Mark Zuckerberg must read Contagious
There's no other explanation (full disclosure: there are a couple other explanations).
Less than four months after Oculus Rift was shortlisted as one of the Most Contagious Technology products of 2013, Mark Zuckerberg checked the Facebook account balance and dropped $2 billion for Oculus Rift, Kickstarter-funded makers of what is currently the undisputed leader in Virtual Reality (VR) tech. We assume compensation for our advisory services will be landing in our BitCoin wallet any minute now.
But what does this mean? Let's look briefly at the initial response to the surprising deal, and then get on to what it means for Oculus, what it means for Facebook and what it means for you.
Backers Get Their Backs Up
I won't devote too much ink to this because, A) I don't think it's worth very much time and B) It has already (somewhat unsurprisingly) become the defining narrative of this acquisition. Still, it bears noting: within seconds of the deal's announcement, former financial supporters, prospective Oculus Rift owners and general champions of the little guy began a full-on assault against Oculus for selling out, betraying patrons and giving up the indie ghost.
Kickstarter backers instantly forgot how Kickstarter works and demanded refunds and equity. Minecraft creator Markus Persson immediately shelved plans to adapt his game to Rift because, in his words, 'Facebook creeps me out'. When Oculus co-founder Palmer Luckey took to Reddit to defend the move, his responses and assurances were, almost without exception, ruthlessly downvoted by the community.
To be blunt, none of this really matters. My mom hasn't heard of Oculus Rift. Thanks to Facebook, she might. I think Wieden+Kennedy interactive creative director Dan Hon captures it best: 'Oculus Rift and their partners at the big thumb aren't going to care much about what the peanut gallery thinks. Because they've got their vision thing going on, of variously a) finally bringing about the VR we've all been dreaming of, and b) connecting the world.' (ed: subscribe to Dan's newsletter, because it's great.)
In fact, viewed another way, the reaction speaks well to the popular perception of Oculus Rift's viability on the market. When Snapchat's founders turned down $3bn they were roundly mocked; the Oculus acceptance of $2bn has been met with chagrin (and not a few cries of 'but you could have gotten more!').
For Oculus, Bigger People Beat Up Little People
Philadelphia Eagles coach Chip Kelly has often described his drafting strategy with a few simple words: 'Bigger people beat up little people.' Simplistic? Sure. But it also neatly encapsulates what likely went through Oculus's founders' minds when they decided to join the FB mothership. Though the Rift has enjoyed more than a year as the headline product of the VR revolution, Sony's recently announced Project Morpheus may signal the start of more intense competition. To win, Oculus realised that it needs a few Big People on its team. Enter Mark Zuckerberg.
This isn't about the thousands of Oculus Rift backers on Kickstarter, and it's not about the thousands with Oculus Rift development kits. That's little people stuff. With $2bn – and more importantly, Facebook – on its side, Oculus has grown two feet taller overnight.
As Luckey explained on Reddit yesterday, Oculus can now make custom hardware rather than relying on mobile phone scraps, it can hire more people to manage things like developer relations and it can invest in custom content (surely necessary when going up against Project Morpheus and its PlayStation 4 tie-in). It can reach millions, not thousands.
Oculus is moving past the Kickstarter and early adopter stage, and this deal will get its headsets viably to market, on many more faces, as quickly, smoothly and affordably as possible. John Carmack, lead programmer of games like Doom and Quake and current Oculus CTO noted on Twitter, 'I expect the FB deal will avoid several embarrassing scaling crisis for VR.'
Of course, this tie-up is about expanding Oculus Rift's application as well. Though Zuckerberg scrupulously avoided mentioning the word 'social' when announcing the acquisition, he was clear that FaceBoculus will explore areas beyond gaming, noting that VR is more communication platform than technology. 'By feeling truly present, you can share unbounded spaces and experiences with the people in your life. Imagine sharing not just moments with your friends online, but entire experiences and adventures,' wrote Zuckerberg. Imagine being able to talk to your Facebook friends – face to face!
Expanding on his 'creepy' tweet on his blog, Persson himself grants that VR and non-gaming applications can very mix well:
'VR is not bad for social. In fact, I think social could become one of the biggest applications of VR. Being able to sit in a virtual living room and see your friend’s avatar? Business meetings? Virtual cinemas where you feel like you’re actually watching the movie with your friend who is seven time zones away?'
Facebook's world is expanding, too. Just like it did with the recent purchase of WhatsApp and last year's Instagram acquisition, Facebook has snatched one of the hottest tech properties around and brought it to the mothership. In a way, this is Facebook being proactive, attempting to absorb future platforms and properties before they become legitimate competitors.
Zuckerberg and co. realize that the number of hours people will stare at Facebook on a computer screen daily has likely reached its peak, and they're trying to figure out where and how they might connect with each other in the future. As Reuters' Felix Salmon noted, 'Oculus might be valuable to Facebook if the social network grows. But it will be even more valuable to Facebook if the network shrinks.'
Just a couple of weeks ago we noted that big companies are losing their advantages over startups in the hardware sector. As silly as it seems, this deal embodies that better than anything to date; Oculus went from a glimmer in Palmer Luckey's eye to a multi-billion-dollar valuation in less than two years, thanks to readily available funding, improved technology and crashing hardware costs. Zuckerberg realises the threat posed by upstart companies – from messaging to media to, yes, virtual reality – and is doing all in its power (and pocketbook) to get those weapons wearing Facebook blue.
For Brands And Agencies: Virtual Re-AD-lity?
There is plenty more to come from Oculus, Facebook and VR as a whole. And no doubt the ramifications for the advertising industry will be myriad. Though Oculus has spent the last day and a half promising that it will not shoehorn ads into its games (the official line is that ad placement is up to developers, not Oculus), there's little doubt that the future of VR will provide opportunities for brands and agencies to engage with users, whether through original content, in-experience advertisements, product placement, branded utility, smart partnerships or countless avenues that have yet to emerge.
For now, Facebook's acquisition of Oculus Rift is a sure sign that VR is headed to a more mainstream audience, faster and cheaper than anyone would have predicted as recently as a few days ago. And it's a reminder that in today's world, even the little guys can very quickly become big properties worthy of serious time and investment. The best marketers will be the ones who keep an ear to the ground and their eyes on the horizon – whether outside or inside a headset.
Images courtesy Wikimedia Commons, apart from this one. This is one of our researchers setting the controls for the heart of the sun at MoCo in NYC last year: