March 25, 2014

Mark Zuckerberg is a kind of visionary. He embodies the wisdom of legendary former Intel CEO Andy Grove: “Only the paranoid survive.” He looks into the future and imagines how his social network with over a billion users could be crippled and disrupted. Then he acts on his fears with bold strokes, spending $21 billion in cash and stock in the last few months on WhatsApp and Oculus VR so that he can sleep more soundly at night.

 

Facebook paid around $19 billion for WhatsApp, a messaging app with little revenue and little user data other than phone numbers. While the price for WhatsApp seems out of whack, it was clear that the company was concerned about slowing growth and that it would continue to lose ground to external messaging apps like WhatsApp, as well as SnapChat, WeChat, Viber, Line, Secret, Tango, Whisper and others.

 

Annexing WhatsApp’s 450 million users was a relatively easy decision for Zuckerberg and his board. Likewise, Facebook's $2 billion buy of Oculus VR is a hedge against a future where people could be spending more time interacting in virtual space than in real space. Virtual Reality (VR) is going to fundamentally change the user interaction model in the next 10 years.  

 

Why Oculus? The startup hasn’t even shipped a product yet, although it has 75,000 pre-orders for its Oculus Rift 3D gaming headset. Zuckerberg is betting $2 billion that the fledgling company can be a platform for moving Facebook interactions and much more into virtual space. 

 

“We going to make Oculus a platform for many other experiences. Imagine enjoying a court side seat at a game, studying in a classroom of students and teachers all over the world or consulting with a doctor face-to-face -- just by putting on goggles in your home," Zuckerberg wrote in a Facebook post on the deal. “This is really a new communication platform. By feeling truly present, you can share unbounded spaces and experiences with the people in your life. Imagine sharing not just moments with your friends online, but entire experiences and adventures.”

 

The social graph and all the data associated with interacting with the real world is gradually moving to the borderless, 3D  virtual world. Paranoia sets in when Zuckerberg imagines how Google Glass, Google Now, Google +, Google Knowledge Graph and an Oculus Rift or Meta's 3D glasses could become the VR platform for the future.  

 

Oculus VR may not turn out to be what Facebook needs to enter virtual reality, but it's likely the first of many acquisitions in that area. Ten years into his stewardship of Facebook, Zuckerberg is showing that he is a capable disruptor of his own company. As Andy Grove warned in his book,  “The person who is the star of previous era is often the last one to adapt to change, the last one to yield to logic of a strategic inflection point and tends to fall harder than most.”

 

 

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