You are kidding.
No, I am not kidding. It’s unlikely that we are going to see that valuation in the next few years, but it’s likely that Facebook is aiming at something big. When I say big I don’t usually mean valuations, but in terms of Facebook, I mean power and influence. When we commented the rumours of Facebook buying Titan Aerospace, we all knew that Mark Zuckerberg was making fun of us when he said that would take time before acquiring another company at the Bacerlona Mobile World Congress.
It didn’t take too much, because Facebook has just acquired Oculus VR. When you try a product for the first time and you almost faint, you think that it’s either a bad product or the most revolutionary thing you have ever seen. I was probably sweating because the Oculus was something that my brain couldn’t even imagine of. When an innovation of that kind is introduced in the market, it takes time before people start understanding it. That’s why Oculus didn’t release its product, but it’s iterating.
Facebook probably had that need that we identified, they had to force themselves to get out their comfort zone. They firstly tried to do it with Snapchat, but didn’t succeed, then moved to Whatsapp and now to Oculus. While the Whatsapp acquisition makes sense in terms of what the Facebook’s ecosystem is about, Oculus is completely on a different world. They have acquired an hardware company that produces a product to play video games (for now).
Rumours say the acquisition has ben set at $2 billion, but how much Oculus is worth doesn’t matter. What should let us think is the reason behind a $200 billion company that is focused on social buys, after a $19 billion acquisition, a company that produces hardware. We all know that the Oculus Rift is a pretty cool device and that everyone is waiting for it, but what’s Facebook interest behind something like that?
The first reason is to differentiate. Facebook has come to a point where they can decide to be either a social company forever or expand, by building a portfolio of several different products and maybe trying to be at the same level of Google and Apple, financially. They are in a position where they can invest to gain more value or build something with the employees they already have. A good example is Paper, the app they released from their Creative Labs.
As Zuckerberg has also said on a post published on his timeline:
Immersive gaming will be the first, and Oculus already has big plans here that won’t be changing and we hope to accelerate. The Rift is highly anticipated by the gaming community, and there’s a lot of interest from developers in building for this platform. We’re going to focus on helping Oculus build out their product and develop partnerships to support more games. Oculus will continue operating independently within Facebook to achieve this.
But this is just the start. 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.
This is really a new communication platform. By feeling truly present, you can share unbounded spaces and experiences with the people in your life. Imagine sharing not just moments with your friends online, but entire experiences and adventures.
At the moment, Facebook can’t do anything apart from closing this transition in Q2. They have to keep Oculus VR as independent as possible and accelerate what they are doing to try to ship before everyone else. A good innovation is always copied by those who follow “innovators” and we already know that Oculus won’t be the only one shipping something like this. For this reason, they need to iterate and move fast.
In a second scenario, where the Rift will have taken a substantial traction in the gaming community, Facebook will be able to take over and start working with them. It’s natural to think about social gaming and the dozens of the integrations that we might see with Facebook; but the company might even choose to leave this asset as independent as possible from what they are building at Menlo Park.
It would be cool to put goggles and be in another different world, but that takes time and now the priorities are others. Oculus has to start shipping and partnering with other companies, otherwise they won’t go anywhere. Even though Zuckerberg uses the word “platform” three times, as he used to do with Facebook, the Oculus now is just a mere feature. They are building something on which developers can build games, true; but the Oculus, without a computer, XBOX or Playstation is worth nothing.
What if Sony comes up with a similar product and decides not to partner with Oculus? The game changes and this time Zuckerberg will take over.