Facebook has either pulled off a smart deal or gambled £1.2 billion on Oculus VR – a trendy technology company with no track record making a virtual reality gadget that is not proven to work.
The social networking site has a vision of the future which involves the merging of humans and gadgets in a virtual reality and wants to buy in at the ground level to have a firm root in ‘the platforms of tomorrow’.
Chief executive Mark Zuckerberg says the deal is not intended to take Facebook in to the hardware manufacturing market.
Shareholders in the public listed company are more concerned Zuckerberg is funding a technology spending spree with their money that will not show up in the bottom line and which lacks a strategy.
Virtual social life
Some suggest Facebook is trying to emulate the success of Google by spotting and investing in trends early to make big profits – like Google investing in android software in 2005 when everyone had a desktop computer, only to see it become the dominant software powering three out of four mobile phones less than a decade later.
Oculus VR produces 3-D virtual reality goggles that shut out the world and allow the wearer to interact online as an avatar in gaming environments.
No doubt virtual reality games are a big attraction for many.
Maybe Facebook sees social networks developing into 3-D environments where friends can hang-out in coffee shops, play sports or even go on virtual trips to the shopping mall or exotic tourist spots,
Paranoia or protectionism?
Sooner or later, the virtual world is going to creep into the real world, but just how many people will want to spend a significant part of their spare time wired up to gadgets is something else – especially if that gadget keeps them locked inside Facebook’s homogenised and controlled walled-garden and doesn’t let the out to play anywhere else.
Facebook has a history of buying up competitors threatening to breach that wall to siphon away advertisers or users, seen in the recent acquisitions of image-sharing service Instagram and mobile messaging app WhatsApp.
Call it paranoia or protectionism but in the end the key to the success of a social networking site is the size of the user database. The database dictates who advertises and what they will pay.
If Facebook lets competitors snatch chunks of users, then advertising revenues go with them.
That’s the reality for Facebook.