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Facebook Buys Oculus VR for $2 Billion

The deal includes $400 million in cash, 23.1 million Facebook common stock and a $300 million earn-out.

Facebook will acquire Oculus VR, the makers of the virtual reality headset Oculus Rift, for $2 billion, the companies announced today.

The deal includes $400 million in cash, 23.1 billion million Facebook common stock and a $300 million earn-out in cash and stock based on future performance.

Oculus rose to prominence two years ago after the Rift raised $2.5 million from Kickstarter. Last year, the company raised a ton of VC funding, including a $75 million round led by Andreessen Horowitz.

For the uninitiated: Users wear the Rift on their heads, and it acts as both a monitor and partial controller. A connected PC or Android device does the processing to create a three-dimensional virtual world where turning one’s head in the real world changes their focus in the virtual world.

Although the Irvine, Calif.-based startup initially focused on gaming, since that round it has hinted that the Rift may also be good for non-gaming applications, and that seems to be Facebook’s interest here.

“Mobile is the platform of today, and now we’re also getting ready for the platforms of tomorrow,” Facebook CEO Mark Zuckerberg was quoted as saying in a press release. “Oculus has the chance to create the most social platform ever, and change the way we work, play and communicate.”

At last week’s Game Developers Conference, Sony introduced its own virtual reality headset, dubbed Project Morpheus, to compete with Oculus, and indicated that it also saw more than games in virtual reality’s future. PlayStation research & development senior director Richard Marks said that things as commonplace as booking a hotel room would be part of the technology’s future.

Also at GDC, Oculus unveiled a second edition of the Rift headset for developers, as a consumer version has yet to be officially announced. To date, the company has shipped 75,000 units of its first prototype, priced at $300, to developers. The newer version costs $350.

On an investor call following the announcement of the acquisition, Oculus CEO Brendan Iribe declined to provide any update on when the consumer version will launch.

In an interview last year following the $75 million round, Iribe told me the short-term goal was to get “v1,” a consumer edition to market, but that Oculus’ long-term goal was to compress the headset into a “smaller and smaller form factor.”

“A decade or two from now, it will be nothing but sunglasses,” Iribe said at the time. “You’d put them on and have this new virtual world.”

Intriguingly, he described in that interview a hypothetical social/messaging application for the Rift that would let people be “finally free of this 2-D monitor.” The application, he said, would let people communicate in a 3-D, 360-degree virtual environment, as though they were standing in the same room.

“Kids will one day look back and laugh at FaceTime,” Iribe said.

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