Facebook has acquired virtual-reality hardware developer Oculus VR for $2.3bn. The purchase is comprised of $1.6bn in stock, $400m in cash and $300m performance-based earnout.
Founded in 2012, Oculus VR’s headset, Oculus Rift, came to prominence toward the end of 2012 via a round of crowdfunding enabled by Kickstarter, surpassing its target of $250k by nearly 1,000%. 2013 saw two further investment series, $16m in June and $75m in December. Launch details remain unconfirmed.
Some of our thoughts on the VR market have already been offered in a recent Insight, accompanying Sony’s reveal of its Morpheus headset. The key point therein – that VR is a perennially interesting platform but one that still has a lot to prove in terms of application and market reach – still holds in the wake of Facebook's purchase.
More tangibly, however, there will be a recalibration of sentiment among developers, as Oculus repositions from being a startup, to a Facebook company.
We see two short-term priorities for Facebook:
1) Oculus Rift needs to be allowed to capitalise on the momentum it’s cultivated. Its name and cachet were built by appealing to enthusiast audiences, and the potential for enhancing game experiences that would be most pliant to these players. If VR feels better-poised in 2013, it's thanks to these such efforts, and taking them to term will be vital for feedback and experience, if not revenue.
2) Manage the expectations of investors. On the one hand, Facebook has taken one possible step to combat concerns of the company being ill-prepared for major long-term switch-up in terms of device categories through which consumers access the social network. On the other hand, where VR is concerned, painting a roadmap with vibrant scenarios is tempting but risks placing the cart before the horse. Facebook will also need to remind investors of the sheer distance and numerous hurdles that lay ahead on such a road.