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Alphabet Inc. Looks to Make Google Cardboard a Sturdier Competitor

By Tim Brugger - Jan 29, 2016 at 2:26PM

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The burgeoning world of virtual reality is quickly becoming crowded with players, including the search king.

When Facebook's (META -1.01%) Oculus Rift virtual reality (VR) headset became available for pre-order in early January, it seemed as if all the hype surrounding what is expected to become a multibillion-dollar business was warranted. Facebook hasn't released sales figures, but as per Oculus founder Palmer Luckey: "Pre-orders are going much better than I ever could have possibly expected."

Oculus' early success bodes well for Facebook, of course, but you can bet others have also taken notice, including Google, which now operates under the Alphabet (GOOG -0.54%) (GOOGL -0.57%) umbrella. Alphabet isn't new to VR by any means; it introduced its Google Cardboard back in 2014. Cardboard, which has shipped 5 million units, turns Android phones into a makeshift virtual-reality headset by letting users hold the phone to their eyes.

However, the cheap-looking Cardboard -- it's all of about $20 in these early stages compared to Rift's $599 headset -- didn't appear to stack up, regardless of cost. But following several recent moves, it's now clear Google intends to get serious about VR, and if that means taking down Facebook's Oculus, so be it.

Cardboard. Source: Google.

The gloves are coming off
Facebook has a large mountain to climb to catch Alphabet as the digital ad king, but strides are being made, and in 2016, investors can add another battle in the Alphabet vs. Facebook war: virtual reality. The first indication that Google was taking its entry into VR seriously came a couple of weeks ago, when it was revealed that Google was forming a distinct, VR-centric business unit with former VP of product development Clay Bavor in charge.

Bavor isn't new to Cardboard, having led its development and early release in 2014. But now, Bavor's full-time responsibility is to get Cardboard ready for the masses before losing too much time, and market share, to Facebook's Oculus. And Bavor is already doing just that.

Shortly after the new VR division and Bavor appointment were announced, Google introduced a significantly enhanced audio experience for Cardboard users. One of Alphabet's many acquisitions last year was Thrive Audio, a specialist in 3D sound solutions, and it's using the technology to improve Cardboard. In addition to now offering consumers a full, 360-degree audio experience, developers are able to create eerily realistic sounds.

For example, if your VR experience takes you spelunking, the sound will adapt to include the echo-like audio that being in a cave would deliver.  With Bavor focused solely on VR, investors can expect the introduction of a lot more enhancements to Cardboard before long. And Alphabet has VR plans other than taking on Facebook via its Google Cardboard.

Beyond today's Cardboard
Alphabet said it intends to bring the VR experience to its wildly popular YouTube property, expanding on its early stage efforts that began in late 2015. Facebook fans may recall that it began testing its own 360-degree, VR-like ads and non-commercial video content last year as well. Based on Alphabet's recent hiring of Scott Broock from privately held Jaunt as head of its YouTube VR initiative, it's serious about getting developers onboard to generate more VR content.

Today's iteration of Cardboard requires the use of a smartphone, putting it directly in the path of Samsung's Gear VR. But with Alphabet's existing mobile-device manufacturer relationships and its renewed focus on VR, developing a more Oculus Rift-like VR headset solution to directly compete with Facebook wouldn't be a stretch.

The brewing battle between Facebook and Google for VR domination isn't on the same scale as the fight for digital ad spend by any means, but it does turn the tables. Alphabet is now in the unfamiliar position of looking up at its primary competitor. How much ground can Google make up in 2016 in its efforts to catch Facebook's Oculus, now that it's focusing more people and resources on VR? Only time will tell, but it will sure be an intriguing clash for investors to watch unfold.


Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Tim Brugger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. 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.

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