Facebook's (NASDAQ:FB) $2 billion purchase of VR headset maker Oculus VR last year was a big vote of confidence for the future of virtual reality, which has been hailed as the "next big thing" in tech ever since the 1980s.
It's unclear what Facebook plans to do with Oculus, which hasn't launched its Rift headset commercially, but there are plenty of tantalizing possibilities -- including video games, VR films, or even virtual doctor's visits. It's an industry that research firm KZero believes will be worth $5.2 billion annually by 2018 -- up from nearly nothing today.
Over the past few years, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) seemed curiously absent from the VR space, opting to invest heavily in augmented reality with Glass instead. But at I/O 2014 last June, Google gave out Cardboard, a DIY VR headset that could be assembled with just a piece of cardboard, two lenses, two magnets, some velcro strips, and a rubber band. Since then, Google has encouraged people to download the designs off its website or buy third-party kits to build their own cheap VR headsets.
Google's approach is completely different from Facebook's, but it has the potential to steal the VR market away from Facebook before Oculus launches the Rift.
How Google is disrupting Facebook's plans
The devkit version of Oculus Rift can be purchased for $350, but it's not designed for casual users -- it takes some elbow grease to get it working properly with full PC games, although Oculus offers lighter games and tech demos on its "VR Share" website.
That's why Oculus teamed up with Samsung (NASDAQOTH:SSNLF) last year to launch Gear VR, a VR headset that transforms the Note 4 into an Rift headset and lets users download VR apps directly from the app store. However, the Gear VR costs $200, and the Note 4 costs up to $800 off contract -- making it a much more expensive product than the Oculus Rift.
Since the Oculus Rift and Gear VR are pricey products that appeal mainly to hardcore gamers or hobbyists, there wasn't really a compelling reason for the average developer to create a VR app instead of a touchscreen-based one.
That's why Google introduced Cardboard, which can be assembled for less than $10, and launched an in-house app showcasing the possibilities of using VR for virtual tours, animated films, and YouTube videos. The Cardboard experience certainly wasn't as refined as the Oculus Rift or Gear VR experience, but it got people interested in the technology. As of this writing, the Cardboard app has been downloaded up to a million times.
Consumer growth breeds developer interest
Since Cardboard arrived, developers have launched more VR experiences for Android phones, including games, roller coaster simulators, and interactive films. FabulousPixel's Tuscany Dive, originally designed for the Oculus SDK, was ported to Android and downloaded up to half a million times. Google also launched Chrome Experiments for VR, which lets developers create VR apps within the Chrome browser.
Google's VR efforts undermine Facebook in two ways. First, it makes the Rift -- which will reportedly cost $200 to $400 at launch -- look overpriced. Other companies are already launching more durable plastic headsets, based on Cardboard's simple design, for just $20 to $30. Granted, the Rift doesn't require a smartphone, but it still needs to be hooked up to a PC or console. Second, it lures more VR developers into the massive Android ecosystem, which could make it the primary VR development platform instead of Oculus.
The beauty of Google's plan is that it won't have to do the heavy lifting -- it just has to open the doors for the developers and nurture the ecosystem.
Should Facebook fight back?
Today, Google's growing VR ecosystem won't hurt Facebook's core business in any noticeable way. But we should also remember that when Google bought Android in 2005, few people expected it to become the most popular mobile OS in the world. A few years from now, we might look back at the introduction of Cardboard as the pivotal moment Google laid claim to the VR market.
Facebook has the tools to fight back. It can launch its own Android app store, similar to Amazon (NASDAQ:AMZN) and Samsung's (NASDAQOTH:SSNLF), to encourage Oculus developers to launch paid Android VR apps that Google can't profit from. It could encourage the use of Facebook single sign-ons in VR games to curb Google's influence. It could promote the Oculus Rift to its massive 1.39 billion monthly active users when it finally launches. But none of that can happen unless Facebook integrates Oculus VR more tightly into its core business.
Leo Sun owns shares of Facebook. The Motley Fool recommends Amazon.com, Facebook, Google (A shares), and Google (C shares). The Motley Fool owns shares of Amazon.com, Facebook, Google (A shares), and Google (C shares). 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.