Source: PaxForex Premium Analytics Portal, Fundamental Insight

Facebook's dominance in the segment of the social network is staggering. As of the end of March, the company had 2.85 billion monthly active users (MAUs) visiting its namesake site, and another 600 million unique MAUs visiting WhatsApp and Instagram, which are also owned by Facebook. Thus, 3.45 billion people, or 44% of the world's population, visit one of the products owned by Facebook at least once a month. With that many users, Facebook has a huge price impact on advertisers. In fact, the company's ad revenue has grown by double-digit percentages during 2020 (i.e., the toughest year for the U.S. economy in decades).

Facebook lately admitted to buying BigBox VR, developer of the popular multiplayer game Population: ONE, for an unknown amount. Population: ONE is a "battle royale" game similar to PUBG and Fortnite, but optimized for virtual reality headsets and emphasizing climbing, jumping, and flying.

Those uncommon characteristics have made it one of the most popular games for Facebook's Oculus VR headsets since its launch about a year ago. The whole studio will accompany the Oculus division, where it will probably supervise Population: ONE and create new VR games.

BigBox depicts another addition to Facebook's lineup of VR gaming studios. In late 2019, the company bought Beat Games, developer of the music game Beat Saber, and in April of this year, it acquired Downpour Interactive, developer of the VR shooter Onward. Let's take a look at why Facebook is extending its VR gaming ecosystem, and whether investors should await these purchases to better the company's revenue shortly.

Facebook bought Oculus VR in 2014 and released the first commercial version of the Oculus Rift headset in 2016. But at the time, the Rift had to be tethered to a high-end PC with cables.

Consequently, Oculus headsets remained expensive niche devices until Facebook released Quest, its first standalone VR headset, two years ago. Quest was a lightweight wireless device that didn't require a PC or phone, so players could finally move freely while playing VR games.

The Quest 2 headset has performed even better since its launch last October, and SuperData expects Facebook to ship at least 3 million headsets this year. That may seem like a small number, especially compared to traditional gaming consoles, but it will make Quest 2 the clear leader among standalone VR headsets.

In May 2020, FB reported that content sales for Oculus Quest exceeded $100 million in its first year. In September, the company raised that figure to $150 million and noted that 35 games for Quest brought in more than $1 million in revenue. In late 2020, Facebook said more than 60 Oculus developers were generating revenue "in the millions."

Facebook retains 30% of developer revenues on the Oculus platform. So it would make sense for Facebook to buy the best studios, such as Beat Games, Downpour, and BigBox, and keep 100% of their revenue. These studios could develop even more hit games for Facebook in the future.

Last quarter, Facebook got 97% of its revenue from advertising. The "other" segment, which includes Oculus, Portal smart screens, and payment commissions, accounted for the remaining 3% of the top line.

Based on these percentages, Oculus may seem insignificant. But if you analyze the growth of Facebook's "other" business over the past two years, you can see how the two Oculus Quest headsets powered revenue in that segment.

Facebook's Portal smart screens haven't had much success in the smart speaker and screen market against Amazon and Alphabet's Google, so one is able to reliably say that most of the growth in this segment has come from Oculus.

Facebook's VR business seems small for now, but Fortune Business Insights expects the global VR market to grow from $3.1 billion in 2019 to $57.55 billion in 2027. It is recommended to consider those optimistic projections with some doubt, but they indicate that Oculus still has plenty of room for growth.

Within the following several years, shareholders should see Facebook to keeping releasing new Oculus headsets and buying leading developers. Over the next decade, these investments are likely to pay off and boost the growth of market-leading VR hardware and software, which could meaningfully decrease the company's overall reliance on targeted advertising.

Still, the most surprising thing about Facebook is the realization that CEO Mark Zuckerberg hasn't quite hit the gas pedal yet. Even though the company has more than $101 billion in annual advertising revenue in 2021, it doesn't make much profit from Facebook Messenger or WhatsApp. That ad revenue comes almost entirely from the namesake site and Instagram. Imagine how quickly Facebook's operating cash flow will grow when the company starts monetizing two of the six most visited social platforms in the world.

While the price is above 319.00, follow the recommendations below:

• Time frame: D1
• Recommendation: long position
• Entry point: 331.26
• Take Profit 1: 349.00
• Take Profit 2: 356.00

Alternative scenario:

If the level 319.00 is broken-down, follow the recommendations below:

• Time frame: D1
• Recommendation: short position
• Entry point: 319.00
• Take Profit 1: 306.00
• Take Profit 2: 298.00