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VR Focus: Facebook firmly believes in VR, despite slow start

This is part 2 of a 3-part series about virtual reality trends around the world. Part 1, which covered VR efforts by market leaders in Asia, was published Dec. 19, while part 3, focusing on Apple's alternative approach to VR, was published Dec. 21.

Facebook Inc. CEO Mark Zuckerberg may be a firm believer in virtual reality technology, but the social media giant faces a number of challenges when it comes to the adoption of VR.

Facebook's VR firm Oculus, which the company acquired in 2014, unveiled in October a prototype of a stand-alone virtual reality headset and several other products during its third annual Oculus Connect VR developers conference.

The Oculus Touch wireless motion controller was showcased at a cost of $199, along with earphones for Oculus Rift worth $49, as well as some VR software, such as Oculus Avatars, new mobile software development kits, VR gaming and art apps, and partnerships with studios.

For many, however, VR is still way too costly.

Currently, a $599 Oculus Rift requires a powerful PC that may also cost a fortune, while HTC Vive costs $799, and Sony Corp.'s Sony PlayStation VR will cost $399. At the lower end, a Samsung Gear VR headset costs $100, while Google Cardboard ranges between $15 and $25, and the Daydream costs $79.

George Jijiashvili, an analyst at CCS Insight, said that Facebook and other players in the VR space should not think about monetization, yet.

He is convinced Oculus should make an effort to expand its user base by introducing a VR platform for smartphones, or develop a cheaper VR headset, pointing out that all major companies, including Google Inc. and Microsoft Corp., are now actively looking at virtual reality and related technologies.

He told S&P Global Market Intelligence in an interview that VR is "not only the next step when it comes to entertainment, it is [the] next step for communication as well."

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In fact, Jijiashvili anticipates a big VR battle between Facebook and Google as "both could be fighting real hard to establish their brands in the VR market," mainly through VR content and experiences.

According to a research report by CCS Insight, shipments of AR and VR headsets is expected to increase to 96 million units by 2020, at a value of $14.5 billion. Also, the augmented reality segment is expected to expand into a $1 billion business in 2017.

Recent data from Juniper Research further showed that hardware revenues from VR headsets, mainly peripherals and 360-degree cameras, are expected to generate more than $50 billion by 2021. Compare that to $5 billion in sales this year, based on data from Enterprise Innovation.

Therefore, it is still early days for VR. Even Zuckerberg acknowledged that VR has had a slow start, even though he stressed that the technology will emerge as the next major computing platform.

"We are in the very, early stages of this new opportunity. Think about VR today like when the first Apple iPhone or Google Android hit the market," independent tech analyst Jeff Kagan noted.

"[There is] enormous potential, however; we really had no idea what to expect in the coming years," he said in an interview.

Facebook's biggest challenge currently is to increase awareness of VR, and let its user base grow, which may require several years to do so.

"Raising overall awareness and making it fun to use is the number one issue at the moment," Jijiashvili said, adding that it "may require one or two years to come to that stage."

Kagan suggested that VR may, eventually be incorporated into WhatsApp, Instagram and other social media platforms.

Privacy and security challenges remain, however.

"There are security and privacy issues that will continue to grow in this new space," Kagan said. "Expect in the near future that company after company will enter this space, but that does not mean we really know what to expect," he added.

While all players in the VR sector face the same privacy and data protection issues, Facebook has been fairly proactive in terms of addressing these challenges. Most importantly, it introduced an encryption feature for its messaging app WhatsApp.