Facebook Oculus Rift Purchase: Why Did Social Media Giant Bet $2 Billion on Virtual Reality?

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Oculus Rift

Facebook's Oculus Rift purchase for $2 billion gives the impression that virtual reality could really be the next big thing. Weeks after recent purchase of Whatsapp for $19 billion, this buyout is indicative of the times to come. What's surprising is not the price tag on purchase, but the strategy raising many eyebrows.

Business Insider quotes Mark Zuckerberg on his plans post acquisition of Oculus Rift. Mark Zuckerberg aparently intends to expand Oculus Rift offerings beyond video gaming.

"After games, we're going to make Oculus a platform for many other experiences. Imagine enjoying a court side seat at a game, studying in a classroom of students and teachers all over the world or consulting with a doctor face-to-face -- just by putting on goggles in your home," he said.

Details of Facebook's Oculus rift purchase include $400 million in cash and 23.1 million shares of Facebook common stock (valued at $1.6 billion based on the average closing price of the 20 trading days preceding March 21, 2014 of $69.35 per share).

The agreement also provides for an additional $300 million earn-out in cash and stock based on the achievement of certain milestones.

Oculus Rift makes tens of thousands of virtual reality headsets that are getting a lot of buzz among video game developers. Popular Mechanics even calls it "the most hotly anticipated gaming peripheral in years."

Oculus headsets are a threat to companies like Sony considering its immersive features developed for programmers. As the social media company has no experience in hardware, Facebook's Oculus Rift purchase is indeed a very bold move.

Brendan Iribe, co-founder and CEO of Oculus VR stated in the press release, "We believe virtual reality will be heavily defined by social experiences that connect people in magical, new ways."

"It is a transformative and disruptive technology, that enables the world to experience the impossible, and it's only just the beginning," the statement further said.

Following the announcement of Facebook's Oculus Rift Purchase, Zuckerberg said: "Mobile is the platform of today, and now we're also getting ready for the platforms of tomorrow.

"Oculus has the chance to create the most social platform ever, and change the way we work, play and communicate," he said.

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