The bad news just keeps piling up for GoPro (NASDAQ: GPRO), which has lost over 80% of its market value over the past 12 months due to slowing camera sales, poorly timed and priced product launches, big writedowns, and wasteful buybacks.

Image source: GoPro.

GoPro's sales fell nearly 50% annually last quarter, its non-GAAP margins contracted more than 12 percentage points, and its bottom line sank deeper into the red. It also delayed the launch of its Karma drone, the only product which would have truly boosted sales in the first half of the year, back to the holiday quarter.

But one bright spot which GoPro has repeatedly highlighted is its early mover's advantage in the virtual reality space and its partnership with Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google. The two companies teamed up a year ago to co-develop the 16-camera Odyssey rig for Google's Jump VR platform for YouTube. Unfortunately for GoPro, that partnership wasn't an exclusive one -- Google recently announced that it would also team up with Yi Technology, which makes the action cameras sold by Xiaomi, and IMAX (NYSE: IMAX) to launch new rigs for Jump.

Why did Google partner with Yi and IMAX?

Google relies on software ecosystem growth, but GoPro generates all of its revenue from camera sales. Therefore, Google's goal is to boost mainstream awareness of VR videos with low-cost headsets like Cardboard and panoramic videos on YouTube. That growth will add a new dimension to YouTube, enabling it to evolve beyond traditional videos and staking its claim to the growing VR market.

For that strategy to work, Google can't depend on a single camera maker like GoPro, which sells its devices at premium prices. The Odyssey costs $15,000, and GoPro's new six-camera Omni costs $5,000. Therefore, Google must open up YouTube 360 and Jump to makers of cheaper cameras. That's why cheaper 360-degree devices like the Ricoh Theta, Kodak PixPro SP360, the IC Real Tech Allie, and 360fly can now be used to create panoramic videos on YouTube for just a few hundred dollars.

GoPro's Omni (L) and Odyssey (R). Image source: GoPro.

Yi Technology's new Yi 4K Action Camera 2, which will likely be integrated with its Jump solution, offers the same specs as the $500 Hero 4 Black but adds the touch LCD display of the $400 Hero 4 Silver for just $250. In the high-end market, Google will likely work with IMAX to create videos optimized for big theater screens -- something which isn't ideally done with GoPro cameras.

By casting its net as far and wide as possible, Google wants to expand its VR ecosystem to include the cheapest to the priciest 360-degree cameras. That growth should strengthen the software foundations for its upcoming stand-alone headset, the Daydream, and widen its competitive moat against Facebook's (NASDAQ: FB) first-mover Oculus Rift.

Why this is bad news for GoPro

Google's decision to partner with other camera makers undermines GoPro's attempts to establish itself as a market leader in VR. GoPro probably already noticed this conflict of interest -- that's why it launched its own non-YouTube site for VR videos called GoPro VR in late April.

During last quarter's conference call (as transcribed by Thomson Reuters), CEO Nick Woodman called GoPro VR "a place where users can upload and share their own VR content" and claimed that it represented "one of the world's most comprehensive platforms for capturing, stitching, sharing and enjoying VR content." Woodman also claimed the updated GoPro VR app "further establishes GoPro as a leader in virtual reality."

However, it's not hard for investors to read between the lines. With Google opening up Jump and YouTube 360 to more camera makers, GoPro could lose its edge as a "VR leader" on YouTube. It will probably sell fewer of its pricey rigs as Xiaomi's cheaper options, powered by the same hardware as GoPro's premium devices, hit the market. Google's support for other cameras also means that the notion that the search giant might buy GoPro to expand its VR ecosystem is deeply flawed.

Another broken promise

GoPro has broken promises to its investors before. When the company went public in 2014, it claimed in its S-1 filing that it would evolve into "an exciting new media company" which "scale as a media entity and develop new revenue opportunities." That promise still has yet to be fulfilled. It promised to launch a drone in the first half of 2016, but we all know how that went.

Therefore, GoPro investors should take Google's new VR partnerships seriously, and take GoPro's comments about virtual reality with a grain of salt. There are simply too many competing cameras in the VR camera market, and GoPro's bulky rigs look like they're stuck in the past compared to elegant single-device solutions like Nokia's Ozo.