Doubts Emerge About Whether Oculus Connect 5 Will Positively Impact Facebook, Inc.

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Facebook - Doubts Emerge About Whether Oculus Connect 5 Will Positively Impact Facebook, Inc.

If any company needs a positive distraction, it’s Facebook, Inc. (NASDAQ:FB). From the eyes of the general public, the social media giant is still reeling from the Cambridge Analytica fiasco. In particular, political pundits accuse Facebook of helping to elect a decidedly unpopular President. The recent Oculus Connect 5 announcement couldn’t have come at a better time.

Oculus, the FB-owned virtual reality company, hosts an industry conference called Connect every year. This latest entry will occur on Sep. 26-27 in San Jose, California, home to tech-savvy entrepreneurs and businesses. On the agenda is a recap about the previous five years in VR innovations, and what Oculus fans can expect over the next five years.

Facebook eagerly anticipates strong media coverage and the opportunity to set the tone for its entire organization. While the primary social media business isn’t going away anytime soon, CEO Mark Zuckerberg clearly wants to diversify and “de-leverage.” Like any visionary leader, Zuckerberg doesn’t want to limit his company to any one industry.

For instance, Facebook spent considerable time developing its smart-speaker products. Code-named Aloha and Fiona, FB will go head-to-head against Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and market-share leader Amazon.com, Inc. (NASDAQ:AMZN).

It’s a remarkably ambitious move as Amazon and Alphabet combined for nearly 88% global market share in the fourth quarter of 2017.

That’s not all. In another show of force against Alphabet and its YouTube platform, Facebook signed a licensing deal with Sony Corp (ADR) (NYSE:SNE). Under the agreement, FB users can post music from the Sony/ATV catalog in videos uploaded to Facebook’s platforms, which include Instagram and Oculus.

Therefore, Oculus Connect 5 demonstrates that Facebook isn’t a one-trick pony. However, the challenge remains proving relevancy.

Can Oculus Connect Spark Momentum for Facebook?

Make no doubt about it: VR technology is very much relevant. The platform represents the next step forward in video gaming and other media formats. That said, the question is whether VR will be a winner for Facebook.

It’s more than a fair inquiry. No one questions the company’s dominance in social media. Twitter Inc (NYSE:TWTR) and Snap Inc (NYSE:SNAP) have both made strides, but they can’t touch Facebook’s growth and user base. Yet when it comes to expanding to other businesses, FB has a mixed record.

One of the company’s biggest acquisitions is Instagram. The photo-sharing app provides Facebook an in with the younger crowd. So far, Instagram is doing its job as advertised. Still, in terms of overall dominance, Snapchat resonates with teenagers and young adults at an untouchable magnitude.

And as impressive as Oculus is, the VR company isn’t quite living up to expectations. Don’t get me wrong: VR enthusiasts love what Oculus is brewing. For example, in last year’s Connect 4 conference, the FB-owned firm unveiled the Oculus Go.

Physically a stand-alone device that doesn’t require being tethered to a separate device, the Go costs only $200. It truly is the VR platform for the masses. So, where are the masses?

Industry experts forecast that Sony’s VR device shipments will take 40% market share. Those same experts believe that Oculus will take half that figure at 20%. HTC Corp is expected to bring in 12% market share, while Microsoft Corporation (NASDAQ:MSFT) may take 8%.

If Oculus resonated with customers, their market share would be much higher. Moreover, CNBC contributor Todd Haselton argued that no compelling reasons are readily available to justify Oculus’ VR headsets. They’re platforms seeking a reason to exist.

Right Attitude, Wrong Technology?

We also know that Oculus has been struggling because it’s constantly experimenting with price points. If the demand was there, the company wouldn’t have to entice customers to consider its innovations.

Which brings me to my final point: I love Facebook’s attitude, but it’s probably chasing the wrong technology.

For whatever reason, virtual reality doesn’t jive with the social media experience. Haselton brought up Altspace VR, a relatively popular social VR platform. However, the company shut down last August due to poor demand. Microsoft later acquired the company, but we’ll see if the acquisition is worth it.

At this point, I have much more faith in Facebook’s smart-speaker systems. With Aloha and Fiona, it can organically utilize the Facebook network, which is a data goldmine. After all, that’s the reason why Cambridge Analytica wanted access.

But with VR, I’m not sure what the endgame is. Yes, Oculus has the right stuff, but without compelling, practical applications, the products will collect dust. I’d like to be proven wrong on this as I’m generally bullish on FB stock. However, the evidence indicates that VR detracts from Facebook’s more-promising ventures.

As of this writing, Josh Enomoto is long SNE.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2018/06/doubts-emerge-about-whether-oculus-connect-5-will-positively-impact-facebook/.

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