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Facebook Inc. on the Cutting Edge of Virtual Reality

By Tim Brugger - Sep 28, 2015 at 11:00AM

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360-degree videos in News Feeds could yield all kinds of good results for Facebook in terms of ad dollars and even hardware sales.

Facebook (FB 1.41%) CEO Mark Zuckerberg raised a few eyebrows when he announced the $2 billion acquisition of Oculus about a year and a half ago. Getting into the hardware business, even in an upstart, early-stage market like virtual reality, seemed like a stretch. But as Facebook nears the introduction of Oculus' Rift VR headset in Q1 of 2016, it's become apparent Zuckerberg was ahead of the curve. And Rift isn't the only VR solution Facebook has up its sleeve.

In a blog post on Sept. 23, a senior engineer in Facebook's video development unit announced that mobile friendly, VR-type videos are coming to the all-important News Feed for its 1.49 billion monthly active users to enjoy, and the timing couldn't be better. Based on some recent estimates, the VR market is poised to explode. Facebook's 360-degree videos are created when a special set of cameras records all 360 degrees of a scene at the same time. Then the viewer can choose what angle to view the video from.

Coming back for more
A telling statistic Zuckerberg shared during last quarter's conference call addressed the engagement levels of Facebook users. Some social media pundits have suggested young users are leaving the fold since Facebook is becoming passe. An interesting perspective, but nothing could be further from the truth, which is demonstrated by two key benchmarks.

While MAUs are the generally accepted measuring stick for a social media site's popularity engagement levels are another matter, and Facebook is happy to share figures.

Last quarter, just shy of two-thirds -- 968 million to be precise -- of Facebook's 1.49 billion MAUs accessed the site daily. Facebook's DAU results were a 17% increase year-over-year, compared to a 13% jump in monthly users. Of course, logging on to Facebook every day is one thing, sticking around a while is the other determining factor of how engaged, or not, users are.

According to Zuckerberg, at the end of last quarter, Facebook "friends" increased their average time spent on the site to 46 minutes a day. Considering Facebook's size and reach, nearly an hour a day on average is an impressive figure. And with the introduction of its new, immersive 360-degree VR technology, Facebook's engagement levels should continue to impress. 

This is going to be good
Facebook has made no secret of its intention to diligently focus on video, both as an advertising medium to drive revenue, and as a means of maintaining -- if not improving -- user engagement levels. Though limited to a select number of publishers, Facebook has rolled out its VR-like videos to its News Feeds. For folks logging into Facebook via a PC or laptop, users are able to drag the cursor across the video and it will show a complete, 360-degree view of the "scene." The new technology's mobile capabilities are even more impressive.

For the more than 1.3 billion MAUs that access Facebook via a mobile device, taking advantage of the new VR technology is done either by swiping a finger across the screen or, and this is really something, simply turning your smartphone to a new angle. Better still, if a mobile user simply turns around while viewing their device, they'll get a 360-degree view of the video: no headset needed. As it stands, it takes a specially made camera to film in 3D, which is why it's initially limited to a few Facebook partners. But the future possibilities are endless.

A Facebook video engineer described a great example of what the future may bring: "imagine watching 360 videos of a friend's vacation to a small village in France or a festival in Brazil -- you'll be able to look around and experience it as if you were there."

Some of the first to post 360-degree videos to Facebook are Star Wars (speeding across the Jakku desert from Star Wars: The Force Awakens) and Saturday Night Live (a show opening featuring Jimmy Fallon and Justin Timberlake).

In addition to the obvious user engagement, gaming and video advertising revenue opportunities the new technology offers -- mobile gaming alone is expected to become an estimated $50 billion industry in five years -- there's likely to be an ancillary benefit. As Facebook users become accustomed to the VR experience thanks to its new technology, it stands to reason many will transition to using a headset, a market that is estimated to grow to about 20 million units sold by 2020.

Facebook's ongoing efforts to improve user engagement and develop new ways to drive ad revenue is a big part of the reason its stock is nearing the $100-share level, despite pressures on the overall market. Technologies like its new 360-degree 3D video is just one more reason investors can expect continued growth from Facebook in the months and years ahead.


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