Facebook's $2 billion bet on virtual reality has been a fiasco (so far)

In 2014, 24-year-old Palmer Luckey sold his virtual reality company, Oculus, to Facebook for $2 billion (£1.6 billion). Since then his company has become a headache for Mark Zuckerberg.

Now, less than three years later, Luckey is on his way out of the social media giant. In that time Oculus made headlines for all the wrong reasons:

• The Daily Beast reported that Luckey was the backer of a conservative group dedicated to "shit-posting" anti-Hillary Clinton memes.
• Luckey's appearance on the cover of Time drew as many lampoons as it did praise.
• Oculus was accused of stealing the technology its product is based on and Facebook paid a further $500 million in legal costs.
• Oculus sales have not hit expectations.
• Luckey, Oculus's founder, was replaced as the leader of his own company by a more experienced executive.

The question that's likely to be on many people's minds is: "Was it Luckey's choice to leave or was he fired?" A Facebook spokesperson declined to comment on this matter.

Luckey's departure, along with several other events at Oculus, suggests that Facebook's big VR bet has so far produced more headaches than victories.

What happened before Luckey left

Last September, The Daily Beast revealed that Luckey secretly funded a conservative group called " Nimble America" that created viral, anti-Hillary Clinton memes.

Nimble America said in its description that "we've proven that s---posting is powerful and meme magic is real." Luckey told The Daily Beast that Nimble America work is "something that no campaign is going to run." One such example was an enlarged image of Clinton's face with the phrase "Too big to jail" alongside it.

Luckey, who has a net worth of around $730 million (£586 million) according to Forbes, admitted his involvement with Nimble America and said he ran a Reddit account under the pseudonym, "NimbleRichMan." That same pseudonym shows up on the Nimble America website, which describes Luckey as vice president. He later denied using the Reddit account.

"I've got plenty of money. Money is not my issue," Luckey told The Daily Beast. "I thought it sounded like a real jolly good time."

Following the revelation, multiple female employees resigned from Facebook, people familiar with the matter told Business Insider.

Prior to The Daily Beast's article, Luckey was the public face of Oculus and regularly made media appearances on behalf of the company. Time Magazine

Luckey on the front cover of Time.


He even made the front cover of Time magazine (wearing no shoes) in August 2015. The image was widely mocked, and turned into many unflattering photoshops.

He has been keeping a low profile ever since.

He was absent from Oculus's annual developer conference in October and not mentioned when Oculus restructured its leadership team in December.

Lawsuit and Xiaomi hire highlights issues deep inside Oculus

In January, Zuckerberg hired Xiaomi executive Hugo Barra to lead all of Facebook's virtual reality efforts, suggesting that Facebook wanted to give the Oculus project some adult supervision.

Luckey's last public appearance on behalf of Oculus was in February, when he testified in a Dallas lawsuit by game maker ZeniMax that claimed Oculus was based on stolen technology.

The jury found Oculus be guilty of patent infringement and ordered Facebook to pay $500 million (£401 million) in damages. The jury also found that Luckey violated a signed non-disclosure agreement with ZeniMax during Oculus's early days. He was personally ordered to pay $50 million (£40 million) for false designation.

Oculus Rift sales failed to meet expectations

Facebook was heralded by the media as one of the tech industry's leaders in virtual reality when it acquired Oculus three years ago, but early sales of VR headsets have since fallen short of Zuckerberg's expectations.

When Zuckerberg was asked about Facebook's VR and augmented reality efforts during a conference in February, he said "we're a little behind from where we want to be."

He added that the delayed shipments of the company's Oculus Rift VR headset and touch controllers were a "disappointment," and that VR sales "won't be profitable for quite awhile."

Facebook has yet to reveal how many units of its more expensive Oculus Rift headset have been sold but competitors like HTC and Sony have also made early market share inroads and put pressure on Oculus.

Samsung recently confirmed that it has sold 5 million of its lightweight Gear VR headsets to date, all of which run Oculus software. A report from SuperData Research last month said that total VR revenue from 2016 was $1.8 billion (£1.5 billion), with 6.3 million devices sold.

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