Closed As it happened: Facebook buys virtual reality company Oculus VR

Facebook has just spent $2bn on start-up Oculus VR, in a bet that virtual reality headsets will be the next big social platform after smartphones. The world’s largest social network thinks virtual reality will become part of everyone’s daily life, being used in everything from entertainment to education. This is Facebook’s second big deal of the year, as Mr Zuckerberg goes on an acquisition spree to help maintain its dominance. Join Hannah Kuchler and Tim Bradshaw for a live blog of the call where Mr Zuckerberg is expected to explain the sense behind the deal.

While we’re waiting for the call to begin, here’s an irreverent guide to Oculus Rift for those who don’t know what it is: http://whiteguyswe…

And a slightly more serious take, Tim Bradshaw crowned Oculus Rift the winner of this year’s consumer electronics show:…1/oculus-ces-2014/

Tim also wrote about Oculus VR when they raised $75m at the end of last year, when that seemed like a lot of money:…-00144feabdc0.html

If pictures of young white guys getting excited about Oculus Rift don’t persuade you of its wow factor, here’s a video of a 90-year-old grandmother trying it out

We’re going to hear from Mark Zuckerberg, Brendan Iribe, Oculus CEO and David Ebersman.

Mark starts off by saying Facebook’s mission is to give people the power to share and make the world more open and connected. There are now 1bn people using Facebook mobile apps – strong enough for them to move on to look at what might come next.

History suggests that whoever builds and defines the next platform will benefit financially and strategically. He thinks that is virtual reality.

“I believe Oculus can be one of the platforms of the future”. When you put on their goggles you enter a completely immersive environment – different from anything I’ve ever experienced in my life, he says.

Oculus’ plans for virtual reality games will not be changing, he says. We will focus on helping them build out their product and develop their partnerships.

Then they will make Oculus a platform for much more – from seeing your doctor to shopping. Facebook remote medical services?!

Oculus has the potential to be “the most social platform ever” he says, clearly a big fan of the product.

There was a tone of finality to Zuckerberg’s summary – could it be he is suggesting that as Facebook has its long term vision now sorted, it won’t be making any more mega deals? Never say never…

Zuckerberg finished by saying Oculus bolsters the third of its three long term goals: 1. connecting everyone 2. understanding the world 3. building the knowledge economy, including future technology platforms.

Brendan Iribe, Oculus’ CEO, takes the mic.
“Virtual reality definitely sounds like something out of science fiction but science fiction has a habit of becoming fact.”
He says the two teams are culturally aligned – both like moving fast and are used to making “bold bets on the future”. Facebook brings bigger scale, new resources and opens doors to new partnerships, he says, so Oculus can focus on “delivering on the dream of virtual reality”.

Now Facebook’s chief financial officer – David Ebersman. Reviews the terms of the deal. Transaction to close in second quarter. In the near term it isn’t expected to have a material impact on Facebook revenue.

He said they are “very impressed” by Oculus and the combined strength will help drive the broader development and adoption of virtual reality enabling over time a range of services including and beyond games.

Forrester analyst James McQuivey strikes a cautious note on this deal:

Facebook’s acquisition of Oculus seems motivated more by fear than by good business alignment. Facebook missed the shift to mobile and has played catch up ever since. It feels like Facebook executives have sworn to never miss another big shift again. Only unlike mobile, virtual reality will only ever be a niche, even if it eventually becomes a very exciting one.

Unlike mobile, where you can realistically use your phone for hours a day, in any location, for any number of purposes, the eventual utility of virtual reality is bounded by physics, the physiology of your five senses, and the content industry’s inability to generate this kind of content easily.

Your Facebook friends certainly won’t be developing virtual reality content anytime soon. Which makes the fit between social media and virtual reality less than obvious.

The last time someone tried to marry virtual experiences with social media, Second Life emerged. And then quickly went nowhere.

Ebersman said WhatsApp and Oculus will both help Facebook create a value for shareholders over the next decade.

Call now open to questions.

The creator of virtual-world game Minecraft is unhappy about this deal, according to a tweet just now:

First analyst say give us some confidence that you were right to buy Instagram. That deal, in 2012, was decades ago in Silicon Valley years.

