Social media giant Facebook’s $2 billion Oculus VR acquisition is sparking some strong reactions. One analyst suggested CEO Mark Zuckerberg was nuts and the company’s stock is trending down in morning trading. Oculus VR supporters aren’t happy, either.
Let’s review: Oculus is developing as a heavy hitter in immersive virtual reality technology. The company has established plenty of interest among developers, having posted more than 75,000 development kit orders for the Oculus Rift, its virtual reality headset.
Facebook is betting about $2 billion on the virtual reality technology and hopes to change the future of social media with it. But it’s not an all-cash deal. Facebook is forking over $400 million in cash and 23.1 million shares of its common stock. So why are people so upset?
“What in hell was the point of Kickstarter if you sell out to a giant company like Facebook? This is very disappointing. I will no longer be supporting the Oculus Rift in any way,” said Kickstarter campaign user Mike Cooper on the project's Kickstarter comment board. Another commenter, Adam Willis, agreed it’s a “terrible idea.”
The Future of the Web
Ray Young, an analyst at investment banking firm Sterne Agree, is taking a different view. He told us the acquisition is strategic and aimed at the future of computing and the future of the Web.
When he looks at the deal from Facebook’s perspective, he can see why the company believes virtual reality has the potential to become the most social platform ever in the next five to 10 years as the world evolves beyond the mobile platform.
“We think the rationale is if Facebook can own the pipe, the platform or the operating system of the future, it will have much greater control over its destiny,” Young said. “We believe Oculus has some of the most talented people in the field.”
Oculus Not Flinching
Zuckerberg is certainly convinced. The company announcement noted that several industries beyond gaming are experimenting with virtual reality technology. Facebook aims to extend the technology into some of those verticals, including communications, media and entertainment, and education.
So far, Oculus VR has been known mostly for its traction in the gaming industry. Still, many of the startup's early supporters are downright disappointed, not so much because the company is going beyond gaming but because, they believe, the company sold out.
Young was on the conference call Facebook held to address the acquisition. He said Facebook made it clear that while Oculus VR’s Rift virtual reality headset is becoming popular with developers, ultimately, the business model would generate revenue through software and services and also advertising.
“I have no idea how to make sense of this at this point,” a user named Richard Bettridge wrote on Oculus VR’s Web site after the announcement. “I have no doubt no matter what this means, for sure they will use highly sophisticated metadata collection of users for profit.” Facebook could not immediately be reached for comment on that view.
In any case, Oculus VR’s founders aren’t flinching at the criticism or worried about the future. “This partnership is one of the most important moments for virtual reality: it gives us the best shot at truly changing the world,” the company said in its announcement. “It opens doors to new opportunities and partnerships, reduces risk on the manufacturing and work capital side, allows us to publish more made-for-VR content, and lets us focus on what we do best: solving hard engineering challenges and delivering the future of VR.”