Facebook Thinks Big With Virtual Reality
Online advertising is an area Facebook knows best, with an even larger market, where software and goggles will rise in billions in the virtual reality world. With a $2 billion acquisition of Oculus, Facebook entered the VR market in 2014. Last month it began shipping its $599 Rift goggles. It has 70 or more games coming by the end of the year and has already launched 30 games.
At the company’s F8 developer conference that ended on Wednesday Facebook CEO, Mark Zuckerberg declared we’re in “a golden age of video”, where the company gave a 10-year outlook and showcased some new projects. Virtual reality is a market that Facebook aims to lead. This was among the highlights they talked about.
The Virtual reality headsets are seen as the future in entertainment and in gaming. Facebook’s acquisition of Oculus core reason was not to knock out gaming fields, but merely enter it, says Robert Enderle, the President of the Enderle Group research firm.
The 360-degree view that Virtual reality provides is an extremely large canvas for the placement of ads, such as virtual billboards, with ads for the latest blockbuster movies mixed into scenery and branded product ads inserted into the games.
Enderle said, “Virtual reality advertising is already being tested.” If the social networking site takes the idea of engaging virtual reality through Facebook, it puts Facebook in a good position.
Less Than 1 Million, Or 2.5 Million Unit Sales This Year?
The virtual reality market estimates vary as to how large Facebook will get. This year Oculus will sell about 500,00 Rift headsets, as expected by Piper Jaffray analyst Gene Munster, while 600,000 is the number that Cantor Fitzgerald analyst Youssef Squali puts it at. In a recent research note, Squali wrote: “Facebook is positioning itself at what we believe is the epicenter of a multi-year, multi-billion growth opportunity in virtual reality”.
By 2020, the company’s revenue will be at 10% of the Oculus platform. Jim McGregor the analyst of Tirias research is more conservative. Vive began being shipped by the Taiwan-based HTC on April 5th.
“Pushing the cost even higher for many,” he said.
VR competition is lining up to be quite intense.
Facebook Will Raise The Bar For VR Content
Facebook faces no serious business risks with its VR headset, even with the rising competition says, Enderle. He continued by saying “Oculus is the most prominent leader, giving (Facebook) the opportunity to define this new entertainment medium,” he said. “Acquiring Oculus and investing in the development of Rift really has no downside for Facebook, even if they sold the headsets at a loss.” Oculus will also be able to raise the bar as to the type of content that Facebook wants to promote. “They’re trying to push industry faster than it might otherwise go,” he said.
Virtual reality could be a compelling feature that encourages people to spend more time with friends on Facebook, besides the direct revenue. Providing a more engaging social networking site and boosting ad sales. As a generator of profit and revenue Facebook downplays Oculus. There is still a lot of work to be done in the VR field.“What you can do with the Rift, at that price, is impressive,” Teich said. “But while it’s good, it’s not yet good enough.”