Facebook Betting Heavily on Virtual Reality

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Facebook Betting Heavily on Virtual Reality

Facebook (NASDAQ:FB) stock volume surged Mar. 27 with 112,649,696 changing hands, nearly double its three-month average volume of 60,102,158 shares.

The uptick in volume is being fueled in part by Facebook’s announcement Mar. 25 that it has reached a definitive agreement to acquire Oculus VR Inc., a leader in immersive virtual reality technology, for a total of approximately $2 billion.

This includes $400 million in cash and 23.1 million shares of Facebook common stock (valued at $1.6 billion based on the average closing price of the 20 trading days preceding Mar.21, 2014 of $69.35 per share). The agreement also provides for an additional $300 million earn-out in cash and stock based on the achievement of certain milestones.

According to Facebook, Oculus is the leader in immersive virtual reality technology and has already built strong interest among developers, having received more than 75,000 orders for development kits for the company's virtual reality headset, the Oculus Rift.

While the applications for virtual reality technology beyond gaming are in their nascent stages, several industries are already experimenting with the technology, and Facebook plans to extend Oculus' existing advantage in gaming to new verticals, including communications, media and entertainment, education and other areas. Given these broad potential applications, virtual reality technology is a strong candidate to emerge as the next social and communications platform.

“Mobile is the platform of today, and now we're also getting ready for the platforms of tomorrow,” said Facebook founder and CEO, Mark Zuckerberg.

Google Also Interested in Virtual Reality

Facebook is not the only technology giant investing heavily into virtual reality. Google Inc. (NASD: GOOG) is quietly working on a prototype of a phone powered by a special android program that could make smart phones including Apple’s latest versions obsolete.

This might seem fantastical, but all you have to do is read Google’s current presentation on its Tango Project and you’ll see why the company that has it tentacles in every online venture conceivable could be on the verge of another major breakthrough.

What Is It?

First, let me give you a taste of Project Tango’s potential by explaining what it is.

The current prototype is a 5” phone containing customized hardware and software designed to track the full 3D motion of the device, while simultaneously creating a map of the environment.

These sensors allow the phone to make over a quarter million 3D measurements every second, updating its position and orientation in real-time, combining that data into a single 3D model of the space around you.

It will be interesting to see which of these companies find a practical application for virtual reality first.

On Mar. 27, FB’s share price closed at $60.97 cents, up 58 cents from its closing price of $60.39 the previous day.

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King Digital Entertainment’s IPO Sets the Wrong Kind of Record

In other news, King Digital Entertainment Plc (NYSE: KING) went public this week and ended up setting records, but not the kind it was hoping for.

The maker of the extremely popular Candy Crush game became the worst performing IPO of 2014 when it debuted Wednesday, losing 16% of its $22.50 IPO price before closing.

On Thursday, the stock continued to lose value, with KING closing at $18.49, down 51 cents from its close of $19.00 the previous day.

The chairman and CEO of King Digital Entertainment lost $230 million on Wednesday as a result of the company's weak performance in its first day of public trading, according to a Wealth-X estimate.

Eggs in One Basket

Scrambling for reasons to explain the poor showing, some analysts say King’s IPO is weak because the company is a “one-trick pony,” meaning it has no other monster gaming hits  to back up Candy Crush when it eventually loses its popularity.

However, such prognostications may be unfair and premature.

That’s because there are more than 180 "game IPs" in King’s Digital library.  Candy Crush has proved to be the company's money-maker with 97 million daily active users, according to the IPO prospectus. Candy Crush accounts for 78 percent of King's sales. But  King's other popular games include Farm Heroes Saga and Bubble Witch Saga, each of which has fewer than 20 million daily users. 

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Twitter About To Launch Mobile-App-Driven Ads

Meanwhile, the social networking pioneer Twitter Inc. (NYSE: TWTR) share value on Mar. 27 closed at $46.32 up $1.89, or 4.25% from its closing price of $44.43 the previous day, on volume of 15,507,597 shared changing hands.

Going Mobile

The uptick in Twitter’s share value is being triggered in part by rumors that it’s about to launch a mobile-advertising product in the weeks ahead that would let app makers download their software. The fact that the format would be for mobile phones is also significant because of its growing use among the Millennium demographic.

Such an app-driven ad format would be a big deal for companies looking for repeat business and a younger more affluent marketplace.  

So far, Twitter and other popular social networks have yet to prove they can generate income from ads on their platform. Not too long ago, General Motors canceled an expensive ad campaign on Facebook, citing it had proven to be ineffective.

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