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FB Stock: Where Social Networking Meets Virtual Reality

Why Facebook spent so much money on the emergin VR trend

By Hilary Kramer, Editor, GameChangers


Virtual reality is no longer a figment of sci-fi lovers’ imaginations. While the technology is still in its early stages, it’s very real. And starting today, with preorders opening up for Samsung’s Gear VR powered by Oculus, consumers can experience it themselves first-hand.

FB Oculus VRFacebook Inc (FB) CEO Mark Zuckerberg made a surprise appearance this week at Samsung’s Mobile World Congress press conference, touting the wonders of virtual reality (VR) and reminding the world that almost a year ago to the day, the social media company dropped a hefty $2 billion to fund research and development for VR-headset manufacturer Oculus.

FB already had a solid growth story thanks to Instagram and its global exposure, so why is Zuckerberg pursuing VR with such conviction?

The short answer is: It’s complicated.

Why VR Is Important for FB Stock

To me, FB’s interest in VR is less about embracing the future and more about defensive positioning: The company fought hard for its stranglehold on desktop users, and will spend whatever it takes to spread its brand across whatever new screens emerge to replace it. In the same vein, FB has struggled in recent years because Wall Street wasn’t seeing its ad platform get enough traction on mobile.

Evidently, management has learned their lesson because they now want to ensure they’ve got a seat reserved in head-mounted screens for augmented and virtual reality if (or when) that system overtakes conventional mobile platforms like phones and tablets. They also want to make sure that those head-mounted screens have the capability to access Facebook, opening up all those tempting user experiences to data collection, advertising, sharing among friends and so on.   

This isn’t a new train of thought in business. Alphabet Inc (GOOG, GOOGL) did something very similar when it bought Motorola a few years ago and spun that into its line of Android phones. Management wanted to make sure they weren’t trapped with dominant share of a dying desktop universe, so they invested in the mobile experience. Likewise, they built into virtual reality via Google Glass. The imperative in both cases — and in Facebook’s — is that if a consumer screen pops up, they don’t want to be locked out.

Head-mounted virtual reality is the first new screen that has come around since the mobile revolution, so naturally Zuckerberg and the other FB executives want to make sure they have exposure if it looks like it will take off. Now that they own Oculus, the initial applications are video games, as FB can link virtual reality games across a social network the same way it used to support Zynga Inc (ZNGA) and King Digital Entertainment PLC (KING) games (à la Farmville and Candy Crush).

What’s interesting to me is that Apple Inc. (AAPL) has been very quiet on this front. Either the company is missing the boat on VR or it just doesn’t see the point of jumping at this platform. I know a few staff members at AAPL who think Google Glass was a ridiculous waste of R&D … and considering its ocean of criticisms, they might be right.

Exactly how much revenue this endeavor will generate for FB remains to be seen. Still, virtual reality through the Oculus Rift headset or Samsung’s Gear VR seems like a very cool experience. Consumers have been waiting for this for a long time, and now that the technology has finally caught up, a lot of people are sure to buy in, barring any prohibitively expensive pricing.

Hilary Kramer is the editor of GameChangersBreakout Stocks Under $10High Octane Trader,Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/02/fb-stock-social-networking-meets-virtual-reality/.

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