Facebook conference call about acquiring Oculus
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The Occulus VR acquisition looks like Facebook hedging its bets with the future of consumer computing UX. Better $2 billion and, say, $200 million a year for ten years today than $19 billion tomorrow. Or so it seems he is thinking.
Still, I like to check the math. Occulus VR says it has sold 75 000 "development kits" [1]. It has been 1 year and 7 months since August 2012 [2], when Occulus VR began selling its development kits. Let's assume a 200% YoY 2013 growth rate - that means 56 000 kits were sold in 2013. Let's say these keep selling at the $350 the Developer Kit 2 goes for [3]. That's $20 million in 2013 revenues. Let's turn that into $2 million of profits - a 10% margin.
Let's value Occulus VR as if it were a growing perpetuity. If Facebook had a cost of capital of {10%, 20%, 30%}, Occulus VR free cash flow (FCF) would have to grow at least {10%, 20%, 30%} a year. Otherwise, its $2 billion price tag would not make sense.
Companies are not immortal. Let's value Occulus VR as a 20-year growing annuity. Setting Facebook's cost of capital at {10%, 20%, 30%}, Occulus VR's FCF would have to grow at least {45%, 58%, 71%} a year.
Not a bad deal.
[1] http://www.oculusvr.com/blog/oculus-joins-facebook/
Tens of billions of dollars for Facebook's mobile efforts?
[1]: http://investor.fb.com/releasedetail.cfm?ReleaseID=835447
The guidelines say the title can be changed if the original is misleading, which would seem to apply here.
Best quote from Zuck: "We're clearly not a hardware company. We're not gonna try to make a profit off of the devices long term. We view this as a software and services thing, where if we can make it so that this becomes a network where people can be communicating and buying things and virtual goods, and there might be advertising in the world, but we need to figure that out down the line."
Caprica holobands here we come...
I think I'd prefer if the ultimate VR social network was actually open source and decentralised if possible.
They've both managed to maintain long-running virtual communities.
The ability for anyone to create is powerful, as recent games like minecraft have shown. Second Life just never kept up with technology, and now the best ways to create content for it involve the use of modeling software with a high barrier to entry. (Of course, it's terrible in many other ways, but that's a separate discussion).
If someone can build a virtual world platform from the ground up, with tightly integrated content creation that is intuitive (maybe something like sketchup), and all in-world, it would be very powerful.
I've actually been wanting to build just such a platform for a long time, but learning 3d graphics isn't the easiest thing out there :)