Facebook’s Acquisition of Oculus VR

According to Time magazine, Facebook announced Tuesday that they will be acquiring Oculus VR, a virtual reality technology company (Luckerson, 2014). The article states that the acquisition will cost Facebook $2 billion, with $400 million in cash, and $1.6 billion in Facebook stock. The announcement of this merger came to the surprise of many cult followers in the video gaming community, with much of the criticism being entirely negative, which was unexpected to Oculus VR founder, Palmer Luckey (Futter, 2014). The following paragraphs will explain the merger from both of the companies’ perspectives, as well as present potential issues and dilemmas of the acquisition.

On Tuesday, March 25th, Mark Zuckerberg (Facebook founder) published a detailed post to his Facebook account regarding the acquisition. In this post, Zuckerberg claims that virtual reality is the future of gaming, along with other social experiences such as watching sports games or studying with friends (Zuckerberg, 2014). Zuckerberg believes that virtual reality is the future of entertainment, and will undoubtedly be lucrative from a business perspective. Zuckerberg (2014) also stated:

Virtual reality was once the dream of science fiction. But the internet was also once a dream, and so were computers and smartphones. The future is coming and we have a chance to build it together. I can't wait to start working with the whole team at Oculus to bring this future to the world, and to unlock new worlds for all of us.

It seems that aside from the monetary aspect of this promising new technology, Zuckerberg seems to have a personal passion for virtual reality; it seems fitting considering they are paying such a large amount for a company that has yet to release a consumer product.

Oculus VR also has nothing but a positive outlook on the success of this merger. Palmer Luckey, the founder of Oculus VR, also created a post on March 25th to the company’s website regarding the acquisition. It can be stipulated that Luckey is very satisfied with the monetary exchange for the company and it was more than likely a strong point of reasoning for selling. However, Luckey seems to also be looking to do what’s best for the technology. He claims that the partnership with Facebook is very important for the technology of virtual reality in general. He goes on to assert that:

It opens doors to new opportunities and partnerships, reduces risk on the manufacturing and work capital side, allows us to publish more made-for-VR content, and lets us focus on what we do best: solving hard engineering challenges and delivering the future of VR. (Luckey et al., 2014). It seems to be a convincing argument since now Oculus VR has the support of such a powerful company, but that doesn’t mean issues may not occur.

The main problem that is already occurring with this acquisition seems to be a backlash by consumers in the gaming community (Futter, 2014). However, Oculus VR believes that they simply need to educate people and share what’s going on within the company (2014). Nevertheless, for the time being, Facebook stock has dropped 6.9% after the announcement of the acquisition (Wang et al., 2014). With that said, software developers for the technology may be hesitant to continue working with the product.

Both parties of the acquisition seem to have been motivated by financial prosperity (future or present), as well as a vision for the technology. Although there has been some public outcry regarding the appropriateness of the merger, only the future will tell.

References

Futter, M. (2014, March 26). Oculus’ acquisition 'almost happened overnight'. Game Informer. Retrieved March 28, 2014, from http://www.gameinformer.com

Luckerson, V. (2014, March 25). Facebook buying Oculus virtual-reality company for $2 billion. Time. Retrieved March 27, 2014, from http://time.com/37842/facebook-oculus-rift/

Luckey, P., Iribe, B., & Carmack, J. (2014, March 25). Oculus joins Facebook. Oculus VR. Retrieved March 28, 2014, from http://www.oculusvr.com/blog/oculus-joins-facebook/

Wang, L., & Bost, C. (2014, March 26). U.S. stocks cap biggest drop in two weeks; Facebook drops. Bloomberg.com. Retrieved March 28, 2014, from http://www.bloomberg.com/news/2014-03-26/u-s-stock-index-futures-gain-before-durable-goods-report.html

Zuckerberg, M. (2014, March 25). Mark Zuckerberg - I'm excited to announce that we've... Facebook. Retrieved March 27, 2014, from https://www.facebook.com/zuck/posts/10101319050523971