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Why Facebook (Nasdaq: FB) Is Buying Oculus VR Inc. for $2 Billion

Yesterday we told investors to watch for Facebook Inc.'s (Nasdaq: FB) next move in M&A. And just like that, we found out.

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Late Tuesday, Facebook announced it is buying Oculus VR Inc., a maker of virtual-reality goggles for $2 billion in cash and stock.

The deal includes $400 million in cash and 23.1 million FB shares, valued at $1.6 billion. Also included is a provision for an additional $300 million "earn-out" in cash and stock to be paid if certain milestones are reached. The deal is expected to be finalized in Q2 of 2014.

As with Facebook's $19 billion purchase of text-messaging WhatsApp last month, and its early March $60 million acquisition of drone (atmospheric satellite) maker Titan Aerospace, the deal furthers Facebook's aim of connecting the world across all modes of communications and devices.

And, it's a multi-billion dollar bonanza for 20-month-old startup Oculus VR.

Why Facebook (Nasdaq: FB) Wants Oculus

Irvine, Calif.-based Oculus is best known for the Oculus Rift, its virtual headset for gaming. Said Facebook in a statement about its acquisition of Oculus: "While the applications for virtual reality technology beyond gaming are in their nascent stages, several industries are already experimenting with the technology and Facebook plans to extend Oculus' existing advantage in gaming to new verticals, including communications, media and entertainment, education and other areas. Given these broad potential applications, virtual reality technology is a strong candidate to emerge as the next social and communications platform."

A social platform at its core, Facebook has shown its commitment to becoming a true mobile company with purchases like WhatsApp, Titan Aerospace, and online photo-sharing app Instagram (purchased for $1 billion in April 2012).

Indeed, Menlo Park, Calif.-headquartered Facebook has been busy building a portfolio of mobile apps and has made an aggressive push into mobile advertising. The Oculus purchase expands its reach to platforms.

"Mobile is the platform of today, and now we're also getting ready for the platforms of tomorrow," Facebook Chief Executive Officer Mark Zuckerberg said in a statement. "Oculus has the chance to create the most social platform ever, and change the way be work, play and communicate. The incredible thing about the technology is that you feel like you're actually present in another place with other people. People who try it say it's different from anything they've ever experienced in their lives."

What Is Oculus?

Join the conversation. Click here to jump to comments…

  1. Anon | March 27, 2014

    They better not mess up the 3rd party support for oculus.
    Or monitor what can go on.

    Otherwise goodbye porn games :(

  2. H. Craig Bradley | March 27, 2014


    Virtual Reality Sex could cause social pathologies such as being an "internet sex addict" . Not all "social" connections are good or even healthy. What Americans need is more outdoor activities and exercise as a way to build healthier lifestyles offline. Say goodbye to Facebook.

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