The Only Explanation Of Facebook Buying Oculus For $2 Billion That Makes Any Sense

Mark Zuckerberg
Mark Zuckerberg

Getty Images/David Ramos

Facebook CEO Mark Zuckerberg.

Facebook shocked the world yet again with an unexpected acquisition.

It announced that it was paying $2 billion for Oculus Rift, a virtual-reality gaming company. Oculus makes a headset that delivers an immersive experience. It blows away the people who use it.

Unlike other recent acquisitions in technology, this one doesn't immediately make sense.

When Facebook bought Instagram for $1 billion, it was a perfect fit. Facebook is all about photo sharing. Instagram was eating into Facebook's business as the primary social network for sharing photos.

When Google paid $3.2 billion for Nest, it made sense. Google is working on home automation and the Internet of Things.

When Facebook bought WhatsApp for $19 billion, it was getting a messaging service that was on pace to have 1 billion users. WhatsApp was a social network of its own, and as such it posed a threat to Facebook, which has its own messaging service.

But Oculus Rift? It's not a social platform. It is no threat to Facebook in the near term, and probably not in the long term.

So why did Facebook buy the company? There are two, intertwined reasons to explain this deal.

The first and most straightforward explanation is just what Facebook CEO Mark Zuckerberg said last night. He believes virtual reality could be the next major computing platform. First there was desktop computer, then there was mobile, and he believes virtual reality is next.

"W e're going to make Oculus a platform for many other experiences," said Zuckerberg while announcing the deal. "Imagine enjoying a courtside seat at a game, studying in a classroom of students and teachers all over the world or consulting with a doctor face-to-face — just by putting on goggles in your home. This is really a new communication platform."

Some people are skeptical about Zuckerberg's vision. In general, people don't like to wear goggles or glasses in their homes. It's one of the reasons 3-D televisions have never taken off. The immersive experience of an Oculus is mind-blowing, according to pretty much anyone who's tried it, but it's also isolating, which could limit its mainstream appeal.

But if Zuckerberg is wrong — and Oculus is not the next major platform — it's not a big deal.

S ure, $2 billion makes it sound like a big deal, but the deal terms are good for Facebook. It is spending $400 million in cash and using 23.1 million shares to buy Oculus. There's an additional $300 million in earnout bonuses.

This is the second reason for Zuckerberg buying Oculus. Zuckerberg looks at his stock price, which is quite high right now and thinks, "Great! I can spend this buying cool stuff!"