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The Bulletin

Inside Facebook's $2B bet on the next major computing platform

Posting in Technology
Facebook's $2 billion purchase of virtual reality headset maker Oculus VR came as a shock, particularly considering the social networking company's recent spate of high-profile acquisitions. Not to mention, that Oculus VR doesn't even have a product ready for consumers yet (although it has received 75,00 orders for development kits). 

Nuts and Bolts of the Deal

Facebook will buy Oculus VR for about $2 billion, including $400 million in cash and 23.1 million shares of common stock that's valued at $1.6 billion. The stock valuation is based on the average closing price of the 20 trading days preceding March 21, 2014 of $69.35 per share. Under the agreement, Facebook will provide an additional $300 million earn-out in cash and stock based on the achievement of certain milestones, according to a company statement. 

The Upshot

So what is Facebook's plan? Does the company's purchase suggest a bigger play into gaming? 

Comments from Facebook CEO Mark Zuckerberg during a conference call Tuesday suggests a bigger vision than gaming. 

For the past few years, Facebook has focused on building mobile apps in its aim to give people the power to share and—as Zuckerberg says—make the world more open and connected. As of last week, there are more than 1 billion people actively using Facebook mobile apps and more than half of the company's ad revenue comes from mobile, Zuckerberg said during the call. 

While Zuckerberg acknowledged there was still more work to be done, he said the company is strong enough that it can also focus on building the next major computing platform that will come after mobile. Zuckerberg believes that the immersive experience of virtual reality is the computing platform of tomorrow.

"Today's acquisition is a long term bet on the future of computing," Zuckerberg said in the call. 

Facebook will initially help Oculus build out its existing product. But Zuckerberg also said that the company wouldn't stop at gaming. 

Here's an excerpt from Zuckerberg on his blog (he made similar comments during the call) 
But this is just the start. After games, we're going to make Oculus a platform for many other experiences. Imagine enjoying a courtside seat at a game, studying in a classroom of students and teachers all over the world or consulting with a doctor face-to-face -- just by putting on goggles in your home.
This is really a new communication platform. By feeling truly present, you can share unbounded spaces and experiences with the people in your life. Imagine sharing not just moments with your friends online, but entire experiences and adventures.

These are just some of the potential uses. By working with developers and partners across the industry, together we can build many more. One day, we believe this kind of immersive, augmented reality will become a part of daily life for billions of people.

— By on March 26, 2014, 1:33 PM PST

Kirsten Korosec

Contributing Editor

Kirsten Korosec has written for Technology Review, Marketing News, The Hill, BNET and Bloomberg News. She holds a degree from Northwestern University's Medill School of Journalism. She is based in Tucson, Arizona. Follow her on Twitter. Disclosure