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Facebook-Oculus Deal Hints at Bigger VR Trend on the Horizon

March 28, 2014

Facebook has bought virtual reality technology company Oculus VR, Inc. for a reported $2 billion. Oculus is known for its flagship product, the Oculus Rift, a gaming-oriented virtual reality headset that started as one of the most successful Kickstarter projects of all time.

The Rift has generated a huge level of buzz in the industry, even though it is still available only to video game developers. Oculus does not yet have a consumer-facing product.

As Business Insider noted, the power of the device is “nearly impossible to describe,” immersing the user wearing the headset into a digital world that feels real. Mark Zuckerberg has reiterated this sentiment: “Oculus’s mission is to enable you to experience the impossible. Their technology opens up the possibility of completely new kinds of experiences.”

Where does Oculus fit into Facebook’s business plan?

Zuckerberg released a statement about the acquisition that hints at where Oculus fits within Facebook’s long-term business plan. In his remarks, he says that he sees potential for Oculus beyond the gaming world.

“After games, we’re going to make Oculus a platform for many other experiences. 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.”

It’s a vision that combines the real-world communication and connection of the Facebook platform with the “virtual presence” of experiences like Second Life, enabled through hardware that creates a truly immersive experience. On a conference call, Zuckerberg called the acquisition a “long-term bet on the future of computing.”

Oculus is not the only player in the space of modern virtual reality; just a couple of weeks ago Sony announced its own VR headset, and there are strong signs that Microsoft is exploring a similar initiative. But Oculus has had time to build developer support, and to refine their platform. They may be the closest to realizing the decades-old vision of VR pioneer Jaron Lanier; virtual communities interacting in three-dimensional space via avatars.

As was the case at the beginning of Facebook, it appears as though Zuckerberg is seeking to get ahead of consumer behavior, in order to help shape it. It’s possible that he is looking at a larger picture, over a longer timeline, in which Facebook (the company) is significantly larger than Facebook (the product).

Facebook’s recent buys support this model: within the past several months the company has bought a popular photo sharing service (Instagram), a giant messaging ecosystem (WhatsApp) and now a next-generation hardware platform (Oculus); all products which fit into the company’s core competencies of social and community interaction. Google and Apple are positioning themselves similarly in the digital space – making purchases and initiatives that broaden their reach far beyond the scope of the products that launched them.

In a more immediate sense, purchasing a buzzy hardware startup also benefits Facebook in that the company has acquired a team of highly talented developers, and aligned themselves with an upcoming wave of technology in one fell swoop.

Of course, it’s also possible that Oculus won’t fit into Facebook’s overall strategy nearly so well. The initial response from Wall Street was a sharp after-hours drop in Facebook’s stock value; a distinct sign that the logic of this purchase isn’t clear to the larger public.

What does this mean for the industry?

The VR space may seem like a futuristic (or perhaps archaic) concept to many people, but it will only continue to grow – and the emergence of high quality, low cost 3D modeling will drive this space in a big ways.

While Wall Street may not see it yet, Facebook has just bought a significant piece of what could be the next big communication platform. If Oculus can truly enable shared experiences that couldn’t be dreamed of before (sports, entertainment, education and more), this is a space that Facebook doesn’t want to miss. Expect Facebook to give Oculus everything they can to make that vision a reality.

What does this mean for brands?

There are two real takeaways for brands watching this all unfold.

First: virtual reality hardware and experiences are on the immediate horizon. Some brands have already dipped their toes in, such as HBO’s virtual elevator ride for “Game of Thrones” at SXSW this year (client).

Whether it’s Oculus, Sony’s Morpheus, or another as-yet-unnamed contender, it’s almost assured that within the next year or two this hardware will be in consumer hands, enabling dramatically new and engaging experiences. The brands who can take advantage of this opportunity will have a significant first-mover advantage.

The second take-away is a note of caution. Facebook’s acquisition provoked an immediate and very strong negative reaction among the Oculus fan-base. Those who had backed the Rift from the very beginning expressed feelings of abandonment and betrayal, and some prominent figures even distanced themselves entirely from the platform.

It may be that this backlash is overblown; it’s always the angriest voices that are heard the loudest in the digital world. But whether or not there are lasting ramifications, it’s important to pay attention to the shape of public sentiment.

Mark Avnet, Layne Harris and Fitz Maro contributed to this report.

Photo via TIME Magazine