As we all wake up with the lingering realization that yes, yesterday Facebook actually did buy Oculus Rift for $2bn, and it wasn’t all some weird fever-dream, the attention as it always does has turned to why.
Some early theories have focused on Facebook buying up new ground from which to pump ads out into in the distant future. “There is a glass ceiling to advertising,” writes Om Malik. Zuckerberg “knows that his flagship won’t last forever,” declares Felix Salmon on Reuters. One of Oculus’ own board members told Pando yesterday that by buying Oculus Rift Facebook was making an Android-esque bet on owning the next platform, ostensibly to sell ads.
But considering Oculus Rift as ad platform is so far ahead of where we are now that it could only have been — at best — the vaguest of considerations.
In its lifetime, Facebook has succeeded big at one thing: creating a social network that is so intertwined with our lives we can’t let go and then us selling ads through that. Zuckerberg himself said yesterday that the Oculus purchase was part of a new focus for Facebook on “what platforms will come next to enable even more useful, entertaining and personal experiences.” In Facebook parlance the subtext of entertaining and personal, is something that is addictive and in which we reveal things about ourselves that the company can put ads to. If it can make money this way it will, aggressively.
But long term, Oculus Rift doesn’t break any glass ceiling of revenue for Facebook from ads. Long term, if virtual reality is our post-mobile destiny, it’s really only little more than a zero sum game with advertising revenue.
Facebook has over one billion monthly active users on its mobile app. Out of the many things we put on our home screen, it’s one of the few we actually use. The company only figured out mobile revenue, last year. Mobile ad growth is predicted to still be above 20 percent in 2018. There’s screeds of detailed information available about us on this platform than advertisers don’t know what to do with properly yet and more they’re still trying to discover. A single mobile ad impression is going to be much more valuable in 2018 than it is now.
Mobile has begun to eat into spending on desktop ads, but ultimately it has grown out the overall online advertising market, because we’re spending two hours more a day on mobile devices but the same amount on computers. Mobile has filled in the cracks of our lives where we weren’t opening up our desktops.
It should be noted that yesterday we were still waiting to see if Oculus Rift would be a revolutionary game system, period. We hadn’t reached the part yet about whether virtual reality would replace mobile. But if virtual reality is going to be the post-mobile platform, we’ll use it at the expense of our phones. It could annihilate mobile use in a way that mobile use could never annihilate desktop. Ads on virtual reality will only slice up the pie that mobile has expanded and to make this work, Facebook will be just as reliant on its social graph as it ever was.
Mobile is a new, actively exploding platform. We don’t know where that ends. Conversely, we don’t know where virtual reality starts. Virtual reality as ad platform points to a world where we’re plugged into it for hours each day. Given the suspicion given Google Glass, which looks to electronically supplement rather than replace our vision of the world, it’s much too early to know how we’ll adopt this platform. Wearable technology represents a huge hardware opportunity but if it becomes merely a new portal for companies to always be advertising, you’re inviting consumer backlash.
The good thing about hardware is it doesn’t require advertisers for the business model to work. It’s best not to look for such specific intention in such extreme flights of fancy.
[illustration by Brad Jonas for Pando]