Put the corks back on the tines of your pitchforks and extinguish your torches. It’s way too early to call for Oculus VR founder Palmer Luckey’s head, and here’s the simple reason why.
Advertising driven business models become increasingly risky as we get further into the digital age.
Facebook, Google, and Yahoo (Remember them?) are all based around selling advertising to pay the bills and they have been eating traditional media’s lunch on that score for years. They are able to do this because they have user profiles that allow them to drive targeted advertising that is far more relevant or useful to the user. You might have an ideological issue with this but the bottom line is that nothing is free. Companies provide a service in exchange for some valuable commodity, that’s just how it works. So yes, Facebook has a history of making business decisions based on the same tried and true “viewership” metrics that date back to the first radio broadcasts, but on the Internet the value of advertising-driven revenue is starting to look like it has an expiration date. If users are able to customize specific experiences to their personal tastes that translates to a very thin, but very reliable source of value that is unlikely to annoy the user.
A good example of this is the ability of Valve to recommend PC hardware. They haven’t implemented this yet, but you can count on them doing it at some point. Valve knows what hardware is in your computer. They know what games you look at in their storefront. They know the hardware requirements of those titles. They could very easily automate a system to generate hardware upgrade recommendations based on your current hardware and provide links to sales on those items. This is what the future of advertising looks like.
And this is the key. In this model, content providers are not as powerful as the owners of the networks they operate on. This is why Google has diversified into fiber and space travel (they just “bought” a NASA airfield). It’s important to look at Google and Facebook as siblings who are competing against each other for similar results using totally different methods. Google is to science as Facebook is to social. Think of Google as the captain of the QuizBowl team and Facebook as the captain of the football team. This drive to expand their social circle is why Facebook buying up companies that seem to be counter to their actual business plan makes sense.
Facebook didn’t purchase WhatsApp because they wanted a messaging client, they purchased it because they wanted a rock solid peer-to-peer mobile communication network. WhatsApp gives Facebook a platform on which to deliver content, but more importantly, it gives them another option to leverage social interaction over pure network connectivity.
This is why they bought Oculus and this is also why it’s in their best interest to not do anything drastic with it. Facebook paid to get their foot in the door to the hacker and hardcore gamer community. You know, the people who hate Facebook games and are notoriously hard to pin down socially. They don’t want to drive that audience away because it is that audience and their social network that are valuable to them as a vector for driving targeted content and advertising sales (and probably not as banner ads). In all likelihood, gaining access to Facebook’s deep pockets actually means that the team at Oculus VR will have the resources to actually compete with Sony and produce a quality piece of hardware that may end up being far cheaper than expected.
This is very good for gamers of all types and is a far better scenario than if Sony, Microsoft, or Nintendo had purchased them. If we take Instagram as an example of how a Facebook acquisition functions we shouldn’t be too scared. The Instagram app has seen little to no change since its purchase and the team behind it has been able to hire more employees, expand their operations, and continue to innovate. While some people might see the acquisition as a betrayal of trust, I see it as an opportunity for Oculus VR to become a keystone in the future of computing, social and otherwise. So how about we don’t storm the castle just yet.