Oculus Rift, which was bought by Facebook for $2 billion, has the technology, and perhaps the ability, to change significant aspects of human lifestyle. The virtual reality company, started first as a gaming startup, is prepared to branch out from its original 3d-video-game purpose. For example, using the Oculus technology, a helmet that covers your eyes and ears, you can feel as if you are somewhere else entirely, and interact with your virtual surroundings. This certainly seems applicable to video games, which are already virtual reality in nature, but to what other markets can Oculus expand? For one, they see education as a market they can explore. It is already possible to take classes online, and Skype in to a live class or an old one. However, Oculus is planning on developing software that would 1) allow you to virtually enter the classroom and sit at a virtual desk, and 2) take a virtual trip with a professor. I.e. for a biology class, a trip inside the human body guided by a professor, or perhaps a guided tour of a steel mill without ever leaving the classroom. Oculus also plans to change the way we watch sports by developing 360 degree cameras, giving the feeling of being in the stands at an actual live football game, even sitting court side at a basketball game. Film and television is another market Oculus plans to explore, by developing first person movies or shows that allow you to interact with characters or simply watch as the story unfolds around you. Even shopping could be revolutionized, by uploading your avatar, you can virtually try on clothing before deciding whether or not to buy it. Finally, Oculus thinks the aging population will enjoy Oculus. Somebody with bad knees or a bad back may miss playing tennis, with Oculus, they feel that they can develop a realistic enough feeling of actually playing a sport. Right now this all seems pretty far fetched, but given how far technology has come in recent years, and how far Oculus has already come, it isn’t entirely implausible to think that the next decade may see an increase in the use of a real, virtual reality.
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It seems with a technology like this Occulus Rift has a product that would appeal to all types of consumers, giving it large market potential. It also would appear that development costs could be extremely high, which may make it unaffordable for an average consumer. It is possible Facebook could sell it at a loss in the beginning to establish itself as the leader in the market because a technology like this will certainly attract very similar competitors with little differentiation. Then it could profit from the techonology by selling games, programs, or environments to users of the helmet. Facebook used a similar strategy early on by not allowing advertisements to make the site more attractive than other heavily advertised networks and after it entrenched itself as the most popular it began to become heavily advertised.
How could other companies enter the market? They would have to engage in the same expensive development process as much of these virtual realities exist within computer codes. Further, learning how to recreate software seems to be a tall task- if it were easy I don’t think Google’s search engine algorithm, Apple’s operating systems, etc. would see the same success. I think there’s huge potential for Oculus Rift assuming the end product is actually something consumers are interested in. An entire new market will come to exist, and players from many different industries will want a piece. A disruptive innovation to a T.
Does Facebook have any particular strengths that would let them leverage this product? It seems like a stand-alone product, so the acquisition by FB would only make sense if the company is attractive in terms of its individual profits at $2 billion on a net present value basis. Of course that has to be net of the additional investment needed to commercialize the concepts. I’m a skeptic! — this sounds like the behavior of senior managers / owners who have what they view as free money.
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