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Facebook Buys Oculus Rift for $2bn - What Does It Mean?

Alex Spencer

Oculus RiftYahoo was the undisputed king of acquisitions in 2013, snapping up Tumblr, Summly and 25 other companies over the course of the year. But in 2014, Facebook seems determined to snatch that title for itself.

After its WhatsApp acquisition in February, Facebook CEO and founder Mark Zuckerberg said in his MWC keynote that “after buying a company for $16bn, you’re probably done for a while”.

But since February, we've heard rumours that the social network is in talks to acquire drone manufacturer Titan Aerospace, and now it has bought Oculus VR, the company behind virtual reality gaming headset Oculus Rift, for approximately $2bn (£1.2bn).

This figure is made up of $400m in cash, 23.1m shares of Facebook common stock valued at $1.6bn, plus an additional $300m in cash and stock that will be released in future based on Oculus' performance.

“Mobile is the platform of today, and now we’re also getting ready for the platforms of tomorrow,” said Facebook founder and CEO, Mark Zuckerberg. “Oculus has the chance to create the most social platform ever, and change the way we work, play and communicate.”

Oculus will continue work on the Rift at its current headquarters in Irvine, California.

What does the deal mean?

Oculus' focus so far has been largely on gaming, an area which has never really been a major focus for Facebook, despite the success of casual games like Farmville and Candy Crush Saga on its social network. It's unsurprising, then, that in the blog post announcing the deal, Facebook said it 'plans to extend Oculus’ existing advantage in gaming to new verticals, including communications, media and entertainment, education and other areas'.

It's easy to see how the technology could be leveraged for entertainment purposes, and it will be interesting to see the use cases Facebook finds for VR in the communications space, which is its bread and butter. We can presumably expect to see the ability to share more immersive videos and pictures with other Facebook users. It's perhaps more difficult to imagine how the social network's text-based posts - or indeed, its advertising - will work on the device, though the FT reckons Facebook could be trying to build 'a virtual world where members could eventually spend most of their daily lives'.

One brand that's already thinking about how to leverage VR technology is Tesco, which this week launched a virtual store on the Oculus Rift.

By widening the focus of its offering, though, Oculus could risk alienating some of the core gaming audience it has been wooing since its wildly successful Kickstarter campaign, which raised $2.4m back in August 2012.

On the Oculus blog post announcing the deal, the most popular comment (ironically posted through Facebook) reads simply: "DO NOT WANT". There's a sense of disappointment on social networks, especially from those who backed the Oculus Rift Kickstarter campaign - a sentiment which has been echoed by some of the gaming world's biggest developers.

Shortly after the news broke, Markus Persson - owner of Mojang, the games company behind Minecraft, which has consistently been one of the top paid apps since it launched on Android and iOS in late 2011 - tweeted that: "We were in talks about maybe bringing a version of Minecraft to Oculus. I just cancelled that deal. Facebook creeps me out."

In a slightly more tongue-in-cheek move, the currently ongoing Kickstarter campaign for comedy game Frog Fractions 2 has gained a new stretch goal. If the game's funding reaches $2bn, developer Twinbeard promises to "Buy Oculus back from Facebook".

Of course, not ever developer is against the move. Rami Ismail, co-founder of Vlambeer, the studio behind iOS hits Ridiculous Fishing and Super Crate Box, told The Guardian: "This is a smart move for Oculus. We may all know of them in the tech scene, but outside of our bubble nobody has ever heard of them. Oculus needed a backer that has huge mindshare, a lot of money, a lot of technological credibility and access to great software and hardware facilities."

If nothing else, Facebook's acquisition is certainly a huge endorsement of the nascent VR market. Alongside Sony's recently-revealed Project Morpheus, it seems that tech's big players are starting to step into this space, and bringing huge marketing budgets and public awareness with them.