27 Mar 2014 Three ways Facebook’s $2bn move into virtual reality will drive growth
Facebook agreed the acquisition of virtual reality (VR) firm Oculus VR for approximately $2bn on Tuesday with CEO Mark Zuckerberg claiming it could become “the most social platform ever, and change the way we work, play and communicate”. Oculus VR has created ‘low persistence’ technology for a prototype wearable tech gaming headset called Oculus Rift. The device generates a 3D virtual reality world which changes according to the wearer’s head movements in two to three milliseconds.
However, Facebook’s acquisition will drive VR’s growth beyond prototype gaming. Facebook is looking to create an entirely new social platform, revolutionise the gaming sector and create completely new means of mainstream entertainment.
Facebook is anticipating the next platform after mobile
In a shareholder call discussing the acquisition, Zuckerberg made it clear he sees VR’s communications potential as a higher priority than gaming. He described mobile as the “platform of today”, but added “Oculus can be one of the platforms of the future”. Elaborating, Zuckerberg said social currently allows people to share moments, whereas VR will let them “share entire experiences and adventures”.
Zuckerberg’s strategy is to introduce VR to Facebook’s 1.3 billion users and “reach another billion people” through the technology in five to ten years. He also highlighted the potential for monetisation, for example through advertising.
Facebook is not the only company exploring VR. Sony unveiled its own prototype headset this month, Project Morpheus, for PlayStation 4. Google Glass could one day be used in this way, while Apple, Microsoft and Valve are also exploring VR. But Oculus Rift, which has raised nearly $2.5m since launching on Kickstarter in 2012, appeared the most advanced at this month’s Game Developers Conference.
Although a surprise, Facebook’s $2bn acquisition should be seen in the context of its $19bn purchase of Whatsapp, another key part of the social network’s growth plans, as discussed on our blog last month. Owning neither a mobile OS nor app store like Apple and Google, Facebook has missed out on significant revenue, which buying Whatsapp sought to rectify. In purchasing Oculus VR, Facebook is determined not to miss out on owning an OS on future platforms. This time, instead of buying a market leader like Whatsapp or Instagram, it has taken a gamble on unproven innovation and future potential.
Affordable VR gaming for the mass market
VR was seen as mainly an upcoming growth driver for the gaming sector until now, as detailed in our last blog post. Game demos on Oculus Rift and Project Morpheus have allowed users to experience fighting intergalactic space battles in Eve: Valkyrie or surviving a shark attack in Deep.
For now, Facebook will allow Oculus VR to continue targeting gamers. Demand is high among games developers and Oculus VR received 75,000 orders in a week for its $350 development kit. Through the acquisition, Oculus VR will receive recruiting, marketing and infrastructure support from Facebook. The immediate goal, Zuckerberg said, is “building up the product and making it affordable and ubiquitous”. The global games market could be worth $93bn this year and consumer demand for new, affordable technology would drive significant investment from games developers.
VR in mainstream entertainment beyond gaming
Beyond communications and gaming, Zuckerberg highlighted a range of VR possibilities on his Facebook page:
“Imagine enjoying a court side seat at a game, studying in a classroom of students and teachers all over the world or consulting with a doctor face-to-face – just by putting on goggles in your home.”
Other possibilities likely to be explored are VR conference calls and virtual tourism, allowing the wearer to experience destinations around the world and universe. For example, the Project Morpheus team is working with NASA to create a virtual reality of Mars for users to walk on.
Through its $2bn move into VR, Facebook is aiming to pave the way for the next social platform after mobile. The gaming sector will be Facebook’s first target and although no release date has been projected for Oculus Rift yet, Facebook’s resources will significantly accelerate the process.