Sure, there was some initial head-scratching by investors when Facebook CEO Mark Zuckerberg first announced it was laying down $2 billion for virtual reality (VR) headgear manufacturer Oculus a few months ago. But after the initial reaction, the opportunities for VR began sounding better and better. Online gaming has gone mainstream and is quickly becoming a key source of revenue for big hitters like Apple and Google .
Apple is still king of the app hill, generating more than $10 billion in revenue last year alone. But Google is making strides to better monetize its Google Play store, and games are a key to keeping its app momentum going. Facebook, while a distant third in app revenues, is taking steps to remedy that situation, and that presumably will include Oculus' Rift VR headset. This is why Google's cardboard handouts at its recently completed developer's conference were so... intriguing.
The real deal
Rift, though still in its infancy, is widely considered one of the leading VR headset alternatives around. Gamers, the primary users of the device, seem to love it, and are likely the user base behind the more than 100,000 Rift development kits already sold. Of the 100,000 Rift units, 45,000 are the second generation kits that didn't begin pre-orders until March of this year. This was right around the time Zuckerberg was sharing the $2 billion acquisition news. Rift is picking up steam.
There are challenges, of course. The hardware business is a whole new ballgame for Facebook. Reigning in costs, and improving development efficiencies while still making the VR devices affordable to the average consumer, is a pretty tall order. But Zuckerberg has proven to investors time and again that he has a way of delivering on Facebook's strategic initiatives.
While gaming is an obvious revenue-producing alternative for Rift, Zuckerberg has gone on record saying VR games are just the tip of the Oculus iceberg. If Facebook has its way, Rift will change entire industries, from education, construction, and even health care. Even with Facebook's hardware manufacturing learning curve, the $2 billion it paid for Oculus could turn out to be a steal.
Is this a joke?
The excitement surrounding Facebook's Rift may have been mitigated for some, intentionally or not, at Google's developer conference. Attendees were handed a bundle of cardboard and a few other gadgets, including magnets and some rubber bands, and told to follow the directions included in the kit. Their reward? Turns out, development conference attendees were just an app and an Android mobile device away from making their own functioning VR headsets.
Google will tell you that it simply wanted to bring VR to the masses, and demonstrate how easy and inexpensive it can be. Some industry pundits seem to agree. A cardboard VR headset using a smartphone, a couple of old lenses, rubber bands, and other assorted everyday objects, certainly drives home the point that anyone can afford immersing themselves into their own, virtual world.
It seems to be a consensus that Google's cardboard box VR sets aren't designed to go head-to-head with Rift. But, as Facebook continues to slowly gain a larger portion of the digital advertising pie, especially mobile ad revenues, being on the wrong end of a subtle dig from Google would hardly be a surprise.
Google remains the king of mobile advertising, accounting for slightly more than 49% of digital ad revenue last year. Facebook's 17.5% mobile ad market share in 2013 pales by comparison, at first glance. The thing is, though, from 2012 to the end of 2013, Google's mobile ad market share dropped more than three percentage points, while Facebook's share more than tripled, from just 5.4% in 2012.
Final Foolish thoughts
Google and Facebook may not have the contentious relationship that others in the world of technology live with -- at least not overtly. However, as Facebook continues to grow market share at the expense of Google, don't be surprised to see the upstart (Facebook) find itself on the wrong end of a few more digs from the established digital leader. Google's cardboard VR? That was just the first of many subtle jabs heading Facebook's way.
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The article Google Inc: Was Its Cardboard VR Meant to Offend? originally appeared on Fool.com.Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google (A shares), and Google (C shares). The Motley Fool owns shares of Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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