When Facebook (NASDAQ:FB) announced its $2 billion acquisition of virtual reality headset manufacturer Oculus in March, the deal was a bit of a head-scratcher. Sure, the $19 billion buyout of WhatsApp got many of the headlines, and rightfully so. WhatsApp's over 600 million active users are more than twice the size of Twitter's (NYSE:TWTR)active user base, and could put even more pressure on the wannabe tweet master, making it easier to see the logic behind the transaction.
Facebook's first foray into hardware via the deal for Oculus and its Rift VR headset may have caught some by surprise, however, it has a clear path to monetization: gaming. But the Rift is still in development mode, so who knows when Facebook will actually get it out to the masses. But based on some new developments and efforts on Facebook's part, it appears Rift might hit virtual store shelves a bit sooner than some industry pundits may have thought.
What's a Rift?
As Facebook CEO Mark Zuckerberg put it, Rift gives users an "immersive gaming" experience, an area of focus for Facebook over the last several months.
If you've ever witnessed a gamer who was in the midst of taking over the universe, you know just how addictive gaming can be. Now imagine those same folks utterly immersed "inside" their game of choice. There's a reason Oculus has already sold over 100,000 Rift development kits. But dominating the VR gaming market -- and the numerous revenue opportunities it presents -- is only part of the Rift equation.
The latest on Rift
Facebook has what it calls a "bounty program," in which developers are monetarily rewarded for finding potential security threats or programmatic concerns. The idea is to use developer resources from the entire technology community, rather than relying solely on in-house talent. In fact, Facebook paid about $1.5 million in bounties last year alone. And as of a few days ago, Facebook's bounty program expanded to include Rift.
Getting the kinks out of Rift is quite naturally the first step in readying it for mainstream use, and now Facebook has a horde of gaming development gurus on the job. Does that mean Rift will be available by the holidays? Not likely, but it's a sign that Facebook is getting the ball rolling.
As for Twitter, its attempts to address user growth and engagement issues took a hit recently when it began force-feeding users with posts from people they were not following. While Facebook explores additional revenue opportunities, Twitter is in full-on damage control mode. Of course, that's what market leaders like Facebook do: take charge, not follow, as Twitter has so often, including the late introduction of mobile in app ads, and testing video advertisements.
More positive Rift VR news came recently from none other than Markus Persson, creator and driving force behind the ridiculously popular game Minecraft. With over 100 million registered users, and nearly 16.5 million paid subscribers, Minecraft offers Rift a huge opportunity. The only problem was that Persson nearly went ballistic in March when Facebook announced it was buying Oculus, which ended with him ditching plans to make a VR version of Minecraft.
Ah, but time may indeed heal all wounds. Persson went on Twitter earlier this week to say he's "officially over being upset" about the Facebook acquisition of Oculus. A "sure-fire" gaming winner may not exist, but a VR Minecraft experience would be as close to one as possible. Persson's tweet isn't confirmation he'll get to work on an updated Minecraft, but like Facebook's bounty program, it certainly bodes well going forward.
Not just gaming
Zuckerberg was adamant when announcing the Oculus purchase that a gaming solution was just the beginning of what Rift can, and will, become. Some developers at a recent Netflix "Hack Day" provided a glimpse of Rift's possibilities. One developer constructed a VR "room," complete with a Netflix directory of shows that could be scrolled through using nothing but hand gestures. Once a show is selected inside what was dubbed "Oculix," the viewer can sit back and enjoy the content from "inside" the show. Can you imagine the possibilities a Facebook-Netflix partnership would present?
Final Foolish thoughts
Like a VR Minecraft, there's no way to know if a VR Netflix will come to pass, but Oculus demonstrates one of the innumerable possibilities Rift presents to Facebook. Like anything else, it takes time to assimilate acquisitions and grow new revenue sources, so don't expect immediate profitability when Rift hits the street. But Facebook has to start somewhere to get VR ready for prime time, and it appears Zuckerberg many have just hit the "go" button.
Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Facebook, Netflix, and Twitter. The Motley Fool owns shares of Facebook and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.