1 Way Facebook Inc. Won Big At CES 2015

By Markets Fool.com

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Source: Oculus VR.

Every year, the Consumer Electronics Show in Las Vegas kicks things off for the tech world, setting the tone for what major companies may have up their sleeves in the coming months -- which typically means hardware players showing off a wide range of gadgets.

Normally, Facebook wouldn't come to mind when thinking of CES, since the social network hardly dabbles in hardware. Well, Facebook just won big at CES this year.

Thanks to Oculus VR
CES tends to have certain themes each year. For example, a few years back, 3D TVs were all the rage, but those are now dead in favor of 4K TVs. This year, virtual reality headsets had a notable presence at the convention, which speaks to the possibility of VR becoming a viable trend.

There were smaller VR start-ups like Avegant, Fove, and 3DHead trying to make names for themselves, but Oculus is the clear leader in this nascent space with its latest model, Crescent Bay. Oculus had a massive two-story booth at CES, packed with people trying on its latest prototypes in dedicated rooms. That's a stark contrast to CES 2013, where Oculus merely gave private demos from a hotel suite. There are certain benefits to being acquired by a much larger company.

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The Oculus two-story booth at CES 2015. Source: Oculus VR.

Oculus continues to march its way to a headset that's ready for consumer prime time, and Crescent Bay is the closest to making that a (virtual) reality. Even beyond Oculus itself, the increased presence of other companies looking to get into VR benefits Oculus through increased consumer awareness of a new technology.

"A 10-year thing"
Piper Jaffray analyst Gene Munster is similarly optimistic after seeing interest in Oculus at CES. The analyst saw lines of people willing to wait upwards of 2 hours on average just to get a demonstration. Just last month, Oculus acquired Nimble VR, a start-up that specializes in hand-tracking technology. As Nimble becomes integrated, Oculus will distance itself even further from its rivals. Munster believes that Oculus will begin to affect Facebook shares within the next 5 years.

In October, Mark Zuckerberg laid out a very long time horizon before he expects Oculus to pay off. Zuckerberg noted that new major computing platforms tend to come around once every 10 to 15 years, and his $2 billion bet is that VR will be the next one.

Facebook is a platform company, and as such knows how to build new ones. Oculus hosted its first developer conference in September, acknowledging the importance of having engaging VR content available. In order to become a major computing platform, Zuckerberg believes that Oculus will need to reach at least 50 million to 100 million units sold. That will take several design cycles and iterations, but again, this is very much a long-term bet, and Oculus is far better positioned for the long haul with Facebook's backing. According to Zuckerberg, Oculus will be "a 10-year thing."

That's the kind of long-term thinking that we Fools appreciate. The specifics of the business model are unclear at this point. Will Oculus seek to profit upfront, or will it sell at cost to spur adoption and capitalize on content or advertising later? No one knows yet, but it also doesn't really matter yet. Zuckerberg has plenty of time to work out the details there. For now, it's about building a platform, and Facebook continues to improve its track record at doing exactly that.

The article 1 Way Facebook Inc. Won Big At CES 2015 originally appeared on Fool.com.

Evan Niu, CFA owns shares of Facebook. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.