Facebook's $2 Billion Bet On Oculus Rift Could Take Years To Bear Fruit

Posted: Mar 26 2014, 2:57am CDT | by , Updated: Mar 26 2014, 3:00am CDT, in Technology News


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Facebook's $2 Billion Bet On Oculus Rift Could Take Years To Bear Fruit

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.”

Yet he didn’t elaborate on that vision during his conference call earlier today, and that perturbed at least one analyst with 25 years of experience in the field of virtual reality: “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, 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 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 with its Glass program, locking in the front runner of a “promising” technology that will play a key role in the future of social media, albeit one that we probably won’t wear on our faces for two years or more.

Source: Forbes

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