Facebook in 1Q17: Live Sports, Ad Strategies, and Competition

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Part 12
Facebook in 1Q17: Live Sports, Ad Strategies, and Competition PART 12 OF 15

What Could the Oculus Founder’s Exit Mean for Facebook?

Luckey exits Oculus amid controversies

Facebook’s (FB) troubles in the virtual reality (or VR) business appeared to escalate with the March 2017 announcement that the founder of Oculus, Palmer Luckey, was leaving the company. Oculus is Facebook’s subsidiary that develops VR products and technologies.

In addition to the reportedly slow adoption of its headset, Oculus has recently faced legal challenges that include claims of patent infringement. Facebook was ordered to pay $500 million to ZeniMax Media after a court found that Luckey had violated a confidentiality deal. ZeniMax was the company Luckey worked for before he founded Oculus, which he sold to Facebook in 2014 for ~$3 billion.

What Could the Oculus Founder&#8217;s Exit Mean for Facebook?

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The worldwide market for VR systems is expected to grow to $12.3 billion by 2018, up from $0.7 billion in 2015, as shown in the chart above.

How Luckey’s exit could impact Facebook

Luckey’s exit may seem to rob Facebook of a key talent and add to the troubles at Oculus. However, Luckey’s departure could help the company clean up its name and calm the controversies regarding some of his actions. 

In 2016, Luckey was linked to a donation to a pro-Trump political group that pumped out far-right content on social media, according to the New York Times. That donation occurred at a time when Facebook was already facing public backlash regarding its failure to rid its platform of fake news. Critics claimed that the proliferation of fake news on its platform may have helped Donald Trump win the US presidential election.

However, Luckey’s exit could also disrupt the innovation process at Oculus. Facebook’s statement regarding Luckey, reported by the BBC, said “his ‘inventive spirit’ helped to ‘kickstart’ recent interest in VR and get the industry going. It said it wished him well in future ventures.”

Facebook is looking beyond VR to augmented reality (or AR) eyewear, where it could compete with Microsoft (MSFT), Apple (AAPL), and Alphabet’s (GOOGL) Google. According to the Financial Times, Magic Leap, a startup backed by Google and Alibaba (BABA), is also developing a wearable VR device.


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