Facebook's latest multi-billion buy: 3D gaming company Oculus

Facebook's latest multi-billion buy: 3D gaming company Oculus

Summary: Facebook continues to blow through billions of cash like wildfire, but what is the bigger picture? For today at least, that picture is 3D.

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Facebook continues to blow through billions of cash like wildfire, likely causing many analysts and investors to question what the end goal is.

The finish line (if there is one) is not just solidifying Facebook as a preeminent social media company, but rather as a social media empire.

The world's largest social network confirmed the acquisition, worth approximately $2 billion, in an announcement after the closing bell on Tuesday.

That breaks down to $400 million in cash followed by 23.1 million shares of Facebook common stock, which were valued at $1.6 billion based on the average closing price of the 20 trading days preceding March 21, 2014 at $69.35 per share. There is also another $300 million singled out as earn-out in cash and stock based undefined "milestones" if achieved.

The multi-billion deal is just one in what appears to be evolving into a string of many for the Menlo Park, Calif.-headquartered company.

Just over a month ago, Facebook picked up the popular messaging service WhatsApp for $16 billion in a user land-grab to build upon a base that already consists of more than a billion members worldwide.

Matched by Facebook's ambitious but nascent Internet.org initiative to connect everyone worldwide to the Internet, the Whatsapp deal essentially represented Facebook's plan to form a social infrastructure conglomerate. Previous acquisitions such as Parse, Gowalla, and (most famously pre-Whatsapp) Instagram, among others, certainly play into that.

However, much like it has also demonstrated with previous acquisitions, Facebook is letting Oculus maintain at least some level of autonomy to preserve brand identity.

Oculus will stay put at its current headquarters in Irvine, Calif. as it continues to work on the virtual reality platform Oculus Rift, which won best in show at CES 2014 in January.

The VR headset is currently being prepped for developers, but not quite ready for consumers just yet. The merger announcement revealed that Oculus has already received more than 75,000 orders for development kits.

Facebook can certainly help provide a bridge to mainstream consumers that are likely not familiar with augmented and virtual reality technologies that have been buzzed about over the last few months.

But Facebook's greater interests lie within the channel where its revenue stems most these days: mobile.

Facebook CEO Mark Zuckerberg affirmed as much in Tuesday's announcement:

Mobile is the platform of today, and now we’re also getting ready for the platforms of tomorrow. Oculus has the chance to create the most social platform ever, and change the way we work, play and communicate.

Facebook also argued that "virtual reality technology is a strong candidate to emerge as the next social and communications platform," making Oculus a prime (albeit unexpected) piece in the puzzle that is Facebook's social conglomerate strategy.

Topics: Software, Hardware, Start-Ups, Tech Industry, Social Enterprise

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4 comments
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  • Facebook

    Facebook is strongly and continuously dominating the market. Slowly but surely they are owning the best brand services today that makes them stand out form the rest. http://www.crittermap.com/app/pack-goat-jump-jetpack-run-vs-wolf-cougar-and-troll/
    jetpack
  • Facebook

    Facebook is strongly and continuously dominating the market. Slowly but surely they are owning the best brand services today that makes them stand out form the rest. http://www.crittermap.com/app/pack-goat-jump-jetpack-run-vs-wolf-cougar-and-troll/
    jetpack
    • Not really ...

      Oh OK, they're dominating the market by buying up products with short shelf lives.

      Oculus is a questionable gamble, it might end up being the market leader or it may just be the first before something better comes along.
      Pastabake
  • Because it can

    This seems to be another case of Facebook spending billions not because the company is worth it, but because it has no better place to throw the money. Oculus Rift is pretty cool technology, but is it really worth 2bn?

    Important to note that Zuck was still in his diapers (ok, maybe not really, but you get the point) during the dotcom bubble. He wasn't a player then, but Facebook's latest moves reek of the mistakes of the dotcom bubble.
    whitezb