Could Facebook Virtual Reality Spending Hit $5 Billion A Year?

This post was originally published on this site

Facebook (FB) will spend more than $5 billion annually on virtual reality in its quest to bring the emerging technology to the masses, a venture capital group says.

“We estimate Facebook will spend $36 billion on R&D over the next three years (2018-2020),” Gene Munster, managing partner at Loup Ventures, said in a blog. “If we assume 15% is going to VR that would imply over $5.5 billion in spending, which we see as more than adequate to accomplish it’s billion-user target.”

Facebook Chief Executive Mark Zuckerberg, speaking at the recent Oculus Connect conference, said that the social networking behemoth aims to put its VR hardware in the hands of 1 billion people. Zuckerberg has said virtual reality will be the next major computing platform, after mobile phones.

The company this week unveiled a lower-priced virtual-reality headset that works without being tethered to a computer. The new $199 wireless headset, called Oculus Go, is set to be available in early 2018. Sony (SNE) and HTC have also lowered VR hardware prices, aiming to make the technology more affordable for consumers.

Facebook acquired Oculus VR for $2 billion in 2014. That could be a modest investment compared to what Munster says is coming from the social media giant.

Google-parent Alphabet (GOOGL), Microsoft (MSFT), Samsung and others are pushing into VR as well. While virtual reality immerses a user in an imagined or replicated world such as video games, augmented-reality overlays digital imagery onto the real world. Facebook, Apple (AAPL) and many companies are pursuing both technologies.

“Facebook can singlehandedly turn VR from a nascent user base today into a mainstream computing platform in the next five years,” added Munster, formerly an analyst at Piper Jaffray. “Facebook has the capital ($502 billion market cap and $43 billion in cash) and its founder is committed to empowering global VR adoption.”

Benjamin Schachter, an analyst at Macquarie Capital, says Facebook and others need to develop better apps in order for VR to become mainstream. At the Oculus conference, Facebook disclosed a partnership with game developer Respawn Entertainment, the developer behind “Titanfall.” Facebook also showed new content from its Walt Disney (DIS) partnership.


IBD’S TAKE: The FANG group of closely watched internet stocks is made up of Facebook, Amazon, Netflix and Google parent Alphabet. For the latest news on the group, visit IBD’s page on FANG stocks.


Facebook trimmed the price of its high-end Oculus Rift headset and controllers by $100, to $399. That compares with $599 for HTC’s Vive.

Schachter says that Facebook could set itself apart with stand-alone devices while rivals tether VR headsets to smartphones.

“Oculus Go is a Facebook-made alternative for the (Samsung) Gear VR that will not require a recent Samsung phone to operate,” Schachter said. “The device and price point will allow them to move away from relying on phone manufacturers.”

Facebook earlier this year hired Hugo Barra to head up Oculus and other VR efforts. Barra, who previously helped develop Android at Google, had been at Chinese smartphone maker Xiaomi.

Loup Ventures forecasts that monthly global VR users will grow from 100 million in 2018 to 1.2 billion by 2022.

RELATED:

Apple Not The Only Stock Play In Augmented Reality: Morgan Stanley

Virtual-Reality Gear Discounted As VR Interest Ebbs