Oculus VR: Where Did Facebook See The Billions?

Late in April, Facebook acquisition of Oculus VR got greenlighted by the US FTC, for around $2B in cash and stocks.

What did Mark Zuckerberg see in this company to justify the hefty sum? According to him, he saw the future.

For those unfamiliar with the topic, Oculus VR is a small hardware company, bootstrapped via the popular crowdfunding platform Kickstarter. A first hint of their value is that they delivered on the promise of virtual reality for the masses, where others either failed to propose a satisfying experience, or required a DARPA scale budget to purchase!

People who got to try the product, called "the Rift", all went on a stream of elogious comments: "3D gaming done right", "truly immersive experience", "Oh.My.God." And by tackling the challenge at the right time, they managed to get it this done with now commoditized components, bringing the cost to produce in the lower hundreds.

OK. So now you can feel like you are actually in the plane, or in the middle of the battlefield. So what?

I certainly am not in Zuck's mind (or I would be CEO of a famous company) but there are a few assumptions which can be made. And let's dare to suggest far fetched ideas, because one have to be bold when thinking about the future of a 1B+ social network.

First things first: gaming.

That is where Oculus VR is rooted, and the company seems to be on a very promising track. They snatched John Carmack, the creator of "historical" first 3D games (Wolfenstein 3D, Doom, Quake) as their CTO, and entered partnerships with top-tiers game engines (Unity, Unreal) to integrate Oculus VR into their SDK (software development kit) available on PC, Mac, Linux. Nothing is done yet, but the stage is set to address the hardcore gamers crowd - and then, being already adopted by the big games publishers will make Oculus a fast track choice for console makers to bring VR to their customers. Out of the 34M US core gamers playing over 22h a week (which represent the die-hard community of games in the USA) let's assume 30% buy a Drift at $399. 
That's already a $4B first-purchase market, and I have left aside both the rest of the world, the wider gaming community, and of course the renewal market.

With the financial soundness of acquisition in mind, it is now time to comfortably drift ;) towards more far-fetched considerations (or are they?)

A relatively cheap device to bring immersive virtual reality can be very convenient for a lot of use cases, like in flight entertainment, or e-learning. But coupled with the network effect Facebook brings, with over 1.23 billion monthly active users, possibilities become tremendous. Think of advertising, Facebook's bread and butter. 2013 saw a 55% percent bump, to $7.9B in sales, at an average cost per click of 45 cents.

Now, imagine Facebook enables these same advertisers to set shops on the network (yes, they already do) with the possibility for Oculus owners to actually visit the shop, see and "touch" products and make purchases. Other pieces of hardare would be required, but it would make Facebook move from a cost per click to a cost per transaction, which has a lot of value for retailers, and drives higher revenue per unit for Facebook, who would own the virtual ecosystem and likely the payment process. Yes, this already exists too, the best known instance is called Second Life. (Smartphones existed before iPhone, too ...)

Then again, what is important here is that is the first time scale (1B+) meets satisfying experience (Second Life is still screen ridden). These elements would justify Facebook claiming a revenue share comparable to Apple's on each sale, i.e. 30%. With the f-commerce already big and growing, expected to surpass Amazon in 5 years, it would be another hit for Facebook, potentially over $10B yearly.

Closer from now: Facebook is already the leading global communication network. You already get news from the pal next door and your friends expatriated the other side of the world. What if you could sit in the same room with them and comment the rugby match you're watching? With a twist, it could also bring a revolution in telepresence, with a cheaper cost of equipment and a more immersive experience.

Let's get a little crazy now (if not, where is the fun?) You must have read or seen at least one (and likely a dozen) of books and movies depicting a distant future where we would be living most of our lives in a virtual world, difficult to distinguish from reality? Yes, the likes of The Matrix, Surrogates, Ready Player One, eXistenZ (I'm sure I have forgotten your favorite one). What if Oculus acquisition by Facebook was the fundation of such a world? What if that very world was to come upon us sooner than we expect, just without all the drama?

Of course there are a lot of "ifs", you can bet Oculus will not stay alone in the space for long, and this will be commoditized very soon. But grabbing a slice of the future has a price.

Mark Zuckerberg figured it would be $2B, and it might be a steal.

Chromecast, the Google trojan horse

Chromecast was all the rage last week. The cheap, easy to use $35 dongle turning your TV into a giant wireless display.

I'm not going to write a device review - others already did a good job here, here and there.

What personally stroke me is how Google changed its tactical approach to reach the same objective.

Remember: back in 2010 or so, as part of a broader initiative to get its services on as many screens as possible, Google announced Google TV. The platform was meant to bring Google to the main screen, by seamlessly integrating linear programming, VOD, YouTube, and basically turning your TV into a big Chrome browser - and targeted ads recipient.

Flop. Or rather, epic fail.

Fast forward three years. Google's Android system is insanely successful, YouTube domination is undisputed, but still, one screen is resisting. The TV.

Here comes Chromecast. There is a lot more in it for Google than just a piece of hardware. It's a way for Google to hack its way (back?) into the living room by short-circuiting everyone, from hardware manufacturers to broadcasters to content providers. With this very low price tag, it's Google's window to give as many people as possible a taste of what Google TV experience is supposed to be.

