$2B Oculus deal: Is Facebook visionary, or crazy?
Longtime technology analyst Roger Kay wonders whether Facebook CEO Mark Zuckerberg “is nuts” for agreeing to pay $2 billion for Oculus less than five weeks after inking the WhatsApp deal for $19 billion.
The Associated Press
NEW YORK — Facebook’s latest multibillion-dollar acquisition, of virtual-reality headset maker Oculus, is prompting some people to wonder if CEO Mark Zuckerberg is already living in an alternate reality.
Longtime technology analyst Roger Kay wonders whether Zuckerberg “is nuts” for agreeing to pay $2 billion for Oculus less than five weeks after inking a deal to buy WhatsApp for $19 billion.
Oculus, which got its start on the crowdfunding site Kickstarter, has no consumer product on the market, just the promise of bulky virtual-reality goggles that have generated huge buzz among video-gamers
Zuckerberg, for his part, sees long-term implications in the technology, for communication, entertainment and beyond. He was right about mobile and he’s created the world’s biggest online social network.
So, is he looney or visionary?
“Mobile is the platform of today, and now we’re starting to also get ready for the platforms of tomorrow. To me, by far the most exciting future platform is around vision or modifying what you see to create augmented and immersive experiences,” Zuckerberg said on a conference call Tuesday discussing the deal.
“Today’s acquisition is a long-term bet on the future of computing. I believe Oculus can be one of the platforms of this future.”
Facebook’s investors seem to think Oculus’ promise is too far off. The social-networking company’s stock fell 7 percent Wednesday to close at $60.38.
Beyond sticker shock, the deals for WhatsApp and Oculus — along with Facebook’s spurned offer to buy Snapchat for $3 billion — have raised questions about the Menlo Park, Calif., company’s ability to innovate on its own.
Some of its most high-profile products, such as the Snapchat-like Poke, the messaging-service Facebook Messenger and Home, have flopped. The jury’s still out on Paper, a stand-alone app that lets users read news, Facebook feeds and more.
“Facebook I don’t think has the best innovation strategy,” says Gartner analyst Brian Blau. “So far it’s been ‘move fast and break things.’ Move fast is good, but break things may not be.”
Blau calls the Oculus acquisition “kind of out of left field.”
“We have always thought about experience as a focus of virtual reality,” he says. “Certainly it can be social, but we have not thought about it as a core social experience.”
That’s not to say it can’t work. There were questions about Facebook’s acquisition of Instagram back when it offered $1 billion for the photo-sharing app (the final purchase price was $715 million) in April 2012 — and Instagram “turned out fine,” Blau points out.
Facebook said Tuesday that Instagram has 200 million users, up from 30 million at the time it agreed to buy the company.
Irvine, Calif.-based Oculus is a horizontal acquisition, which means it lets Facebook expand into a new space, rather than grow its core business. It’s a strategy employed by Amazon.com, whose businesses range from online retail to video streaming to tablets; and Google, which recently bought high-tech thermostat and smoke-detector maker Nest Labs for $3.2 billion.
But across Twitter, video-game websites and Oculus’ own blog, players and developers panned the company’s decision to sell.
Swedish game programmer Markus Persson, who created the popular “Minecraft” for personal computers and mobile devices, voiced his displeasure on Twitter.
“We were in talks about maybe bringing a version of Minecraft to Oculus,” Persson said. “I just canceled that deal. Facebook creeps me out.”
Oculus co-founder Palmer Luckey sought to reassure Oculus’ fans in a series of posts on social-networking site Reddit. The startup will work independently of Facebook, have cash to bring down the cost of making the hardware and “make huge investments in content,” he said.
“I won’t change, and any change at Oculus will be for the better,” he said. “A lot of people are upset, and I get that. If you feel the same way a year from now, I would be very surprised.”
Information from Bloomberg News
is included in this report