Facebook Buys Virtual-Reality Co. Oculus for $2 Billion

Do consumers really want to commune with friends — or even watch a move — in an online “immersive environment”? Facebook envisions extending social media and entertainment into virtual-reality worlds, announcing a deal to acquire virtual-reality headset maker Oculus VR in a deal worth up to $2 billion.

Deal comes after Facebook last month announced it was buying mobile-messaging company WhatsApp for about $16 billion, plus $3 billion in stock grants.

The Oculus Rift virtual-reality headset was designed to provide an immersive experience for videogames. But Facebook plans to extend the Oculus system to other areas, including communications, media and entertainment, and education. According to Oculus, founded in 2012, it has received more than 75,000 orders for development kits for the VR system.

“Ultimately, the scale of this acquisition is modest in context of the rest of Facebook, and — unlike WhatsApp — there appears to be a clearer path to monetizing its new asset through game-related software and hardware given Oculus’ development activities over the past couple of years,” Pivotal Research analyst Brian Wieser wrote in a research note.

Silicon Valley has become enamored with the idea that wearable computing devices mark the next big personal-tech category.

Google Glass, for example, are wireless eyeglasses that let users browse the web, check email, watch and record video, and access other apps. And Sony recently a announced Project Morpheus, a virtual-reality peripheral for the PlayStation 4.

“Mobile is the platform of today, and now we’re also getting ready for the platforms of tomorrow,” Facebook founder and CEO Mark Zuckerberg said in announcing the deal. “Oculus has the chance to create the most social platform ever, and change the way we work, play and communicate.”

Oculus will maintain its headquarters in Irvine, Calif., and will continue development of the Oculus Rift, its virtual-reality platform. Deal is expected to close in the second quarter of 2014.

Under terms of the deal, Facebook will buy Oculus for $400 million in cash and 23.1 million shares of Facebook common stock (valued at $1.6 billion, based on the average closing price of the 20 trading days preceding March 21). The agreement also provides for an additional $300 million earn-out in cash and stock based on performance milestones.

“At first glance, it might not seem obvious why Oculus is partnering with Facebook,” Oculus founder Palmer Luckey, CEO Brendan Iribe and CTO John Carmack wrote in a blog post. “But when you consider it more carefully, we’re culturally aligned with a focus on innovating and hiring the best and brightest; we believe communication drives new platforms; we want to contribute to a more open, connected world; and we both see virtual reality as the next step.”

Luckey started the company after raising $2.4 million from a Kickstarter campaign to fund the VR headset’s development. Oculus subsequently raised $91 million from venture-capital investors Andreessen Horowitz, Spark Capital, Matrix Partners and Formation 8.

More Digital

  • Michelle Kempner

    BuzzFeed Entertainment Operations Head Michelle Kempner Exiting for Facebook

    Do consumers really want to commune with friends — or even watch a move — in an online “immersive environment”? Facebook envisions extending social media and entertainment into virtual-reality worlds, announcing a deal to acquire virtual-reality headset maker Oculus VR in a deal worth up to $2 billion. Deal comes after Facebook last month announced it […]

  • Empty movie theater

    AMC Theatres Teams With Facebook for Movie Ticket Purchases

    Do consumers really want to commune with friends — or even watch a move — in an online “immersive environment”? Facebook envisions extending social media and entertainment into virtual-reality worlds, announcing a deal to acquire virtual-reality headset maker Oculus VR in a deal worth up to $2 billion. Deal comes after Facebook last month announced it […]

  • VUDU logo

    Walmart Eyes Q4 Launch of Vudu-Branded Service to Rival Netflix (EXCLUSIVE)

    Do consumers really want to commune with friends — or even watch a move — in an online “immersive environment”? Facebook envisions extending social media and entertainment into virtual-reality worlds, announcing a deal to acquire virtual-reality headset maker Oculus VR in a deal worth up to $2 billion. Deal comes after Facebook last month announced it […]

  • Marc Hustvedt - Fine Brothers Entertainment

    Marc Hustvedt, Formerly CEO of Above Average, Joins FBE (EXCLUSIVE)

    Do consumers really want to commune with friends — or even watch a move — in an online “immersive environment”? Facebook envisions extending social media and entertainment into virtual-reality worlds, announcing a deal to acquire virtual-reality headset maker Oculus VR in a deal worth up to $2 billion. Deal comes after Facebook last month announced it […]

  • Walter Cronkite Media Broadband

    Rebooting Walter Cronkite: Broadcast News Rushes to Broadband

    Do consumers really want to commune with friends — or even watch a move — in an online “immersive environment”? Facebook envisions extending social media and entertainment into virtual-reality worlds, announcing a deal to acquire virtual-reality headset maker Oculus VR in a deal worth up to $2 billion. Deal comes after Facebook last month announced it […]

  • Spotify logo is presented on a

    Spotify Launches Feature to Help Artists, Labels Submit Music to Playlists

    Do consumers really want to commune with friends — or even watch a move — in an online “immersive environment”? Facebook envisions extending social media and entertainment into virtual-reality worlds, announcing a deal to acquire virtual-reality headset maker Oculus VR in a deal worth up to $2 billion. Deal comes after Facebook last month announced it […]

  • Chance the Rapper

    Chance the Rapper Buys Chicagoist Website, He Announces in New Single

    Do consumers really want to commune with friends — or even watch a move — in an online “immersive environment”? Facebook envisions extending social media and entertainment into virtual-reality worlds, announcing a deal to acquire virtual-reality headset maker Oculus VR in a deal worth up to $2 billion. Deal comes after Facebook last month announced it […]

More From Our Brands

Access exclusive content