What The Oculus Rift VR Headset Means For Facebook, Inc.

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After a long wait, Facebook (NASDAQ:FB) is shipping its Oculus Rift Virtual Reality (VR) headset. The Oculus Rift deliveries began on March 28, shipping to more than 20 countries and regions. "This is a historic moment," says the announcement. "Soon people all over the world will be experiencing fully-immersive VR in their own homes."

VR technology places users in artificial worlds built with computer-generated scenery. First developed for the space program, military simulations, and industrial applications, virtual reality entered the entertainment and video-gaming industries in the 2000s. Modern VR headsets like the Oculus Rift surround users with high-resolution 3D scenery and spatial audio, to permit full immersion in virtual worlds and video-games. Lighter and more powerful than previous VR headsets, the Oculus Rift permits total immersion in virtual scenes and sounds, and therefore most leading developers of video-game have announced support for the Oculus Rift in their upcoming titles.

The Oculus Rift headset was first crowd-funded with a record-breaking Kickstarter project. Then, in 2014, the Oculus Rift technology and its developer Oculus VR were acquired by Facebook for a $2 billion. Now, deliveries are finally starting, with the Kickstarter units shipping first, followed by the first units pre-ordered for $599. A recent Deutsche Bank research note estimated that about 1.5 million headsets will be sold this year, initially to hardcore video gamers.

The Rift can now be ordered directly from Oculus for $599, with a limit of one unit per customer and an expected delivery date in July. The selling price of $599, and the fact that only last generation consumer PCs with fast processors and graphic cards can run Rift VR applications efficiently are expected to limit sales to hardcore gamers and enthusiast early adopters. However, the Oculus announcement directs buyers to Amazon, Best Buy, and Microsoft Store to purchase Oculus Ready PC and Rift bundles with desktop computers from Asus, Dell, and Alienware, with prices starting at about $1,500 and expected delivery dates earlier than July.

In a video presentation and Q/A streamed live to his followers, Facebook creator Mark Zuckerberg led viewers through the content of the Rift box, which contains the headset, motion sensors, and a standard Xbox controller. In fact, last year Microsoft (NASDAQ:MSFT) and Facebook announced a partnership to bring Xbox console games to the Rift. Zuckerberg also showed an advanced hand tracking system to bring the user's hands fully into the VR experience. The hand trackers are not included in the boxes being shipped now, but scheduled for later this year, and touch controllers which will allow users to touch and handle objects in VR scenes are under development.

While underlining the high-tech features in the Rift, Zuckerberg emphasized the need for compelling content. Of course, games are one of the main types of VR content. At this moment, 30 games are available on the Oculus Store, and the company expects to complete production and adaptation of many more top games this year. Zuckerberg mentioned video - spherical videos that surround the user 360 degrees - as another important VR content type for the Rift, and "social VR."

Zuckerberg is persuaded that VR will have important applications beyond entertainment, including social communication and interaction. "That's where Facebook has the DNA to build the best experiences," he said during Facebook's (FB) Q3 earnings call. In fact, analysts have speculated about the possibility that Facebook could launch an Oculus-powered virtual world to take social networking to VR, and the company has already released a first alpha version of a virtual world for Rift users.

Previous-generation virtual worlds weren't a big commercial success because they weren't immersive enough on the one hand, and proved too complicated for average users on the other hand, but the fully immersive user interface provided by Oculus Rift technology promises to make virtual world much more engaging, and at the same time much easier to master. Facebook "is committed to [virtual reality] for the long-term," said Zuckerberg. "In the future you're going to feel like you're right there. The next logical step is fully immersive VR." Facebook has created an internal Social VR team focused entirely on exploring the future of social interaction in VR, how people can connect and share using VR technology, and long-term possibilities as VR evolves into an increasingly important computing platform.

According to The Wall Street Journal, the Rift is an engineering marvel but isn't ready yet for mainstream use. The article mentions cheaper entry-level alternatives to the Rift, such as the portable $99 Samsung Gear VR headset, which implements Rift technology through high-end smartphones. However, "the Oculus experience will likely make quantum leaps in fun and usefulness in the years ahead, especially with the arrival of the touch controllers."

As Zuckerberg said, Facebook is committed to VR for the long term. It seems likely that the company isn't interested in selling huge numbers of Rift units at this moment, but rather in building a VR ecosystem to power its future growth. The expected positive impact on Facebook's stock is likely to arrive by the end of the decade, and Facebook's stock remains a buy-and-hold.