With its $2 billion purchase of Oculus Rift, Facebook has made its second bold acquisition of a rising technology star, little more than a month after its $19 billion mega deal with WhatsApp. This time it’s not the price tag surprising everyone, but the strategy. Does Mark Zuckerberg envision a future where strapping a headset to our faces becomes the default route to going on Facebook? It’s left many scratching their heads.
Zuckerberg, criticized at one time for being too slow to move Facebook onto mobile, explained he’s “getting ready for the platform of tomorrow… Oculus has the chance to create the most social platform ever.” Put on an Oculus headset in the future and you might get a virtual court-side seat at a game, study in a classroom somewhere else in the world or meet a doctor face-to-face, Zuckerberg said.
Yet the Facebook founder didn’t elaborate much more on that vision during his conference call earlier today, and that perturbed at least one analyst with 25 years of experience in the virtual reality field: “He’s telling the same story that has been told for 20 years,” said Gartner researcher Brian Blau. “‘It has great promise for the future. It’s going to change the way we communicate.’ But that promise hasn’t been realized.”
Blau contends that having tried the Oculus himself at last week’s Game Developer Conference in San Francisco, the apps and games being created for the device, “still aren’t that compelling from an immersion experience.” He said it is still extremely difficult to build compelling and effective virtual reality experiences.
Oculus has said it will start selling a consumer product in 2014, and till now has shipped an impressive 60,000 units to developers at $350 each, but Blau believes it will take between two and five years for the startup founded by 21-year-old Palmer Luckey to become a sustainable, $2 billion business. To justify Facebook’s valuation, Oculus would have be selling millions of units costing between $300 and $500.
Virtual reality, he adds, is a much easier sell for enterprise customers like car makers and doctors, who have more limited use cases. Marketing it to consumers is still years away.
And that makes Facebook’s acquisition of Oculus look more like a strategic investment than an acquisition it can start capitalizing on any time soon.
It’s telling that several companies reportedly showed interest in buying Oculus before Facebook swooped in, according to the Verge, and Zuckerberg’s team spent a “marathon weekend” pushing the deal through, Re/Code reports. Last month also Facebook accelerated its $19 billion overture of WhatsApp, wrapping up proceedings in less than week after it got wind that Google GOOG -0.19% was talking to the messaging giant’s founders too.
Having secured his ownership of WhatsApp, Zuckerberg told the founders they could focus on scaling to 2 billion users over the next two to three years, work independently and not worry about monetizing.
Zuckerberg may well have made similar overtures to Oculus Rift in a bid to stay ahead of competitors like Google, which also just announced a partnership between its Google Glass program and Italian eyewear giant Luxottica.
In the process, he’s incubating the front runner of a “promising” technology that could play a key role in the future of social media, albeit one that we’re unlikely to wear on our heads for another two years or more.
That long-term bet on Oculus may also revitalize the nascent wearables and virtual-reality industry, in the same way the Facebook-WhatsApp deal has seen other messaging competitors field more calls than ever from potential investors.
“It’s great news for the industry,” says Matt Kitchales, a product manager and marketing director with wearables startup Meta. The Portola Valley, Calif-based company makes augmented reality glasses that allow the wearer to swipe images and text projected in front of them. Like Oculus, it plans to bring a product to market this year: the $667 Meta 1 this summer, and the $3,650, sleek metaPro several months later.
Zuckerberg was “passionate” about gaming and “the worlds you can create through augmented reality,” Kitchales says. “I’ve waited for this action from Facebook, [and] this is an action that says… we’re doing more stuff than just Facebook. We’re taking the next step, just like Google did.”
Parmy Olson via Forbes