Why Amazon.com Should Be Working on a Virtual Reality Device (If It Isn't Already)

By Markets Fool.com


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Facebook Mark Zuckerbergbelieves virtual reality will be the next big computing platform. That's why he invested $2 billion to acquire Oculus, a leader in virtual reality. When he was asked about the potential use cases for VR on Facebook's first quarter earnings call, Zuckerberg said, "For the first few years of virtual reality, I think gaming and video are going to be the big ones." He added, "Over time, there will be even more."

One case that Facebook hasn't talked about is the potential for shopping with virtual reality. A VR shopping experience could help consumers get as close as possible to products without being in the store, and that's the main reason Amazon.com needs to be working on this technology.

Early stages of VR at Amazon

Back in March, Amazon posted a job listing revealing that the company is assembling a virtual reality team. However, it appears that team is mostly focused on building a VR experience for Prime Video, the streaming video on demand service attached to Amazon Prime.

That kind of experience would put it on par with Netflixand Hulu, which are working on software to make their experiences more immersive through VR as well. Some movie studios are working on virtual reality films, and Amazon could be developing some VR content of its own.

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Prime Video is a very important piece of Amazon Prime. Management says customers who sign up for Prime and use its video service are less likely to churn out of the subscription service. Giving subscribers one more way to use Prime Video could help it further reduce that churn rate.

Why not a shopping experience?

Amazon.com is practically synonymous with online shopping. It would make sense, then, for Amazon to develop the premier shopping platform for virtual reality.

Several other online retailers have already experimented in the space. eBay, for example, recently launched a "virtual reality department store" in partnership with Australian retailer Myer. It uses simple, Google Cardboard-like headsets that shoppers can insert their smartphones into for the VR experience.

The experience is still rudimentary and somewhat impractical at this point, but Amazon is capable of developing the hardware and software necessary to make online shopping more practical for things like jewelry or apparel -- an area in which Amazon is currently investing heavily. Practically any item shoppers would prefer to see in person before buying could eventually see a sales boost from virtual reality.

A VR headset fits Amazon's MO

Amazon's hardware has always served as a way to get technology into the hands of as many people as possible, so that they can spend more money with Amazon's main retail business. While the Kindle moved e-books, the Fire tablet and Fire TV extended the sales to all digital media. The Fire Phone was similarly intended to help people find more things to buy on Amazon. The Echo was designed to spur Prime membership growth, and those little Dash buttons make ordering something from Amazon as easy as pushing a button.

Producing a full-fledged virtual reality headset and selling it near cost would put Amazon's retail and digital media services front and center in the VR ecosystem. Many consumers were disappointed in Oculus' pricing for the first edition of its Rift headset. Even at $600, you still need a high-end PC to power it. The Oculus team claims it's selling the device near cost.

Amazon is already investing heavily in research and development. In fact, its Amazon Web Services business ensures that its R&D budget is one of the biggest in the world -- the company has spent $13.3 billion over the past year. Comparatively, Facebook has spent about $5.1 billion during the same period, including stock-based compensation for its big acquisitions such as WhatsApp and Oculus. Surely, there's room in that budget for more VR development.

With Amazon CEO Jeff Bezos' long-term mindset, virtual reality should be high on the list of potential new devices coming out of Amazon's devices lab.

The article Why Amazon.com Should Be Working on a Virtual Reality Device (If It Isn't Already) originally appeared on Fool.com.

Adam Levy owns shares of Amazon.com. The Motley Fool owns shares of and recommends Amazon.com, eBay, Facebook, and Netflix. 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.