Facebook's (NASDAQ: FB) Oculus division thinks it can get virtual reality in the hands of over 1 billion people around the world, an ambitious goal any way you look at it. It could make strides to that end by lowering the price of Oculus Rift to $399 and introducing the Oculus Go next year as a stand-alone VR headset for $199.
The bigger question may be how Facebook intends to get 1 billion devices in front of consumers in the first place. Virtual travel firm YouVisit estimates that only 11% of people in the U.S. have even tried virtual reality.
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Even though the technology is growing, estimates are that Oculus Rift and HTV Vive have sold fewer than 500,000 units each, paling in comparison to a competing product like Sony's (NYSE: SNE) PS4 console, which has passed 67.5 million console sales. The lack of adoption means developers aren't making games, which leads to even less adoption. I think the key problem as Facebook looks to launch its next generation of VR devices is how it will get consumers to experience virtual reality.
Getting VR in front of people is hard
As you're reading this, think about where you tried virtual reality for the first time, if you've tried it at all. The truth of the matter is that if you've tried high-end virtual reality devices Oculus Rift or HTC Vive, you probably know someone who shelled out thousands of dollars to build a virtual reality setup in their home. That's a massive hurdle for virtual reality companies to overcome.
Next-generation devices will be a little easier to adopt, starting at around $200 and not requiring a dedicated room for virtual reality. But they will run into a similar retail problem as Rift and Vive because there's no place for people to test devices before diving into virtual reality.
I think the solution is what Apple (NASDAQ: AAPL) did with the Apple Store a decade ago. Facebook needs to create a place where people can experience virtual reality before investing hundreds of dollars into a device and games.
Facebook is behind in VR arcades
The other option besides an Oculus Store is to build an arcade platform that small business owners can leverage to build their own virtual reality experiences. HTC has done this with the Vive with a small amount of success. There are a few thousand VR arcades globally, primarily in Asia, although they clearly haven't driven higher adoption of high-end VR devices.
Facebook needs to develop a new world of retail for VR
Apple created a new retail experience with the Apple Store and it was a huge driver of the company's success in growing sales of the iPhone, iPad, and now Apple Watch. These are devices that seem simple to understand today, but needed to be experienced by consumers before they would spend hundreds of dollars on them. Once people were experienced with its devices, Apple could ride peoples' understanding of its devices to grow even more.
Facebook and Oculus face an even more acute challenge showing consumers why they should spend the time and money to buy VR devices. I think the best answer to that problem is to develop an Oculus Store solution where people can use Oculus devices before buying. Without that, VR will be a niche device that won't get anywhere near Mark Zuckerberg's goal of 1 billion users.
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Travis Hoium owns shares of Apple. The Motley Fool owns shares of and recommends Apple and Facebook. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.