Facebook Aiming For Virtual Reality Dominance

Virtual reality is still in its infancy, but the companies who can capture a significant share of the market could become leaders in the next major computing market. According to SuperData Research, VR is going to grow from a $4.5 billion business in 2018 to $19.0 billion of revenue by 2021. Early movers see the opportunity in VR and are eager to capture market share.

As big as the VR market is expected to be, there are only a few companies in a viable position to build a platform the industry will grow from for years to come. So far, it's Sony's (NYSE: SNE) PlayStation VR that has a big head start in virtual reality, with over 2 million units sold. But HTC's Vive and Facebook's (NASDAQ: FB) Oculus Rift are trying to catch up quickly.

What could reshape the VR landscape in 2018 is Facebook untethering itself from PCs and gaming consoles to make VR mobile. Here's why I think Facebook can take a leadership position in this booming market.

Why Facebook is behind Sony in VR today

To understand why Facebook is behind in VR and how it could catch up, we need to lay out the VR landscape today. Sony has sold over 2 million PSVR headsets, more than doubling both HTC's Vive and Oculus Rift platforms, which both are arguably higher-quality products. The biggest advantage Sony has in VR is that 76 million PS4 consoles are already installed in people's homes, so adding VR isn't expensive or cumbersome. Vive and Rift still require expensive gaming computers that aren't floating around the average home.

The next generation of headsets will likely eliminate the need for a console or PC, and at that point we should see wider adoption of VR and technology companies like Facebook differentiating themselves.

Facebook's big VR move

The first step beyond tethered VR headsets is the Oculus Go (pictured above), which is the first stand-alone (no PC or console required) VR headset to hit the U.S. market at a mass-market price point of $200. Oculus Go isn't considered a high-end device because it can't track a user's movement through space like a Vive or Rift can, but it's still a big step forward for the VR industry. What it's perfect for is watching 360 videos and playing simple VR games.

This month, Facebook has shown how it will display the power of Oculus Go by bringing World Cup games to the platform. Users can watch from the stands or near the goalpost, a perspective that would be impossible without being in VR. The company is also adding MLB, NBA, music, and other content to apps like Oculus Venues and Oculus TV.

We don't know what Oculus Go's sales numbers look like yet, but with an accessible entry point and no outside device required, it could be the best-selling VR headset soon.

Just the beginning for Facebook in VR

Oculus's next step is a high-end stand-alone headset it dubbed Santa Cruz, which is expected to be available within the next year. This headset won't require a computer or gaming console, but will allow users to move through a virtual space, like Vive or Rift. It could be a game-changer in VR's adoption in the mass market.

The stand-alone VR market will be key because it expands the universe of customers beyond those with gaming consoles or high-end gaming computers. That's when VR could go truly mainstream and become the $19 billion industry tech companies hope it can be. Facebook certainly looks like it's in a leadership position today.

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Travis Hoium has no position in any of the stocks mentioned and owns a virtual reality start-up. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.