’t have worked out better for OmniVirt,” Michael reflects, also recognising outside of metrics, timing and luck are things you can’t control.

Michael’s experiences pose questions for other startups to consider:

But his biggest takeaways from exiting a startup can be considered even earlier.

Like what you are working on, and like who you are working with.

The MSG Sphere in Vegas, opening late 2023, a new immersive venue.

Venturing into a bold new project, Michael Rucker has transitioned from virtual to physical spaces with MSG Sphere, a $1.8 billion entertainment venue in Las Vegas.

Bringing experience from his OmniVirt and YouTube, his focus is on the future of live entertainment. Exploring how to provide the Metaverse experience in a real-world venue.

“It’s a unique project, in a lot of ways, for a combination of reasons,” Michael shares. “Scale is the first thing. It’s a very large venue, and it’s a large venue that houses all these different technologies that have been put together for the first time.”

Rucker’s key objective is to revolutionise live entertainment and provide a shared Metaverse experience to audiences in a real-world setting. Contrary to the isolation of VR headsets or staring down at a phone screen, MSG Sphere aims to offer an immersive, collective journey for spectators. “What does the future of live entertainment look like?” Michael questions, “A big challenge of the Metaverse is the energy from other people — you can get this somewhat virtually — but what does the Metaverse look like with 20,000 people?”

The Sphere stands out with its combination of size and advanced technology. The exterior alone features 600,000 square feet of programmable lighting. Inside, the venue employs ‘beamforming’ technology with 157,000 ultra-directional speakers, while the screen promises the world’s highest resolution.

“But nobody’s done it on this scale, all together, all at the same time,” Rucker points out. Indeed, the challenge lies in integrating these elements to work harmoniously, offering audiences a seamless, immersive experience.

Besides the cutting-edge technology, Michael is excited about the diverse range of events the Sphere will host. “MSG will create original content. Those will be the primary shows; there will be cinematic experiences to the next scale. We are also going to have performances, of course; there will be artists that come through residencies, concerts, and so on, as well as marquee events: one-off sports events, corporate events, award shows, and that sort of thing. Esports and gaming events are going to be another big aspect.”

The vision for MSG Sphere represents an ambitious step forward in live entertainment. “We just have so much screen, so much technology, and so much scale. We can really wow audiences and take them to different places,” Michael concludes. In his new role, he will harness his expertise in digital entertainment and immersive technology to shape the future of real-world, live performances.

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