You'll buy it for what it does now: play YouTube and Netflix videos, display Chrome tabs on your TV (including videos). Limited for now, but enough (in Google's view, and mine as well) to get to the critical mass and develop in two steps:

1/ Ignite

Entice developers to make their apps compatible with the Google Cast API. It's cross-platform (including iOS), open to anyone, and have a lot more possibilities than competing Apple's AirPlay. By example, in a slightly more far fetched but already supported scenario, you could play MMORPG running in the cloud, directly streamed to your TV via Chromecast (just like Netflix today), your smartphone being the controller. Watch out OnLive! I'm pretty sure developers will have more imagination than me - expect a land rush going on in the coming months.

2/ Integrate

With an established user base and a large apps support, Google Cast API will appeal to the hardware manufacturers, and they will integrate it natively into their wifi enabled devices - by this time, it may mean all of them.

Job done!

With this trojan horse into the living room, Google may ultimately get where they intended to in the first place: securing a channel for Google to distribute their services to as many possible TV screens as possible; it may not be called Google TV anymore, but it's damn close!

Have to go now, and get myself my own Chromecast.

The webification of TV ads

"Personalized" is one of the most (over-) used words in the digital realm. The seamless, continuous, consistent experience of one given user.
I can use Evernote and iCloud, consume Spotify and Canal+ (French pay TV) content, shop on Amazon, across all my devices, and always find myself at home, in a personalized environment, my environment.

Then I turn my TV on and get exactly the same content and ads as millions of persons.

I believe this is going to change, starting with ads. Not overnight - the TV industry is mature and well structured. But let me put two recent news into context.

News one: TF1, the leader of French broadcasters, announced a partnership with Weborama to serve targeted ads on their catch-up TV offering, using the same profiling technology as currently used on the web. It is a PC only initiative, and only on catch-up, but with the rise of connected TVs, don't be surprised to see it coming on your big screen, and inside the linear programming.

By the way, this might also lead to a personalization of the streams: think YouTube meets MoodAgent on your TV screen. Better personalization of your TV "channels", better targeted ads, leading to more consumption and better engagement, and higher monetization. Sounds familiar?

News two: Google revamped their AdWords campaigns to break the wall between desktop and mobile ads. Going forward, marketers will be able to plan their campaigns centrally, and will play with bidding options to target specifically device types, locations, hours of day ... But more importantly, it will reduce the gap between mobile and desktop CPCs. For Google, who is constantly nagged on the mobile CPC sensitively lower than on desktop, it's a big deal! And if you push the reasoning further, you can read "a screen is a screen, give us your expectations, we manage the display".

When correlating these two announcements, one can clearly see a future where TV audience is evaluated along the same metrics as what we see today on the web, and TV being one advertising channel subject to equally objective performance measurements: actual exposition, transformation rate (of a call-to-action on a second screen?), etc.

Highly disruptive for TV channels, who may fight this fiercely, but - will they have a choice? Wouldn't they risk loosing attractiveness for advertisers, who may increase pressure to get the same transparency as they enjoy on the web? And use the same tools and methods?

Will they ever come back?

Last week, my company hosted a client event, where I was moderating a round table on the topic "Digital distribution: what model for the future?". Yes, I know - what an expectation! I guess anybody with a clean and definitive answer would keep it for herself and start her own company. But anyway, it was very interesting to hear what people from different horizons had to say - music, TV, audience measurement agency, etc.

But one point in particular really got my attention. A very senior executive from a major French free TV explained to us non-linear video consumption is not hurting at all linear programming, and that the opposite is actually happening, i.e. an increase in average daily linear video consumption. And when asked how could this be, as all teenagers are hooked on YouTube, his answer was that in fact "the stats have been showing for more than 10 years a sharp drop in audience from teenagers and young adults between the age of 14 and 25, but then a strong come back when moving with a partner, and/or having their first child". Wow. It actually depressed me. So were we all lured into a digital fantasy?

Not so fast.

He was insisting these stats had been showing the inversed gaussian profile described above for over 10 years. But that's the issue. Main concern should not be about how things were nor how things are. It's all about how things will be going forward.

My 4-year-old daughter doesn't ask for watching TV. The asks for "the cartoons inside the TV" to designate VOD services. And "the bird in dad's computer" for road runner episodes on YouTube. So, when (almost) never watching linear programs when a kid, how in the world could she ever come back to them?

OK, I hear you, there in the back of the room, saying this is a very biased view, because we are a population of technology addicts, and our habits do not reflect the broader population. But again. Fine, they do not. I am ready to bet big time they will soon.

And you?

In English, please!

Hello digital friends! From now on, this (reborn) blog will be in English, as I believe it is easier to exchange new ideas with the broader audience. Talk to you soon!

Internet is the king of the living room

Mark Suster est un serial entrepreneur américain devenu VC. Dans un post intitulé "The Future of Television & The Digital Living Room", il livre sa vision des enjeux et des opportunités liées à la convergence entre mobile et sédentaire, TV et Internet, broadcast et UGC.
Un post riche, comme on en voudrait plus souvent.

Arrivée cette semaine de "Gmail Priority Inbox"

Selon Techcrunch, à partir de demain, Gmail s'enrichit d'une nouvelle fonction permettant de filtrer les mails par leur importance à partir d'un certain nombre de critères, et d'identifier rapidement les mails importants des autres (mailing lists, notifications, etc). C'est un filtre antispam inversé!





Et la beauté du système est qu'aucune configartion n'est requise, le système "devine" quels messages sont importants, et "apprend" des corrections que vous apportez à son tri.





La mantra "Organize the world's information" prend ici tout son sens!