Not bad for an idea that started on KickStarter
http://www.theaustralian.com.au/business/wall-street-journal/facebook-to-buy-virtual-reality-firm-oculus-vr-for-us2bn/story-fnay3ubk-1226865137544#FACEBOOK has made its second blockbuster acquisition of the year, agreeing to acquire Oculus VR, a maker of virtual-reality goggles, for $US2 billion in cash and stock.
Like Facebook’s $US19 billion purchase last month of text-messaging service WhatsApp, the deal is part of the social-networking company’s vast ambition to connect people across all kinds of devices and modes of communication.
The goggle deal also highlights the intense competition among big technology companies for promising start-ups, even when those start-ups, like Oculus and WhatsApp, have little revenue.
Oculus’s headset, called Rift, today is a visual device for playing video games. But Facebook Chief Executive Officer Mark Zuckerberg said the social network had bigger plans for it.
“We’re going to make Oculus a platform for many other experiences,” Mr. Zuckerberg said in statement.
“Imagine enjoying a courtside 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,” he said.
It’s not clear that consumers agree. So far, they’ve largely shunned fancy headgear that offers improved visuals, for video games and for technologies like 3-D television.
Virtual-reality technology has long been criticised for triggering motion sickness in users, a challenge the company has said it is working to solve for its consumer product.
Brian Blau, an analyst at Gartner who previously spent years developing virtual-reality technology, predicted it will still take Oculus several years to create “really compelling” virtual reality experiences.
He was also sceptical of Mr. Zuckerberg’s assertion that Oculus could become the “most social platform ever”.
“That line has been the tagline for virtual reality from the beginning but nothing to date has brought that reality,” Mr. Blau said.
Oculus, of Irvine, California, was founded in 2012 by Palmer Luckey, now 21 years old, who was home schooled and got his start in tech repairing old Apple iPhones. He later worked as an engineer at the University of Southern California’s Institute for Creative Technologies.
Mr. Luckey raised more than $US2.4 million from a Kickstarter campaign to help fund development of the company’s first product.Shortly after, the company hired Brendan Iribe as its CEO. Before working at Oculus, Mr. Iribe had worked at Gaikai, a company that offered customers a technology called “cloud gaming”, which streamed video games over the internet much in the same way Netflix streams movies.
That company was purchased by Sony in 2012 for $US380 million and has become a core technology in its PlayStation suite of products.
Unlike WhatsApp, which has 450 million users, Oculus isn’t yet available to consumers, and the company hasn’t said when it will be available. It currently sells prototype units to developers for $US350.
Mr. Iribe said that Mr. Zuckerberg visited Oculus’s offices in Irvine a few weeks ago.
The Facebook CEO said that putting on the glasses was “different from anything I’ve experienced in my life,” he said in his statement.
From there, the deal came together “very rapidly,” according to Nabeel Hyatt, partner at Spark Capital, an investor in Oculus.
Mr. Hyatt said Facebook is likely to let Oculus operate independently, similar to what it has done with photo-sharing app Instagram and its plans for WhatsApp.
“If you look at the pattern of [Zuckerberg’s] last two large acquisitions, I think you can probably see how he is going to handle a team like Oculus,” he said.
Oculus has raised more than $90 million from venture capitalists including Spark Capital, Matrix Partners, Andreessen Horowitz, Founders Fund and Formation 8.
Its most recent funding came in December, when internet pioneer Marc Andreessen joined the start-up’s board of directors.
Virtual reality “is going to complement the real world in lots of interesting ways,” said Joe Lonsdale, founder of Formation 8 Partners, an early investor of Oculus. The Facebook acquisition plans, he said, “is farsighted on where the world will be in ten to twenty years.”
While Facebook brings great resources, it also may worry some developers.
Markus Persson, creator of the immensely popular video game Minecraft, said that it was in talks to bring the game to Oculus before the Facebook deal. “I just cancelled that deal. Facebook creeps me out,” said Mr Persson on his verified Twitter account.
Oculus isn’t alone attempting to build virtual-reality technology. Sony recently unveiled its “Project Morpheus,” a competing headset built to work with its PlayStation 4 video game console.
Sony said it chose to unveil the product, which it had been working on for at least two years, after seeing the development efforts being put forth by other game designers for the Oculus headset.
In an interview earlier this month, Andrew House, head of Sony’s PlayStation division, described the project as “a work in progress”.
Even if Oculus solves its technical challenges, Michael Pachter, a Wedbush Securities analyst, said, it will also need to recruit more game developers to get a broader user base.
“The biggest problem with the technology, is the chicken and egg problem, ” he said. “How will they sell five to 10 million headsets, without lots of really good games?”
He said the pairing with Facebook may give Oculus the deep pockets to produce its own games — but that Facebook also lacks game development experience.
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