| SAN FRANCISCO, March 26
SAN FRANCISCO, March 26 Does Facebook Inc
have Google envy?
The social networking company's $2 billion acquisition of
Oculus VR, a maker of virtual reality goggles, took Wall Street
and technology observers by surprise, not least because of the
hefty price for a company with no real revenue and untested
But Facebook's desire to bet on "the platforms of tomorrow,"
as Chief Executive Mark Zuckerberg described the deal on
Tuesday, also marks a broadening of ambition for a company that
has until now focused mainly on bolstering its existing service
or defending its turf from immediate threats.
It's a strategy more often associated with Facebook's
arch-rival Google Inc, which has established a track
record of making early bets on the next big thing. Google
acquired the Android software that now powers three out of four
smartphones in 2005 when PCs were dominant, and Google currently
has projects under way involving self-driving cars and robots.
"It's really the first acquisition of theirs which is really
thinking about the future, versus the next wave of products or
defensive," venture capitalist Jeff Clavier said of Facebook's
deal for Oculus.
"I don't know whether Oculus is as exciting as driverless
cars or things like that in terms of impact. But at least it's a
future technology that will definitively be mass market at some
point," said Clavier, the founder and managing partner of Palo
Alto-Calif-based SoftTech VC.
Investors seemed unsure about Zuckerberg's crystal ball.
Shares of Facebook were down more than 6 percent at $60.70 in
late trading on Wednesday.
The deal, which comes less than two months after Facebook
announced plans to acquire Whatsapp for $19 billion in cash and
stock, raised fears about the beginnings of an unchecked
"I'd be surprised if a lot of people want to spend serious
time with goggles that shut the world out entirely," said
industry analyst Roger Kay, who wrote a post on the Forbes
website on Wednesday that began "Okay, I'll come right out and
say it: Mark Zuckerberg is nuts."
Detractors warn that Zuckerberg is spending shareholders'
cash on a 2-year-old company that's first prototype was infamous
for inducing motion sickness, though Oculus says it has largely
ironed out the kinks. Though it has distributed some 75,000
development kits to interested developers, it has yet to ship an
actual, consumer-ready product.
Facebook will spend $400 million in cash on the deal, with
the rest in stock. With Facebook's stock up 25 percent over the
past six months, some said it was not surprising that the
company was choosing to use its stock to place some bets on the
As a percentage of Facebook's nearly $160 billion market
value, the Oculus acquisition is not a "bet the company" deal,
said Macquarie Research analyst Ben Schachter.
The most surprising thing about the Oculus acquisition was
that the buyer was Facebook, and not a hardware company like
Apple Inc, said Schachter.
"It's Facebook emphasizing a much broader ambition than
people perhaps had realized," he said. Despite some of the
market's skepticism, Schachter said he believed Oculus could be
a good fit for Facebook's communications services.
"People always underestimate the value of these things when
they show they are going to be the winning platform," said Joe
Lonsdale, a founding partner of venture capital firm Formation
8, which invested in Oculus.
Until now, Facebook's biggest deals have focused on
fortifying or defending its social networking service.
Photo-sharing service Instagram and mobile messaging app
WhatsApp both competed with key aspects of Facebook, threatening
to siphon users away from Facebook's advertising-supported
It recently stepped up its investments in artificial
intelligence. And Facebook was reported earlier this month to be
looking at buying drone company Titan Aerospace for $60 million,
as part of an effort to deliver online access to people in
under-developed parts of the world.
Google meanwhile, has an entire "Google X" division focused
on "moonshot" projects ranging from wearable computers to
airborne wind turbines.
Working on far-reaching technology projects is a good way to
motivate engineers and to retain employees, said SoftTech VC's
And in the fast-moving technology industry, focusing only on
today's business can be dangerous.
"As a Larry Page or a Mark Zuckerberg, you have to be
paranoid and think about who and what is going to displace you
and make you obsolete," Clavier said, referring to Google's
chief executive officer.
"You have to build that next thing or you have to buy that
next thing before it happens. Because by the time it happens,
it's too late."
(Additional reporting by Sarah McBride, editing by Edwin Chan
and Cynthia Osterman)