In April 2012, a group of entrepreneurs and engineers launched a Kickstarter campaign to develop prototypes for a virtual reality headset called the Oculus Rift, which was intended to make video gaming a more immersive experience.
The campaign was so successful that it raised ten times its initial goal of $250,000 in a very short time. Three months later, they founded a company called Oculus VR.
And within two years Facebook acquired Oculus VR for approximately $2 billion in cash and stock.
But Oculus stock is not publicly traded, so if you want to own a portion of this virtual reality company, you must buy Facebook stock.
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If Oculus Stock Could Be Bought
Virtual reality (VR) hasn’t yet taken off the way some early forecasters predicted.
Sales of the Oculus Rift have been slow. In 2016, the company only sold 400,000 units, which is significantly fewer than the 1 million units sold by rival Sony for its PlayStation VR simulator.
Oculus has collaborated with the South Korean electronics giant Samsung on a low-end mobile virtual reality headset called the Gear VR.
Over 5 million of these headsets have been sold around the world.
Sales of the modestly priced Gear VR don’t offset the lack of sales of Oculus’ flagship product.
Most analysts continue to predict that VR is a growing market.
In 2020, sales of VR headsets are forecast to reach 20 million units.
That future is still a ways off, and Oculus has many competitors who are equally determined to play a pre-eminent role in it.
So if you could buy Oculus stock it may not be trading at the high premium you might expect for a leading company in the burgeoning virtual reality industry.
What Do Oculus Headsets Do?
Throughout much of the early 21st century, virtual reality was considered by many to be the digital world’s next big “killer app.”
“Killer app” is the name given to technologies that are so disruptive and innovative that they have the potential to impact much larger and more established businesses. For example, Uber is a killer app that disrupted the taxi industry.
VR headsets’ claim to killer app status lies in their ability to suspend the disbelief of video gamers; it turns video games into truly immersive experiences.
Oculus VR has focused on the manufacture of four first-generation VR headsets:
- Oculus Rift
- Oculus Go
- Oculus Quest
- Gear VR
VR headsets have applications outside of the gaming industry too. For example, virtual reality has the potential to revolutionize industries like architecture and medicine.
One New York-based architectural firm already uses VR software to create 3-D architectural models, thereby giving clients a real-time experience of future building constructions.
In Florida, a pediatric surgeon used a VR simulator to plan an extremely complex cardiac surgery on a baby who’d been born missing one lung and half her heart. (The VR simulator the surgeon used was not an Oculus headset.)
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How Many Oculus Users Are There?
Oculus Rift users now account for 47 percent of all VR headset users on the popular digital game distribution platform Steam, according to a survey conducted on that site.
However, virtual reality gamers only represent a very small segment of players on that site.
Of Steam’s 67 million active monthly users, only 200,000 or so have VR access. That would put the number of Oculus Rift users at 94,000.
In 2017, 700,000 Oculus VR devices were shipped to consumers, according to the online market research portal Statista.
The following year, 900,000 units were shipped.
Oculus is showing growth in product sales, which augurs well for the company’s future sales. It still has a ways to go before it catches up with rival Sony, which shipped 1.7 million VR devices in 2017 and 2 million VR devices in 2018.
Should You Buy Facebook Stock?
The only way to own a piece of Oculus is to buy stock in its parent company: Facebook.
Facebook took a tremendous gamble when it purchased Oculus for $2 billion in 2014, and in some ways, Oculus seems to be a bad strategic fit with the social media giant.
After all, social media is all about making connections with other human beings while the world of VR — as of yet, at least — seems to be about immersing users in a digital world without real humans.
Two other heavily publicized acquisitions, Instagram (for $1 billion in 2012) and WhatsApp (for $19 billion in 2014), seem much more in line with Facebook’s business goals.
The jury’s still out as to whether Oculus will prove to be a smart acquisition on Facebook’s part.
Yet even if Oculus turns out to have been a stumble, Facebook stock has a lot to offer investors.
After all, 2.27 billion active users log on to Facebook every month from all corners of the globe.
Facebook is the third most popular site on the internet and tremendously sticky; the average user spends nearly 10 minutes on Facebook every time he or she logs on.
Certainly, the company has had some bad publicity over data breaches and fake news, and Americans under the age of 24 are abandoning the website.
Those young Americans, though, continue to log on to Instagram and WhatsApp in record numbers, and Facebook owns both those companies.
Facebook and Advertising
Facebook’s revenue model is completely driven by advertising.
In 2017, the company earned approximately $40 billion in advertising revenue, and analysts predict that number will continue to rise.
In terms of its ability to serve targeted ads deploying data its users willingly surrender, Facebook has no rivals.
