Why Facebook bought Oculus Rift and why marketers should care
ANALYSIS: After the initial “WTF?!” moment when Facebook CEO Mark Zuckerberg announced last night (25 March) he was spending $2bn on a new toy, the reasons behind the company’s acquisition of virtual reality headset maker Oculus Rift VR became clear.
The company is taking some expensive punts to futureproof its business, meaning marketers’ long-term Facebook plans shouldn’t just include gaming the News Feed, but on working out how their brands fit in with the social network’s plans to become the platform for the entire internet.
Next stop: virtual reality.
Join me in taking trip back in recent history for a second. DeLorean! February 2012 (stick with me here, we’re talking about virtual reality after all)! When Facebook first filed for its IPO, the social network admitted it had yet to generate “any meaningful revenue” from its mobile products.
By August that year Facebook’s share price fell to half of its original $38 IPO value, with investors spooked by its then inability to make money from its mobile users. But fire up the trusty time travelling car to January of this year: Facebook was nimble enough to rectify its previous mobile errors and posted its first $1bn quarter for mobile revenue. EMarketer predicts its share of the global mobile ad market will grow from 17.5 per cent in 2013 to 21.7 per cent by the end of this year.
Facebook’s acquisition spree strategy is to defend and attack
Facebook may have been quick to turnaround its inability to seize the mobile opportunity, but it doesn’t want to be left behind again. Hence why it has embarked on a Lenovo-like “defend and attack” strategy in its recent acquisition spree - rather than just looking to gobble up competitors.
Facebook shelled out an eye-watering $19bn to purchase WhatsApp just last month. Facebook is already accessed by 1 in 7 people in the world every month, but to make the leap to the next billion, it needs to conquer the emerging markets. A survey from mobile analytics Janu last month found Mexico, South Africa, Brazil and India topped the list of countries whose mobile phone owners use the app as their primary messaging service - opening up the door for Facebook to have meaningful conversations in these territories.
At Mobile World Congress in Barcelona this year Zuckerberg outlined his vision for Internet.org, the conglomerate formed last year between Facebook and six telecoms companies, with the aim of bringing affordable access to everyone in the world by reducing infrastructure costs, removing inefficiencies in networks and offering free or cheap mobile internet subscriptions.
For Facebook, Internet.org offers the social networking site another clear path to build out its userbase as the aim is to offer free access to “basic services”, which of course includes the social network, WhatsApp and other information such as food price, weather and Wikipedia.
The gaming opportunity is clear
Next on the world domination to-do list is gaming and, precisely, another emerging market: virtual reality. In a conference call following the acquisition announcement last night (25 March), Zuckerberg explained that while 40 per cent of the time spent on the internet is on social networking, 40 per cent is spent playing games and that Facebook’s plan is to “fuse both of those together”.
The opportunity is clear, Facebook currently generates just 9.3 per cent of its revenue from payments and other fees (the section of its income that includes gaming purchases), but sales of video games worldwide are set to grow by 10 per cent to $62.2bn in 2014, according to Strategy Analytics.
Facebook plans to accelerate Oculus’ moves into gaming by helping to develop partnerships to support more games and by offering its own developer expertise to help build on the platform. A big name and the big pockets of Facebook will speed up Oculus Rift’s move from tech show geekery to mass market product - all at a time when gaming giants such as Sony are only just showing off prototypes and Microsoft has yet to reveal its virtual reality play.
Virtual reality for marketers
The benefit to marketers of Facebook claiming territory in this space is that the top Facebook advertising spenders should already have strong relationships with the social network. Soon conversations should start turning from whether to use Lookalike Audiences or a Sponsored Story into what role their brands can play in the Oculus ecosystem. Marketers can get into the VR party early, taking on more of a indie games developer role than has previously been afforded to them.
Zuckerberg says gaming is just the start, and that’s where all marketers should really sit up and take notice. Potential uses mooted by Zuckberg include watching a basketball game, studying in a classroom, or attending a consultation with a doctor. It’s easy to snark at virtual reality (“This brings a whole new meaning to the Facebook Poke, harharhar”) but there are applications of the technology that could help brands be seen as first-movers, useful and entertaining should the technology go mainstream as Facebook hopes.
In the UK, mobile operator and England Rugby sponsor O2 has already begun experimenting with Oculus Rift to offer fans a chance to go behind the scenes with the team on matchdays (see video below). Elsewhere, Tesco with the help of creative agency Figure Digital, has created 360-degrees virtual store.
While the latter is an experiment at this stage, I would argue marketers should look not to just recreate the real world but offer new experiences previously not possible through virtual reality - just as users can take on new personas and powers through the characters in their games.
If brands get it right and don’t try to peddle product, but instead use Oculus to bring joy to their consumers. Just as Google has been wary of integrating ads into its Google Glass software, brands should not see Oculus Rift as another excuse to pollute consumers’ eyeballs with sales messages because it’s not an environment in which they will sit comfortably.
Facebook did not want to get left behind and miss the next big thing when it comes to tech. Its ambitious move to acquire Oculus Rift means marketers should start having serious conversations about how virtual reality could become reality for their brands.