Emotions are running high and many people seem very
angry with Palmer and Oculus. I'd like to present an alternative
explanation of the sale that might explain why Palmer thought this was
the best thing for his company. But I'd also like to examine this from
Facebook's perspective, and try and address some of their motives behind
the purchase too.
Why Facebook bought Oculus?
Google entered the smartphone market on the ground floor by
developing the Android operating system. Amazon took a different route
and developed the Kindle. Microsoft has developed the Surface, and Apple
has branched out from its iPods and iPhones into music software and
cloud storage services.
Google, Amazon, Microsoft, Apple. What these firms all have in common
is that they have strategically positioned themselves (with varying
degrees of success) to have products in both hardware
and software, and they all use the sales of one to drive profit in the other:
- Amazon developed the Kindle - not because they thought they'd make
lots of money off selling the devices - but because they wanted a
platform to drive the sales of their e-books.
- Google's Android phones drive their users to Google accounts and Google search, which increases Google's revenue from ads. They don't make money off the operating system or phones themselves.
- Microsoft attempted to increase uptake of Windows 8 with their flagship "Surface" device
- Apple is the odd one out in this group - they use their software
(iTunes and the iCloud) to drive sales of their hardware, not the other
way around.
Facebook missed the boat that these other technology firms have embarked on.
Their Facebook phone failed
leaving them without any hardware to encourage users to frequent their
social networking service. They are slowly bleeding users with no easy
way to stem the tide.
From this perspective, Facebook's purchase of Oculus looks like an
attempt to get in on the ground floor with a brand new technology that
has
massive sales potential, with the intent of using it to
drive people toward their online services. Zuckerberg has decided that
not only is all the hype around VR tech here to stay, but there's also a
decent chance that 10 years down the line VR headsets will be as
ubiquitous as televisions. He has made a careful risk-benefit
calculation and decided to
gamble on the possibility that VR
tech will revolutionize media consumption. Facebook is hoping that
Oculus will become a household name, and they think there's a good
chance that the Oculus Rift will become their equivalent of the Google's
Android.
Facebook hasn't bought Oculus so they can plaster ads in every game.
Nor are they looking for a "get-rich-quick" piece of tech that they can
churn out for a profit. On the other hand, I think they
will integrate Facebook into the Rift somehow, because that is what will drive people to the Facebook social space, and
that
is where Facebook makes its money. This is strategic purchase with a
lengthy ROI period, and Facebook wants Oculus to succeed as much as we
do.
Why Oculus sold out ?
Back when Palmer first floated the idea of a VR headset, he thought
that there might be a small community of technology enthusiasts who were
interested.
After running the Kickstarter campaign, he discovered that
there were actually quite a few people who were willing to back the idea
- so many in fact, that Oculus needed to mass produce Devkit 1. As more
people became interested and Oculus cropped up in the media more and
more frequently, Palmer was able to secure some serious investor funding
($100 million) and the vision of CV1 changed from a hand-crafted
headset for enthusiasts to a polished, high tech VR experience for the
masses.
Palmer has always had a vision of VR tech spreading until every
household has one. He's always dreamed of revolutionizing media
consumption. But... he didn't think it would happen this quickly. No-one
did. Instead of gradually developing the knowledge and technology
through multiple consumers versions and interations, now Oculus has to
get it perfect the first time. And they have to do it quickly - because
the competition smells blood. Just as Facebook has realized the huge
potential of VR, so have the likes of Sony, Valve and other hardware
companies. They are all rushing to produce their own headsets, and they
have the advantage of billions of dollars in revenue behind them.
So Oculus is, in many ways, a victim of its own success. If there
hadn't been so much public interest in the possibility of VR, no-one
would have bothered to develop a competing product, and Oculus would be
free to trundle along at their own pace. But now that Sony and Valve
have upped the ante (not to mention other potential companies who may be
developing VR products in secret) Oculus risks falling into obscurity.
Their relative lack of funding - million vs. billions -
hamstrings their ability to be the first ones onto the market and produce the highest quality VR device.
Oculus faced a choice: sell to a company with the resources to make
huge investments in R&D and manufacturing, or become a second-rate
company whose technology is inferior to the offerings from bigger
players and whose products are purchased only by open-source
enthusiasts.
Why facebook ?
Yes, Facebook. Facebook has several qualities that are attractive to Oculus:
- Lots of cash to put into R&D and manufacturing.
- NO other public hardware products. Oculus is now Facebook's flagship hardware device, simply by virtue of there being no other hardware announced at present. Hopefully it will receive attention and funding commensurate to its position. On the other hand, if Google had picked up Oculus, the team would now be one of a dozen recent hardware acquisitions alongside walking robots and fancy thermostats.
- Little experience in hardware development. This is a potential advantage, as the Oculus team will likely be left alone to develop the Rift. On the other hand, if Samsung had picked up Oculus, the team would be subsumed into Samsung's massive hardware development division and retain very little independence.
- Facebook is thinking long-term. As I mentioned in the first section of this post, Facebook has not acquired Oculus with a view to making a quick buck. They want to integrate Oculus into their long-term strategic vision - in other words, they have a vested interest making Oculus into a leading VR tech firm rather than having immediate profit as their driving motive.
What this means for the future of Oculus and VR as a whole?
Let's get the negative stuff out the way first:
- The Rift will almost certainly have some degree of integration with
the Facebook platform. Whether this means a mandatory Facebook login, or
something slightly less onerous, remains to be seen.
- The Rift is unlikely to be completely open-source.
- Oculus no longer has control over its own future (bear in mind,
however, that this already happened to a certain degree after they sold
part ownership in the firm to investors.)
- Some people don't like Facebook. And there is the potential, however
unlikely, for Facebook to be a real dick about the whole thing and slap
adverts across a Rift login screen.
But I think this is actually generally a positive announcement:
- Oculus now has serious, billion-dollar muscle behind its vision. They can now compete with Sony and Valve's R&D potential.
- With that muscle comes the potential for mass-produced custom high-def screens and more.
- There is the possibility that with this purchase, Facebook is
turning over a new leaf. They have tried the strategy of wringing every
last dollar out of their online platform and have found it doesn't work.
Instead they seem to be pursuing the more holistic Google-esque growth
strategy, which doesn't cramp hardware with ads but instead uses it to
drive revenue on the software side.
- Most importantly, Oculus no longer has to worry about turning a
profit off CV1. With Facebook's financial backing they can choose to
sell at a lower price point in order to increase uptake, or else
increase the quality of the rift without increasing the sale price. They
just gained a whole lot of financial flexibility.
Ultimately, the winners from this sale are all those who want to buy a
high-quality VR device at a low price point as soon as possible. The
losers are those who believed in an open-source, community-driven future
- who believed that Oculus could revolutionize the technology landscape
and usher in a new era of crowd-sourced tech development.
I really do feel for those people who hoped that Oculus represented
the latter vision. That future is now essentially gone. But I think many
of you are forgetting that Palmer is not an open-source enthusiast,
he's a
virtual reality enthusiast. If you're like Palmer, and
if what you desire above all is to hold in your hands an amazing VR
headset, then I would argue that this sale is a good thing for you.
.jpg "Nokia to become Microsoft Mobile")