Not even Google is as successful at helping businesses target their ads so specifically.
Facebook uses demographic and geographic information about its users to help businesses target potential customers.
Because Facebook is privy to information about users’ social relationships, it can take that process one step further.
If you have a Facebook friend who liked a particular product page, chances are that you may begin seeing ads for that product on your Facebook feed.
And because like begets like, there’s a better-than-average chance that you may respond positively to that ad.
Digital advertising is one of the few types of advertising that’s poised to grow in coming years.
Spending on TV ads, radio ads and newspaper and magazine ads is projected to tumble in the next two years, but spending on digital ads is projected to increase by almost two-thirds.
A huge portion of those digital ad revenues will end up being collected by Facebook.
How to Buy Facebook Stock
The only way to own a piece of Oculus Go is by purchasing stock in Facebook.
Facebook stock is attractive because there’s simply no other company on the planet that offers users its unparalleled connectivity.
There are arguments for the purchase as well as reasons against buying Facebook stock.
Let’s take a look at some pros and cons.
Longevity: Facebook did not have first-mover advantage in the social media sphere.
Don’t sweat it if you don’t; very few people do anymore.
Myspace was the largest social networking website in the world between 2005 and 2009.
It lost its market share primarily because of competition from Facebook.
In the early days of Facebook, many analysts speculated that this was simply the way of social networking sites.
These analysts believed that social media sites were a serial phenomenon that succeeded one another rapidly. If this were the case, Facebook would have eventually given way to the next big thing.
This hasn’t proven to be the case, though.
Facebook continues to dominate the social media universe. And it continues to attract enthusiastic new users over the age of 24 to its platform, and even if its core business is shedding younger users, those younger users are still flocking to Instagram.
Cash reserves: Facebook has a strong cash position with reserves that stood at approximately $44 billion at the end of the first quarter of 2018.
This means that Facebook is well-positioned to weather any economic downturn and to take advantage of opportunities that come its way during more prosperous times.
Volatility: The main reason for concern about purchasing Facebook stock is due to the stock’s recent fluctuations.
The price of Facebook shares has fallen considerably in the latter half of 2018.
Both second-quarter and third-quarter 2018 earnings failed to meet analysts’ expectations, and as a result, the company’s stock tumbled.
One of the reasons why Facebook’s revenue growth rates were lower than expected is because the company spent a great deal of money in 2018 on enhancements to the Facebook user experience.
Such enhancements, which include features like more robust privacy protections, are difficult to monetize in and of themselves.
However, these enhancements should improve Facebook’s ability to retain users, who are after all the reason why businesses are bullish on Facebook advertising.
Such improvements are a strategy that may well pay off and make Facebook stock an even more attractive purchase in the long run.
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How To Buy Oculus Stock Summary
While you can’t purchase stock in Oculus directly, you can certainly buy shares in Facebook, its parent company.
Facebook’s enormous online presence, longevity and cash reserves make it an attractive stock to buy if you’re feeling bullish.
On the other hand, its recent volatility may scare off some investors. As always, it’s wise to do your homework before investing in any type of stock.
Stock and options strategies are a way to ride the ups and downs. Top options trading platforms like tastyworks and thinkorswim can help you buy stock or options at affordable rates, and both are have excellent reputations.
Ps: What You Need To Get Started With Oculus
For Oculus Rift to function properly, it must be used with a high-end gaming PC with either an Intel Core i3-6100 or AMD FX 4350 central processing unit (CPU), a GeForce GTX 960 or equivalent graphics card, two USB 3.0 ports, one USB 2.0 port and the Windows 10 operating system.
The room where the system will be set up also needs to be equipped with sensors.
Oculus Rift ships with an Xbox One Console controller, two sensors and seven bundled games: “Dead and Buried,” “Dragon Front,” “Lucky’s Tale,” “Medium,” “Robo Recall,” “Quill” and “Toybox.”
Oculus Go is a joint collaboration between Oculus VR, the American telecommunications equipment company Qualcomm and the Chinese smartphone manufacturer Xiaomi.
It’s a stand-alone headset with a midrange price. It doesn’t rely on a PC, a gaming system or a smartphone to function.
Oculus Quest is another piece of dedicated hardware that’s designed to give gamers a mobile VR experience. It’s due to be released in the spring of 2019.
Gear VR is a modestly priced headset that’s designed to be used in conjunction with higher-end Samsung Galaxy smartphones.
You’ll need to install the Oculus app on your phone and create an Oculus account before you can use the headset.
You can download games for Gear VR headsets for a price at the Oculus website or purchase them at most electronics stores and gaming stores.