When $17 million in venture capital funding was raised in June 2013, that was a red flag. When $75 million in venture capital funding was raised in December 2013, that was a huge, enormous, really big red flag. The news from yesterday was not shocking.
The buyer, of course, was a little surprising.
Yesterday, Facebook purchased Oculus, the company behind the beloved Oculus Rift virtual reality tech, for $2 billion. People are upset.
Let's unpack why this deal is causing such an emotional reaction. It's complicated, may have more to do with Facebook than Oculus, and underscores some other, unresolved trends coming to a head.
The Kickstarter proposal for the Oculus Rift launched in August 2012. The company was asking for $250,000 to build a developer kit for its pet technology project. People flipped for the idea, and it raised $2.44 million over the next month. The company has likely seen even more money from the many who decided to purchase development kits after the Kickstarter campaign concluded.
In the two years since, Oculus has carefully worked on the Oculus Rift, slowly making advances in its technology, as the hype slowly built through excited word-of-mouth. That hype seemed to reach a peak (if we're lucky, one of many) this month, as Sony revealed its Project Morpheus VR kit (spoiler: it's very similar to the Oculus Rift), and Facebook announced it would purchase Oculus for $2 billion in cash and stock options.
People have become emotionally invested in the idea of VR. Just watch the way Fez designer Phil Fish spoke about its potential (even in, say, our dystopian apocalypse) on our GDC live show last week. VR is Star Trek brought to life. VR is about better realizing the potential for virtual worlds that's been happening in our imaginations for years. I'm a convert, and been a believer in VR ever since strapping on the Oculus Rift for the first time. After that, I tracked down a development kit to play with. In short, I'm a fanboy. I'm not alone.
It's why there's a backlash. The term "emotional investment" is key, and it's why Kickstarter has been such an interesting business tool these past few years. It plays on emotion. On Kickstarter's "What Is Kickstarter?" page, the company outlines what it means to be part of Kickstarter, from the perspective of both a consumer (better known as a "backer") and a creator. There are a couple of sentences worth pulling out more closely:
"Backing a project is more than just giving someone money. It’s supporting their dream to create something that they want to see exist in the world."
When it comes to games, there are many that would not exist without Kickstarter. Broken Age, Shadowrun Returns, Wasteland 2, and others. Several of these games have shipped to players, and some of them turned out to be really good games. Crowdfunding allows us to help make dreams happen, and that's lovely. But emotional investment is not an actual investment--it does not give you control over the company. It does not provide equity, and you are not owed anything by the creators. The ROI (return on investment) is fulfilling hope.
Which leads us to this:
"Backers are supporting projects to help them come to life, not to profit financially. Instead, project creators offer rewards to thank backers for their support."
Backer. That's a problematic term. It sounds too much like investor. It implies more control than what Kickstarter actually offers. Kickstarter is, at its base level, little more than tossing dollars and cents into a tin can, and hoping the person goes and does something nice with it. When established people come to Kickstarter, we can be a little more confident something will happen, but that's not a guarantee. Every time you back a Kickstarter project, this should be how you feel: "that could be cool, I hope it works out." That's it.
I don't root for Kickstarter projects to fail, but it's healthy when some do. Lots of video games are cancelled every single day. Lots of video games with promising ideas turn out to be total crap. We just don't hear about those games. Those are tossed under the rug, and we focus on the success stories. But success only comes through failure, and failure is far more common than people understand. When Kickstarter projects fail, when people get angry over their investment, it gives them a better sense of how development actually works. These stories happen all the time.
What doesn't happen all the time, however, is the complete opposite, which is exactly what happened with Oculus. Oculus delivered what its Kickstarter project promised: a development kit. But people became emotionally invested in the prospect of a new, independent technology company coming out of nowhere and changing the world. The emotional investment fused with the ideals behind Oculus, a notion the company's founders stoked with press quotes that suggested Oculus had no interest in selling to the usual suspects.
Of course, it's easier to say that before a deal is in your face, and when you're being offered an opportunity to, if it works out, do everything you ever wanted and more.
At GDC last week, Facebook reportedly hashed out its deal with Oculus. Scattered chatter at GDC suggested that Facebook was not alone. I heard other companies were interested, but apparently Facebook was offering the best deal. I haven't done enough reporting to say much more than that. Perhaps the reveal of Sony's Project Morpheus forced Oculus to tip its hand, perhaps the initial investors wanted to cash out while the news was hot.
When the Facebook news was announced, Minecraft creator Markus "Notch" Persson announced he was cancelling his deal with Oculus to officially bring virtual reality to Minecraft. Persson wrote a lengthy blog post outlining his decision, and included this line:
"And I did not chip in ten grand to seed a first investment round to build value for a Facebook acquisition."
Yes, you did. Everyone did. And Oculus probably won't be the last time backers struggle with this idea.
On some level, I get it. It doesn't feel fair. You were on the ground floor, and a bunch of other people get the big money. Polygon's Chris Plante put this best in a tweet earlier today:
OcuBook is just another reminder that the middle class has enough money to pre-order $300 toys but not enough money to properly invest
— Chris Plante (@plante) March 26, 2014
But how else was this gonna end? John Carmack, Cliff Bleszinski, Michael Abrash, and Gabe Newell were part of the pitch video. From day one, this was shooting for the stars. If Oculus wanted to be a company producing electronics for the masses, that was not going to happen on its own. It would be like the Pebble SmartWatch: the fuel of a potential revolution without being at the center. Oculus owes you nothing. Oculus does not have to pay everyone's Kickstarter investment back because the company just made a load of cash.
