How Facebook's Oculus Buy Changes Future of Rift, VR

Oculus VR has been writing what most of us thought was the prologue to the explosive story of immersive, virtual reality gaming. Oculus Rift is still only available as a developer kit, and most of us have only experienced it at trade shows using a small handful of games. Today, Facebook announced it was acquiring Oculus VR for $2 billion, and in doing so attempted a spoiler alert, saying that virtual and augmented reality will become the next computing platform.

The deal is expected to close in the second quarter. Facebook CFO David Ebersman confirmed that the deal includes $400 million in cash, 23.1 million in Facebook shares, and earnouts of about $300 million in cash and stock based on Oculus meeting unspecified performance metrics.

Facebook acquired Instagram nearly two years ago for $1 billion, and WhatsApp for $19 billion only a month ago. At this rate, Facebook CEO Mark Zuckerberg’s credit card is just about maxed out.

Oculus received $75 million in funding back in December, courtesy of Andreessen Horowitz. Marc Andreessen is on the board of Facebook.

What it means for Oculus VR

Oculus is fresh off having announced version 2 of its Development Kit ($350) at the annual Game Developer Conference (GDC). A few details:

• The resolution is 960 x 1080 per eye
• Refresh rates of 75 Hz, 72Hz and 60 Hz
• Persistence of 2 ms, 3 ms and full
• Viewing optics provide a 100 degree field of view
• Includes gyroscope, accelerometer and magnetometer, with an update rate of 1000 Hz
• A near infrared CMOS sensor with an update rate of 60 Hz tracks position

And just last week at GDC, Sony finally played its hand by showing off Project Morpheus, a VR headset for PlayStation 4.

Read more: Eyes-in with Project Morpheus vs. Oculus Rift

"At first glance, it might not seem obvious why Oculus is partnering with Facebook, a company focused on connecting people, investing in internet access for the world and pushing an open computing platform," reads a statement from Oculus VR. "But when you consider it more carefully, we're culturally aligned with a focus on innovating and hiring the best and brightest; we believe communication drives new platforms; we want to contribute to a more open, connected world; and we both see virtual reality as the next step."

What it means for Facebook

Ebersman said that the Facebook investment thesis has the Oculus acquisition paying for itself if Oculus simply succeeds in the first phase of its current plans, which revolve solely around gaming. Oculus CEO Brendan Iribe said that Facebook will provide the infrastructure, partnerships and the resources (including recruiting) to allow Oculus to focus on what it does best. Certainly any small company like Oculus experiences growing pains, and now that Sony has a real, demonstrable offering nearing completion, those resources can’t be underestimated.

We would hazard a guess that Oculus wasn’t planning for its technology to be singularly focused on gaming in the long term, but it’s unclear whether its goals would have matched those of Facebook, which has its own designs. In talking about both the Instagram and WhatsApp deals, Zuckerberg spouted the aim of reaching one billion people. And then, presumably, serving them ads.

Oculus adds an exciting, if nascent platform to feed that growth, and while there is definitely some excitement baked into Facebook’s plans, there are also the residual risks attendant in almost everything attached to a computing experience (privacy, for instance), not to mention everything -- good and bad -- attached to a Facebook experience. History shows that whoever defines new computing platforms will shape the outcome and benefit financially, Zuckerberg said.

What it means for you

During a call to announce the Oculus acquisition, Zuckerberg mentioned a series of potential applications beyond gaming, focusing on the social and entertainment potential, like feeling as if you’re courtside during a basketball game, or studying with other students and teachers all over the world, but in the comfort of your own living room.

In broad terms, VR will allow users to be present with whomever they choose, wherever they are, opening up “unbounded experiences with people in your life,” Zuckerberg said. He noted that virtual and augmented reality will change the way we communicate with friends, and “share experiences and adventures.” He predicted that the technology “will become part of people’s daily lives.”

"This partnership is one of the most important moments for virtual reality: it gives us the best shot at truly changing the world," Oculus VR added in its statement. "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."

In Facebook's continuing quest to connect every human on the planet, the addition of VR technology is a bold step towards a connection that people can experience together rather than through more traditional and admittedly far less compelling means. While Oculus Rift targets gamers, Zuckerberg sees it as a new way to communicate.

"This is really a new communication platform," said Zuckerberg. "By feeling truly present, you can share unbounded spaces and experiences with the people in your life. Imagine sharing not just moments with your friends online, but entire experiences and adventures."

But Zuckerberg also mentioned advertising, and it’s easy to imagine the scenarios in which Facebook sees ads as part of these immersive, social experiences.

Oculus Rift still on track

For now, Facebook plans to leave Oculus alone and to its most urgent task: simply shipping a commercial product with broad developer support.

"Oculus already has big plans here that won't be changing and we hope to accelerate," assured Zuckerberg. "The Rift is highly anticipated by the gaming community, and there's a lot of interest from developers in building for this platform. We're going to focus on helping Oculus build out their product and develop partnerships to support more games. Oculus will continue operating independently within Facebook to achieve this."

The fact that Facebook is still digesting Instagram, and hasn’t even closed the WhatsApp deal, let alone this most recent one, should assure that Oculus remains independent in its pursuit. After all, as Zuckerberg said over and over during the call with analysts and press, Oculus has already taken orders for 75,000 development kits. We’re all waiting to simply see how the first chapter plays out.

Read more: Oculus Rift "Crystal Cove" at CES 2014