Facebook Bets Its New VR World Will Ignite the Industry

Facebook is creating a new VR world dubbed Horizon, hoping to drive the market for VR glasses, which has failed to take off.

| More on:

Facebook (NASDAQ: FB) is betting a new virtual reality (VR) world it’s creating will ignite the market, with VR glasses someday replacing smartphones. But while the social-media giant is big on vision, its past forays into VR headsets have been light on successes.

Earlier this month, Facebook’s VR unit Oculus unveiled Horizon, a new social VR world that will be available next year to customers of its Oculus Quest and Rift VR headsets. Drawing on everything it’s learned since acquiring Oculus in March 2014 for $2 billion, the company created a virtual space where people can explore new places, play games, create communities, and interact with other users. Oculus users create an avatar and then access games and experiences that Facebook is creating for this new virtual world. Oculus customers are also able to create their own worlds without needing any coding experience.

Facebook wants to give consumers a reason to buy VR glasses

The idea, for now, is to give consumers a reason to spend several hundred dollars on virtual reality headsets.

Without a killer app, the VR glasses market has failed to take off in a big way. Facebook and other technology companies are betting augmented reality (AR), where real-world places are melded with digital images and videos, will be the driver of future growth.

As it stands, the combined AR and VR market is small but is projected to skyrocket in the coming years. According to Allied Market Research, the global augmented and virtual reality market stood at $11.35 billion in 2017. It’s projected to reach $571.42 billion by 2025, for a compound annual growth rate of 63.3%. The gaming industry, particularly mobile gaming, will be a big driver of growth.

Facebook’s vision goes beyond a virtual world

Facebook has a much bigger vision for Horizon than creating a virtual world just to interact and to play games in. The idea is to eventually create “LiveMaps” that sit on top of existing maps, giving users contextual data about a physical location in real time.

A user could stumble upon a restaurant and be able to see the full menu, make a reservation, or place an order directly from the glasses. Showtimes could pop up as a person passes a movie theater, or more information about an object could appear when touring a museum. Forget videoconferencing: In Facebook’s AR/VR world, users will communicate with a hologram of the person on the other end of the phone.

Horizon and LiveMaps are the latest in Facebook’s efforts to spur the VR market, but there could be more. A report recently surfaced that Facebook was teaming up with Luxottica Group, parent of Ray-Ban, to develop augmented reality glasses, code-named Orion, which will be ready between 2023 and 2025. Users will be able to make calls, access information about a location, and live-stream from the glasses, which Facebook and Ray-Ban hope will someday replace smartphones.

Can Facebook deliver?

Facebook has big ambitions in the AR and VR markets, but if history is any guide, there may be tough going ahead. When Facebook acquired Oculus, it thought it was on the cusp of owning the next big thing in technology. Oculus still makes high-tech VR glasses, but they haven’t yet justified the cost. For Facebook to hit it out of the park this time, it has to create something that’s so compelling people won’t think twice about spending money on an entertainment device.

It also has to convince consumers they can trust Facebook. The social-media giant’s reputation was tarnished by the Cambridge Analytica scandal, which broke in March 2018; that case revealed that the now-defunct political consulting firm accessed the data of 87 million Facebook users without their permission. Since then Facebook has had other data breaches and scandals, and it recently agreed to pay a record fine of $5 billion to the Federal Trade Commission.

If Horizon is to take off, as it sets out to map the world, consumers can’t fear that advertisers, special-interest groups, or nefarious players can access their data or their locations. That may be quite a challenge for Facebook, as it faces calls from all over the world to do more to protect the privacy of more than 2.4 billion active monthly users.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Donna Fuscaldo has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

More on Tech Stocks

grow dividends
Tech Stocks

Why Nuvei Stock Jumped 26% on Monday

Nuvei (TSX:NVEI) stock saw shares surge today as the company confirmed it's in talks to go private through a buyout.

Read more »

Happy diverse people together in the park
Tech Stocks

A Once-in-a-Generation Investment Opportunity: Artificial Intelligence (AI) Growth Stocks

Canadian tech companies like Kinaxis (TSX:KXS) are doing big things in AI.

Read more »

Paper airplanes flying on blue sky with form of growing graph
Dividend Stocks

2 Soaring Stocks I’d Buy Now With No Hesitation

These two stocks may be the most expensive on the market, but they're high for a reason! And I'm still…

Read more »

Man making notes on graphs and charts
Tech Stocks

1 Stock I’d Drop From the “Magnificent Seven” and 1 I’d Add

The "Magnificent Seven" is becoming a bit less magnificent but could rebound if we cut this stock and added another…

Read more »

Business success with growing, rising charts and businessman in background
Dividend Stocks

Don’t Look Now, But These 3 TSX Stocks Look Poised for a Nice Rally 

Three TSX stocks are in a downtrend amid headwinds. 2024 may be rocky for them, but they are poised for…

Read more »

potted green plant grows up in arrow shape
Tech Stocks

Missed Out on Nvidia? My Best Growth Stock to Buy and Hold

Are you interested in growth stocks? Here’s my best pick to buy and hold!

Read more »

falling red arrow and lifting
Tech Stocks

Is Shopify a Buy, Sell, or Hold?

Shopify (TSX:SHOP) stock has been pulling back of late, opening up a window for dip buyers.

Read more »

Different industries to invest in
Tech Stocks

2 No-Brainer Growth Stocks to Buy Now With $2,000 and Hold Long Term

These growth stocks have already proven their worth this year, but are solid investments for long-term holders as well.

Read more »