By agreeing to purchase Oculus VR, a hot startup specializing in virtual video-game reality, the social-media giant is betting that the technology will eventually replace mobile devices as the primary point where consumers talk, shop, play and work.
The $2.3 billion acquisition is the latest - and possibly riskiest - move by Facebook to extend its reach beyond social-networking status updates and photo sharing.
"This is a long-term bet on the future of computing," Facebook CEO Mark Zuckerberg told analysts during a conference call. "I believe Oculus can be one of the platforms of the future.
"It can change the way we communicate with our friends and colleagues," he said. "Oculus has the opportunity to be the most social platform ever."
Zuckerberg described a vision of students consulting with teachers, fans watching athletes, and doctors diagnosing patients face to face without the need for a school, a stadium or a hospital. Unlike video chatting, virtual reality offers the prospect of more personal, immersive interaction.
"We believe virtual reality will be heavily defined by social experiences that connect people in magical new ways. It is a transformative and disruptive technology that enables the world to experience the impossible, and it's only just the beginning," Oculus VR co-founder and CEO Brendan Iribe said in a statement.
Scientists and researchers have worked on the concept of virtual reality - a computer-powered headset, room or other device that lets a person be enveloped in a digitally created experience without physically relocating to a different place - since the 1960s. But no one has fully delivered on the promise.
Challenges Ahead
Gartner Research analyst Brian Blau, a former virtual-reality researcher, developer and entrepreneur, said Facebook will face the same technological challenges with its first major foray into consumer tech hardware."Building great virtual-reality experiences is difficult," Blau said. "It's a risky move, to be honest."
With Oculus, Facebook is buying a company that in just two years jumped to the front of virtual-reality development with its only product, the Oculus Rift, which uses high-definition 3-D view screens over the eyes to simulate a 360-degree experience.
The Irvine startup last year landed a $75 million investment round led by Silicon Valley venture-capital powerhouse Andreessen Horowitz. Oculus also raised $2.4 million on Kickstarter in August, so the Facebook deal will make Oculus the most successful crowdfunded project of all time.
Oculus executives were at the Game Developers Conference in San Francisco last week trying to persuade game makers to buy the company's Rift Development Kit so they could work on virtual-reality games and other applications. The company said it has orders for about 75,000 development kits.
Electronics and entertainment giant Sony stole some of Oculus' thunder by announcing Project Morpheus - competing virtual-reality headgear for the PlayStation 4 home video-game console.
The Facebook deal, however, gives Oculus a bigger war chest to battle Sony and some 15 other companies working on head-mounted virtual-reality devices. But the Rift is still only in a second prototype stage. Although published reports said it might go on sale this year, company executives have declined to outline a timetable to avoid disappointing the market.
Facebook will buy Oculus for $400 million in cash and $1.6 billion worth of stock. The deal includes an additional $300 million in cash and stock that will be paid if Oculus reaches "certain milestones," the companies said.
Another Big Buy
This is the second big purchase for Facebook in a month. In February, Facebook agreed to buy mobile texting app maker WhatsApp of Menlo Park for $19 billion, in a deal expected to close this year. Facebook also bought online photo-sharing app Instagram for $700 million in 2012.Both of those deals fit more immediately into Facebook's goal of becoming the world's communications hub. The company may also want to prevent rival Google from gaining too much ground in wearable computing with its Google Glass project.
But Zuckerberg said the Oculus deal fits Facebook's strategic growth plans over the next decade.
The Facebook deal upset one early Oculus investor, "Minecraft" creator Markus Persson. The Swedish programmer is scrapping plans for an Oculus version of his popular game because he considers Facebook "creepy."
"I will not work with Facebook," he wrote on a blog. "Their motives are too unclear and shifting. ... There's nothing about their history that makes me trust them."
©2014 the San Francisco Chronicle
