A New Frontier for FB Stock
Of the myriad investments made by Facebook, Inc. (NASDAQ:FB), there is one that stands far above the rest. This new product line couldn’t be further out of the company’s core interests, but it could launch FB stock to new heights. Here’s why.
Facebook is the most popular social media service on the planet, with more than 1.55 billion monthly active users (MAUs). But by necessity, that service must always remain free and the possibilities for making money have always been tangential to that core purpose.
So Facebook has had to strive for new and innovative ways to collect revenues. The company has done a spectacular job thus far, pulling in $896 million in net profit for the most recent quarter. That’s not bad considering its core service is free.
Since its inception in Mark Zuckerberg’s dorm room, Facebook has stayed conspicuously shy of hardware investments. The company has opted for software improvements, like smarter artificial intelligence (AI) algorithms to match advertisements to customers, rather than physical pieces of technology.
Now that’s finally changing and it has enormous implications for Facebook stockholders.
Stepping into a New World
The piece of hardware I’m referring to first premiered on Kickstarter, where it raised $2.5 million. The technology promised to revolutionize the entertainment industry by letting gamers step into a videogame or film buffs into their favorite flick.
That’s right, I’m talking about “Oculus Rift.” Barely a year after raising funds from Kickstarter, Facebook paid more than $2.0 billion to acquire the virtual reality (VR) firm, Oculus. This may be old news, but it’s interesting to look back on the Oculus purchase and its Oculus Rift headgear as Facebook’s first foray into hardware. (Source: “A Brief History Of Oculus,” TechCrunch, March 26, 2014.)
It was, in fact, the exact moment Facebook ceased to be a social media company and took up the mantle of conglomerate instead. Brushing it off as a cool little passion project would be a serious mistake, especially since Facebook is partnering Oculus Rift with Microsoft Corporation’s “Xbox One.” There is enormous revenue potential here.
You would think that investors would take the gaming industry seriously after Amazon.com, Inc. bought Twitch (a website that livestreams other people playing video games) for $1.0 billion, but I don’t think the implications have hit them yet. (Source: “Amazon Will Buy Twitch for Over $1 Billion,” TechCrunch, August 25, 2014.)
This is a multibillion-dollar industry about to be disrupted on a massive scale and Facebook is one of only three firms vying for dominance in it. They have the technology that began this revolution, not to mention the guy who invented it. But more than all that, Facebook just started accepting pre-orders for its Oculus Rift, giving the company a head start on sales.
FB Stock, but with Gaming Revenues
Oculus Rift is going to cost consumers $599.00 per unit and that’s just to start. There will obviously be a whole host of accessories to come, but for now, customers who crave virtual reality can get a full-fledged immersive experience in their own homes. If you think no one will pay that kind of money, let me tell you of my own experience with Oculus Rift.
I’ve personally used one in a demo set up in partnership with Game of Thrones. Fans of the show would be familiar with the 700-foot wall of ice that “guards the realms of men.” There is an elevator that is used to scale the wall and they had reconstructed it in a Toronto convention center.
I entered the elevator’s medieval-like cage and someone working at the exhibit placed an Oculus Rift headset on me. I could see Westeros, the fictional world from Game of Thrones, all around me. Then the headphones snapped on and the exhibition room disappeared altogether. I was actually in Westeros now.
The floor was rigged to move in time with the video, so when that elevator started to tremble, I nearly lost my balance. It rose hundreds of feet and I know this sounds ridiculous, but it felt real.
When the elevator peaked, I turned and the back gate opened. I stepped atop the Wall, gazing over a frozen wilderness. And then an orange dot appeared, growing larger every second. It was a flaming arrow.
Before I could react, it hit me in the gut and I looked down in horror. I was falling and everything faded to white. The video was over and I was shaken up, but I knew I wanted an Oculus Rift. The experience is more powerful than words alone can describe.
You have to experience it for yourself and that’s definitely a good sign for FB stock.