David Ebersman said the aim for Instagram was to grow service and in the two years they have done better than anticipated. That deal is a “nice proof point” of the strategy to leave companies to operate independently and just use Facebook’s resources where it makes sense.

Mark says Instagram did prove that model and the theory behind WhatsApp is they are on the path to reach a billion people. Similarly with Oculus not that many companies building technology which can be the next major computing platform.

Andy Baio, part of the team that built Kickstarter, the crowdfunding platform where Oculus first got its break, voices concerns from the independent game developer community:

Next up, what are the most interesting applications for Oculus Rift in the real term?

(Shares in Facebook are down less than 1 per cent after market, investors don’t seem too perturbed about the deal)

Brendan Iribe says that as Oculus solved some of its hardware problems, the team realised “how big the potential was for the social experience… When you truly feel you are actually present in another space and your brain is totally convinced… something fundamentally changes.” Add another person to that virtual world, and “if you are not looking through a screen or a 2D window, but they are right in front of you, you get goosebumps”, he adds.

Who could rival Oculus? Mark says Oculus Rift is way ahead of Sony and Microsoft and the team has many talented people. “In order to build a really big important computing platform, what we see with mobile is how we spend our time 40% of the time people spend overall is in gaming and about 40% is in social communication, about half of which is on Facebook. What we basically believe unlike Microsoft and Sony need to fuse both of those things together.”

An analyst asks what do you think about buy v build? I’m gonna say they are pretty keen on buying…

Mark says Facebook thought about building virtual reality from scratch but Oculus was further ahead and had all the great people in the industry.

He said Oculus VR had so many options – going it alone and being bought by many others (he implies the latter).

David Ebersman says the company does build internally and has been “pretty selective” on M&A in its ten year history.

Mark says all the companies he’s bought are “incredibly rare” and is in a “rare” period of time where they have made two multi-billion acquisition in a period of months. This is not a new era, he stresses.

FT TMT news editor Robin Kwong spotted this tweet from Marc Andreesen, Facebook board member and Oculus investor:

He’s lately been the focus of criticism from activist investor Carl Icahn over conflicts of interest around his board seat at eBay

“The rate [of acquisitions] will certainly not continue” Mark says.
Worth remembering at this juncture his promise from spring 2012 when Facebook acquired Instagram: “We don’t plan on doing many more of these, if at all.”

Why is virtual reality actually going to happen now? We’ve been chatting about it for years, says an analyst who sounds a bit tired of all this VR talk.

Zuckerberg says that one of the things driving virtual reality is that they can now use components which are being mass produced for phones to create a great experience at a cost effective price.

Zuckerberg sounds very excited about the potential for teleporting.

Zuckerberg said Facebook is clearly not a hardware company, not going to try to make a profit off the hardware in the long term, this is a software and services business.

That is important.

“There might be advertising in the [virtual] world but we’ll have to figure that down the line,” Zuck says. Plenty of monetisation opportunities, no near term plans.

The conference call has now ended but stick around for some more reaction.

Chris Dixon, who invested in Oculus Rift, gave it the highest praise in this blog post

I’ve seen a handful of technology demos in my life that made me feel like I was glimpsing into the future. The best ones were: the Apple II, the Macintosh, Netscape, Google, the iPhone, and – most recently – the Oculus Rift.

So someone on Reddit may have been on the money when the wrote this a month ago:

So no way to confirm this, but my friend works in the same building as Oculus, and he ran into Mark Zuckerberg taking the elevator to Oculus’ floor.

The Reddit community seems pretty upset it didn’t buy Facebook stock after reading that rumour.

There is a vocal anti-Facebook brigade who feel the company has too much power, with some wishing Oculus VR had grown into a large, independent company. Under the Oculus blog, commenters have written things like:

All that talk about revolutionizing things and it was just to build up value for an acquisition.

I guess you might as well go full-evil when selling out.

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.

But, as journalists are never meant to say, only time will tell:

So today was the day we found out that the future of Facebook is as a virtual reality platform, accessed by headsets that can take us everywhere from the doctor’s surgery to a holiday. We discovered Oculus was worth $2bn, making virtual reality no longer a technological dream, but something worth cold, hard cash. Or at least, a lot of Facebook stock.