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Alphabet Prepares to Challenge Facebook and Microsoft In VR

By Andrew Tonner - Jan 30, 2016 at 11:11AM

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Evidence is mounting that Alphabet intends to challenge Facebook and Microsoft's early leads in the most important computing development since mobile.


Source: Oculus.

Will virtual reality be the tech trend of 2016?

With names such as Facebook (META 5.82%), Microsoft (MSFT 2.43%), and Samsung each moving headlong into virtual and augmented reality, the market has momentum unlike few tech trends since the dawn of the modern smartphone in 2007.

And as many of technology's largest names vie to establish their own leadership positions in this potential $150 billion market, it should come as no surprise that tech giant Alphabet (GOOG 2.68%) (GOOGL 2.63%) is also laying the groundwork for its own VR devices.

Alphabet staffs up in VR?
As has been noted by a number of technology publications, many virtual reality-themed roles have appeared on Google's careers page in recent weeks, though the company has since diluted the listings, replacing specific references to virtual reality with more vague language such as "consumer hardware." However, before they were altered, Alphabet's career page is reported to have contained listings for positions including "Hardware Engineer, VR Camera Systems" and "Electrical Hardware Engineer." This isn't the only way in which Alphabet appears to be marshaling resources toward a deeper push into virtual reality.

Source: Google.

Earlier this month, Alphabet also moved to officially create a dedicated virtual-reality division, which will be headed by the well-regarded VP of product management, Clay Bavor.  Among other past responsibilities, Bavor ran Alphabet's low-cost Cardboard virtual-reality viewer project. Alphabet also scored what appears to be another major executive coup as part of rival Twitter's recent C-suite mass exodus, as former Vine head Jason Toff  has also reportedly joined Alphabet's virtual-reality division. So while Alphabet appears slowly en route to creating its own virtual-reality hardware, what does this mean for competitors such as Facebook, Microsoft, and Samsung?

A genuine threat to Facebook and Microsoft
Though relatively few consumers have yet to experience it firsthand, the fact that nearly every major consumer-technology company has demonstrated a marked interest in VR signals that this new tech paradigm holds potential across a wide number of potential applications. As such, it should seem more of a logical extension than a surprise development that Alphabet plans to join early leaders such as Facebook, Microsoft, and Samsung in the early stages of the great VR gold rush. Even Apple is reportedly staffing up in the space of late. However, Alphabet's early strategy here, interestingly, does seem a bit at odds with its historic strengths as well.

As we learned with both the PC and smartphone revolutions, major computing paradigms tend to galvanize toward a few dominant operating systems, which can serve as mass-market platforms for third-party application developers. And though not necessarily a given at this early stage, focusing on the software operating system side of the virtual-reality value chain seems like the most logical point of emphasis for a company like Alphabet, not necessarily hardware. That's also where Alphabet runs directly into Facebook's and Microsoft's ambitions in this space.

Microsoft and Facebook are using the early versions of their respective VR headsets to court developers toward creating games and other applications for their ecosystems, and it's my bet that Alphabet will follow a similar track with its nascent VR division. Especially with its numerous software applications that it undoubtedly wants to position to thrive in a more immersive VR-based world (maps, hangouts, YouTube, and so on), Alphabet understands that to remain relevant it cannot stand by idly while others disrupt its own mobile OS empire. Perhaps more problematic, losing its grip as the world's largest OS provider could threaten Alphabet's cash-cow search business it uses to finance its many moonshots. As we learned recently, having to pay for placement on its search bar is an expensive proposition for Alphabet indeed.

So while Alphabet's early maneuverings are perhaps the earliest signs of its interest in VR, rest assured it has every intention of not only participating in, but also shaping, this emerging computing standard.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Andrew Tonner owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, 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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