Persson's original tweet on the subject, which has been retweeted more than 16,000 times now, struck a nerve. Persson represents our ideal vision of a rich person with money. He's a self-made altruistic gazillionaire that invests his money into things he loves, and wants to see them grow. But it's called idealistic for a reason: it's not reality. The response on Kickstarter proved there was interest in the Oculus Rift, and the venture capital funding was simply a way to let the company grow its ambitions and make a move like this. It's clear that Oculus wants to be the tip of the spear, and partnering with Facebook is one way to give it a real shot.
This loud, angered reaction is the feeling our toy, our collective dream, is being taken away from us. And that leads me to what's driving most of the vitriol: a distrust of Facebook.
Persson actually touched on this part in his original tweet.
We were in talks about maybe bringing a version of Minecraft to Oculus. I just cancelled that deal. Facebook creeps me out.
— Markus Persson (@notch) March 25, 2014
"Facebook creeps me out."
He probably could have tweeted only that and received a similarly big response. If we conveniently ignore the disturbing hot-or-not reasons that drove the creation of Facebook in the first place, what Facebook once (and still sort of does) represented was connecting disconnected people. Friends, family, lovers, ex-lovers. Hell, the whole world. Someone took part of what the Internet provides and harnessed it in a way that could bring us all closer to one another. I love that, and still love that. I got over the fact that my mom uses Facebook a long time ago because it does a better job of informing her what's going in my life than my less-than-regular phone calls. (Sorry, mom!) It's hard to imagine she will ever sign up for another social network. Facebook is it.
But as Facebook has expanded and become a normalized social commodity, it's also had to make money. The whole reason Facebook was able to buy Oculus this week is because it went public, and has access to a pool of real money (the $400 million) and funny money (the $1.6 billion in Facebook stock options). In making that transition, it's started eroding its foundation: trust.
(If we want a recent reason to feel better, Instagram was acquired by Facebook for $1 billion and seemingly remains unscathed as part of the buyout process.)
When we engage with "free" software like Facebook or Twitter, we understand the "free" part comes at a cost. Scratch that. I don't think most of us think of it that way, even if that's reality. Nothing is free. But that "cost" is companies finding ways to make money on us via advertisements, and it's hard to blame Facebook for that. What we can blame them for, however, is often dragging us there without our knowledge. How many people have spent a significant amount of time tweaking your privacy settings? You probably did it once and then figured you were good, right? For a while, that's true, but Facebook has time and time again forced its users to share more and more and more and more and more and more, often without explicit consent.
(Side note: I also think people have distanced themselves from Facebook, intimidated by how many people they have friended on Facebook. Social norms make us feel weird about deleting them. I'll disclose my method of dealing with this, but don't tell anyone, okay? Every day, Facebook notifies whose birthday it is. If you can't muster the energy to write someone a virtual happy birthday note, what are you doing being friends with them on Facebook? I've been slowly deleting people from my feed for years this way. I'm a monster.)
This breach of trust is combined with a common buyout tactic in Silicon Valley: talent acquisitions. Companies are often bought to bring in the people who work there, not the product they're making. If you take Facebook at their word, that's not happening with Oculus, but it's not hard to imagine the Oculus folks won't be asked to work on whatever hardware projects Facebook's making. (Facebook seems a bit like Valve, constantly tinkering with internal ideas, even if very few of them see the light of day.)
Even if we look squarely at games, how many studios did the old EA ruin by purchasing? It's a graveyard.
All of this adds up. The emotional investment, the distrust of Facebook, the cynicism we have towards companies with billions of dollars. It doesn't feel like there is much pure in the world anymore. Oculus felt pure. It was a kick ass idea becoming reality. "We made this happen, you guys! And we were going to change the fucking world!" That was, sadly, naive, and helps explains the yelling and the screaming happening today.
I listened to the conference call with Facebook and Oculus. They were saying all of the right things. Oculus will keep doing what they're doing, and Facebook looks at Oculus as an investment that might pay off in five or 10 years. Facebook doesn't intend to make a profit on the hardware, which means Oculus should get to ship the device it wants. Kotaku noticed the company is also performing some damage control, and answering concerns on Reddit. You won't need a Facebook account to use the Oculus Rift, the money from Facebook will mean better hardware and investment in cool games, and a promise there won't be specific tie-ins to Facebook technology. Facebook has also told TechCrunch that it denies The New York Times report that the Oculus Rift would be re-branded and re-designed with Facebook look and interface.
Facebook's social ubiquity means it has time to take chances on long-term gambles, and Oculus seems like one of them. They might screw it up, but also might not matter.
Oculus did start a VR revolution, even if that revolution never takes off and flounders in the same way 3D did during the last five years. But without the Oculus Rift project on Kickstarter, none of this would be happening. It's easy to be upset that you're not walking home with tens of thousands in your pocket, but that was never going to happen. You were a part of something big, though. You contributed to a dream, and that dream is about to take off. Not all dreams succeed, but, hey, we can't control everything.
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