Facebook surprised just about everyone Tuesday by announcing it will acquire Oculus VR, the maker of a prototype cutting-edge virtual reality gaming accessory called the Oculus Rift. The product, a sort of gaming goggle that players put on to immerse themselves in the gaming world, is popular among leading edge gaming geeks.
In a conference call with analysts Tuesday, Facebook CEO Mark Zuckerberg laid out how the deal fits in with Facebook's larger plans for the next decade, particularly as the firm looks to a world beyond mobile.
Facebook, he said, has three main goals: to connect everyone in the world, to understand the world's information and to build the knowledge economy. The Oculus acquisition, he said, fits into the third ambition and buying the industry-leading company puts Facebook years ahead of where it would have been if it tried to develop its own product.
It's no surprise that Oculus was snapped up -- the firm is leading even major companies such as Sony and Microsoft in the virtual reality space, and it was perhaps only a matter of time before someone was willing to foot the bill to make the company its own. What is surprising is that Facebook was the one to do it.
Facebook, after all, is not exactly known for its gaming. That's not a failing on Facebook's part, necessarily, but early fans and Kickstarter backers of the Oculus weren't shy about sharing their worries that Facebook would steer the firm away from gaming down the line. Facebook's track record on gaming, after all, has made for shaky relationship with developers who blamed its waning support of Farmville-maker Zynga for hurting social gaming.
Those concerned probably weren't soothed by comments from Facebook indicating that while gaming will remain Oculus's main focus for now, it won't always be that way.
"Gaming is just the start. After games, we'll make Oculus a platform for other experiences," Zuckerberg told analysts in a call after the deal was announced. Oculus has the potential, he said, to be "the most social platform ever."
Zuckerberg said he's interested in "building future technology platforms," adding that he believes that virtual reality can be one of the best computing and advertising platforms in the future. Users could plug into virtual reality devices to feel as if they're with loved ones across the world, he said, or to feel as if they're attending a far away event.
Gaining control over the next big computing platform -- if the bet pays off -- would be good for Facebook, noted Sterne Agee analyst Arvind Bhatia in a note to investors Wednesday.
"We think the rationale is if Facebook can own the pipe, the platform or the operating system of the future, it will have much greater control over its destiny," he said.
Still, the Oculus acquisition stands out among other Facebook buys, particularly because it's hard to imagine Facebook will integrate Rift and its technology into its social platform in the short-term. Zuckerberg has developed an acquisition strategy of buying fully formed companies and working them into Facebook's overall ecosystem -- see Instagram, or even Beluga, which was the messaging foundation for Facebook Messenger.
Oculus's as-yet-unreleased product, however, doesn't obviously fit in Facebook's current world. Would people, for example, be willing to chat or spend any significant amount of time, even the duration of basketball game, while wearing an immersive headset, especially when they're already wary of devices such as Google Glass?
And Zuckerberg himself noted on the call that Facebook, while many things, is no hardware company, and is in new territory when it comes to launching a physical gadget. The only piece of hardware that the firm has associated itself with was the HTC Cha Cha, which came with a Facebook button on the keyboard and quickly faded into obscurity.
He addressed that obvious weakness head-on, saying the social networking company doesn't expect to make a profit off the devices anytime soon, but sees the Oculus buy more as a "software and services" play for communication. Facebook, he said, wants to use its existing levers, such as its dominant role in the social world, to raise awareness and excitement about the program.
For Oculus, the appeal is clear: $2 billion and a promise that it can continue its roadmap exactly as it wants to. On reddit, Oculus co-founder Palmer Luckey, 21, has been fighting a nearly constant stream of criticism with assurances that not much will change at Oculus. Luckey has said that while Oculus could have taken its vision to fruition on its own, the Facebook buy lets it take a more perfect product to market -- whenever that may be.
He spent much of his Tuesday evening and Wednesday trying to pass that message on to Rift's small but devoted community and their worries that the deal is a sell-out, a move away from gaming, or a data grab.
"Our relationship with the community is not going to change, and we are not going to spy on anyone," Luckey wrote in one comment on the site. "Feel free to rag on me if things turn out the way you predict, but you have my word that nothing will change for the worse."
Zuckerberg, for his part, said that making money from Rift is a goal down the line -- something that may include ads -- but not a short-term goal.