Facebook buys virtual reality headset start-up for $2bn

Why did Facebook spend $2bn on virtual reality? Rory Cellan-Jones reports.

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Facebook has announced it will buy Oculus VR, a Californian company which specialises in virtual reality products, for around $2bn (£1.2bn).

The start-up's flagship product, the Oculus Rift, is a goggle-like "immersive" headset for video gaming.

It was developed with funds raised through crowdfunding site Kickstarter, and subsequent investment.

Facebook's boss, Mark Zuckerberg, said Oculus' technologies could "change the way we work, play and communicate".

Investors appeared sceptical, however, with Facebook shares in New York down 6% by lunchtime.

Analysis

Over the past two years or so Oculus Rift has been getting the video games industry very excited. The immersive experience quite literally adds a new dimension to video games - one demo in particular involving a huge monster had even hardened gamers jumping in their seats.

But as well as entertainment, the Oculus VR team has also been keen to show off the technology's other uses - particularly when it comes to communication. It certainly seems it is this aspect of Oculus Rift that Mark Zuckerberg finds most appealing.

But there could be serious bumps along the way. Oculus Rift is - for the moment at least - likely to be expensive hardware. I say likely because it hasn't even made it to the shops yet.

And it faces a serious competitor in the form of Sony which has its own similar product, Project Morpheus.

The Oculus Rift has yet to be released, but more than 75,000 orders for development kits have already been placed, according to the social media giant.

In a statement released on Tuesday, Facebook said it plans to expand the use of Oculus technologies to include "communications, media and entertainment, education and other areas".

Oculus' crowdfunding campaign raised $2.4m (£1.5m), 10 times the amount originally sought.

It subsequently received a further $75m from investors.

The Rift headset was widely heralded at the CES technology show in Las Vegas in January, where Sony also announced a rival product.

The deal includes $400m in cash and just over 23 million Facebook shares, valued at $1.6bn.

Oculus employees will also receive an additional $300m if the company achieves certain targets.

Game developers hope that the Oculus Rift will bring virtual reality into the 21st century

Commenting on the deal, Mr Zuckerberg said: "Mobile is the platform of today, and now we're also getting ready for the platforms of tomorrow."

'Shame on you'

It is the latest purchase for Facebook, which last month spent $19bn on mobile messaging platform WhatsApp.

A number of Oculus VR's Kickstarter backers took to the original funding page to express discomfort at the move, but some rallied around the decision.

"Shame on you Palmer, shame on you," wrote user Xod, referring to Palmer Luckey, Oculus VR's founder.

"Facebook is smart, they saw the future, just like the rest of us here, and bought it for two billion. They got a bargain," wrote backer Jeff McMorris.

Games developers were also split about the Oculus VR move.

Oculus Rift The Oculus Rift headset sends an image of a game's environment to screens placed directly over each eye

Markus "Notch" Persson, creator of popular online game Minecraft, said he had cancelled an Oculus deal.

"We were in talks about maybe bringing a version of Minecraft to Oculus," he tweeted. "I just cancelled that deal. Facebook creeps me out."

John Carmack, Oculus VR's chief technology officer, said that Facebook's financial muscle would allow adequate resources for the company.

"For the record, I am coding right now, just like I was last week," Doom co-creator Mr Carmack said. "I expect the FB deal will avoid several embarrassing scaling crisis for VR."

Facebook's share value fell more than 2% in early trading on Wednesday.

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