In your face, Facebook
Thwack! That’s the sound of tens of thousands of foreheads being slapped in despair. Now listen closely, can you hear that faint ‘snap fizz’? That’s the sound of half a dozen diet coke cans being opened in celebration at a two-year-old start-up firm in California.
After just five days (or so it is rumoured) of negotiations, Facebook agreed last night to buy virtual reality headset maker Oculus for $2 billion in cash and shares.
Oculus is now the world’s most successful Kickstarter-funded company, which took to the crowd-funding site in October 2012 to raise $250,000 to develop an improved prototype of its virtual reality goggles, known as Oculus Rift (although strangely it never linked a Facebook profile to the page…). It actually raised $2.4 million, followed by $91 million in two rounds of venture capital last year. Now the shareholder get $400 million in cash from Facebook with the balance in stock and performance pay.
It still doesn’t have a commercial product.
Enter Mark Zuckerberg. The Facebook founder was apparently impressed by his earlier visit to the offices of Oculus, and decided that its VR technology represented the shape of the future. On an investor conference call (which you can listen to here), he said that he wants to “start building the next major computing platform that will come after mobile”.
“History suggests that there will be more platforms to come and that whoever builds and defines these will not only shape all the experience that our industry builds, but will also benefit financially and strategically,” said Zuckerberg during his call. “Mobile is the platform of today. Today’s acquisition is a long-term bet on the future of computing. I believe Oculus can be one of the platforms of this future.”
The main focus of Oculus at the moment is its Oculus Rift headset, which has proved to be a massively popular concept amongst hard-core gamers and has around 75,000 development models on order. Despite this version being the size of a welding mask, and just as attractive, it works incredibly well. It is (in my opinion) the best consumer-ready immersive experience out there.
A lot of people agree. Unfortunately, many of these loyal followers have taken to the company’s website to voice their displeasure at the deal. Here’s a sample collection of comments:
“This is a pure sell-out because everyone at Oculus just got richer than their wildest dreams. Have a nice life, guys!”… “Not happy about this at all. The community who have served Oculus so well, never mind provided all the initial cash to make everything happen have just been burnt.”… “This is an epic betrayal.”… “Good job pulling one over on us Oculus. All that talk about revolutionizing things and it was just to build up value for an acquisition.” And so on.
Still, Oculus’ founders were happy. CEO Brendan Iribe and his co-founders took to the company’s blog to explain the reasons behind the deal (carefully omitting that money was a factor, of course):
“We’re culturally aligned with a focus on innovating and hiring the best and brightest; we believe communication drives new platforms; we want to contribute to a more open, connected world; and we both see virtual reality as the next step. Most important, Facebook understands the potential for VR.”
Risking a coke-induced sugar rush as they celebrate the news, the Oculus team entered their own virtual reality world by adding: “Facebook is a company that believes that anything is possible with the right group of people, and we couldn’t agree more. This partnership is one of the most important moments for virtual reality: it gives us the best shot at truly changing the world.”
Zuckerberg maintains that his mission is to make the world more open and connected. Recently, that has meant mobile, but whilst he acknowledges that there is still plenty to do in mobile, he has his sights set on the Next Big Thing, which will “enable even more useful, entertaining and personal experiences”.
This could well be virtual reality, and hence Oculus. Whilst Facebook will support the team’s efforts to focus on gaming first (with the promise that Oculus will continue operating independently within Facebook), there are plenty of other areas that have excited Zuckerberg.
“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,” he wrote on his personal blog, “just by putting on goggles in your home.”
No coincidence that Zuckerberg used the word “goggles” in his post, rather than “headset”. Facebook is becoming increasingly competitive to Google – and whereas Google is investing in its augmented reality Google Glass platform, Facebook is going to do something similar with its virtual reality Oculus platform. And just as Google can buy hardware firms (Motorola might have been a bust, but Nest promises much more), so too can Facebook.
“This is really a new communication platform,” Zuckerberg added. “Virtual reality was once the dream of science fiction. But the internet was also once a dream, and so were computers and smartphones. The future is coming.”
It all sounds rather vague. Sure, VR gaming could prove very popular, but is the time right for VR to really break through into the mainstream? OTT companies are constantly claiming new communications platforms and networks, anxious to break free of their reliance on the established carrier-based ones. Spotting a truly new communications model is incredibly difficult.
It might be true that many of these internet giants have more money than sense, but it would also be foolish to dismiss their lofty ambitious too readily.
The transaction is expected to close in the second quarter of 2014. Facebook’s stock price fell in after-hours trading, resulting in a loss of $1.8 billion of market cap.
Last word, though, goes to Oculus and the founders’ final line in their blog celebrating the Facebook deal: “We’ll see you in the Metaverse!”
Not bloody likely.