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Technology

Facebook's $2 billion bet on virtual reality looks like one of Mark Zuckerberg's rare mistakes

Facebook dropped $2 billion to acquire virtual reality platform Oculus in 2014.

Unlike the company’s other big acquisitions, Instagram ($1 billion in 2012) and WhatsApp ($19 billion in 2014), Oculus does not appear to be paying off.

Although Oculus Gear VR headsets are practically handed out with Samsung smartphones, the company’s more expensive Oculus Rift platform doesn’t appear to have attracted any real following. According to market research firm Canalys, Facebook sold fewer than 400,000 units of the Oculus Rift last year, making it less popular than the competing HTC Vive and Sony PlayStation VR, the latter of which has already shipped more than 1 million units.

Anecdotally, it doesn’t seem to be a hit either. I don’t know anyone outside of the technology industry who owns one. I review gadgets and have a house full of toys, and yet I haven’t found any need to buy one. I know people who own the PlayStation VR.

Facebook has never disclosed sales figures, but based on announcements at today’s annual Oculus Connect event, it’s still searching for the right combo of features and price that will make Oculus a hit.

Facebook on Wednesday introduced the $199 Oculus Go, a virtual reality headset that will launch next year. Unlike most other VR sets, it won’t require a smartphone or an expensive PC to use.

While introducing the Go, Zuckerberg said it’s a product meant to fill the gap between the affordable Gear VR and the Oculus Rift. It’s the company’s plan to attract a wider audience… probably because the general consumer isn’t flocking to buy a gaming computer and a $400 headset.

Zuckerberg permanently dropped the price of the Oculus Rift to $399. It launched at $599.99, then fell to $499.99 before Facebook introduced a $399 summer sale that included a controller. A a price drop wouldn’t be necessary if people were actually buying the Rift.

Us regular Joes don’t want to hang out in VR — at least not yet — but Facebook keeps jamming the idea down our throats. It introduced new avatars that can be customized and feature more lifelike facial expressions on Wednesday. But why?

Altspace VR, a firm that raised $10 million and once ran one of the more popular social VR experiences, originally shut down in August citing the “general slowness of VR market growth.” It has since been acquired by Microsoft, which hopes to bring it back to life with its Mixed Reality headsets. This is probably the first time you’re hearing of Altspace, and that’s the problem.

There’s no must-have app that’s pulling people into the Rift or VR. Sure, it’s fun to look at 360-degree photos or short video clips on the Gear VR with a Samsung phone, but there isn’t a real compelling reason to plop down $400 plus the price of a gaming computer for VR. Facebook needs this, it’s what helps sell gaming consoles like the Xbox and PlayStation. Most readers can probably name a game for one of those platforms, but can you name an app for the Rift?

It’s still early for the VR industry and firms such as Sony have seen relative success. Canalys also estimates that there will be 20 million headsets in the market by 2020, which means there’s still time for Facebook to turn this ship around and show the world why we really need to buy an Oculus.

On the other hand, Instagram exploded from 30 million users when Facebook bought it in 2012 to more than 800 million. WhatsApp had 450 million users when Facebook acquired it in 2014 and now has more than 1.3 billion users. The return on those buys in such a relatively short period of time certainly seems to have been greater than what Facebook has received from Oculus.

CNBC reached out to Facebook for comment but a spokesperson was not immediately available.

Source: Tech CNBC
Facebook's billion bet on virtual reality looks like one of Mark Zuckerberg's rare mistakes

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