So Facebook has bought Oculus for 2 billion and like so many others I’ve got mixed feelings about it. As a Kickstarter backer I feel the typical disillusionment as a cool upstart company matures and sells out. From a VR enthusiast perspective I’m more optimistic than most of the FB trolls posting out there today. But beyond the gut reaction is the underlying question: why buy Oculus?

VR on its own doesn’t make much sense. From a hardware perspective it is just a peripheral, but it requires a much better rig than what most Facebook users have today, and Facebook has no compelling reason to drive hardware sales. From a consumption standpoint it could be a hedge against other VR initiatives from Microsoft and Sony, but VR is and for the foreseeable future is a deep immersive  gaming experience, not a casual social one.

Puchases like WhatsApp and Instagram were defensive buys against potential rivals. Why not look to do the same in the gaming space?  Facebook has always been involved in casual games and with quite respectable profits. A succession of mobile soar-and-crash companies are eating away all their social gaming and can’t be acquired with any sustained value. The only hedge here is to change the game, extending beyond the churn of fad casual games.

Right now there are console games (XBox One and PS4) and PC games. The majority of the PC games, including those from the biggest production houses, are distributed via Steam from Valve. The Steam platform is an impressive platform that ties together sales, marketing, installation, updates, and community.

Someone trying to get into the gaming world would need to build a platform from scratch (a 5 year high risk endeavor), buy a has-been or minor player, or buy one of the three major players. Microsoft and Sony are diversified mega corps in their own right, leaving  Valve.

If Zuck were to approach Valve I’m sure VR would have come up as a must for the future. Both the XBox and PS4 are working on headsets already, with Sony already demoing their prototype. Oculus is the best-in-class company, not encumbered by an existing product line or diversified interests, and has an established relationship with Value.

Buying Oculus would be a prerequisite to acquiring Valve. It may not be core to Facebook’s initial integration of Valve but it is central to Valve’s high end gaming future.

From statements from the Oculus founder it seems the sale has been in the works for a couple of months. This would imply that Facebook has been in negotiations with Valve for at least a couple of months and probably longer.

I predict that Facebook will announce plans to acquire Valve within the next month for approximately 8 billion.

Facebook gets the new Steam OS (a game-centric Linux variant) which can compete with Microsoft’s OS. They get control over the Steambox specs (a very nice reference design and performance hardware classification) which yields influential relationships with all PC hardware manufacturers. They get Steam, which already has awesome gaming community and social aspects. They get an incredibly well respected game production company with all their titles and all technical assets, such as group voice communications embedded into games – a great Skype competitor. They get existing sales relationships with all the major (and most indie) game publishers. Plus they gain control over all aspects of the Steam gaming platform, which for the Facebook site itself has been very profitable but too outside of Facebook’s control. There is nothing that Valve owns that Facebook would want to cast aside or can’t leverage to be more than it is today.

Facebook will make their money back very rapidly. Time to invest.

EDIT: Aug 10 2014 – I’m doubling down on my prediction. Facebook may have been spooked by the nasty backlash to the news they had bought Oculus, but a recent deep inspection of the code has revealed potential plans to incorporate other media such as video (movies) and music. This fits too well with Facebook’s strategy and there is so little existing overlap.

Also I now think my earlier 8 billion is quite low, it may have been low at the time and since them Steam has been solidifying gaming distribution quite nicely. I’m not sure what to value them at but it will probably be more cash than Facebook has on-hand.