Social media companies are developing products and services for augmented and virtual reality
experiences as the metaverse begins to take shape.
Source: Weiquan Lin/Moment via Getty Images
Meta Platforms Inc. and Snap Inc. are positioning their businesses to lead consumers and competitors into the metaverse.
Meta, née Facebook, set off a development frenzy last year with its turn toward building a more immersive internet experience known as the metaverse. Both Meta and Snap are releasing compatible virtual reality and augmented reality hardware and striking partnerships to ensure the availability of augmented reality and virtual reality content, such as interactive concerts, virtual shopping add-ons, and of course, immersive gaming experiences.
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Meta and Snap did not respond to requests for comment.
Meta's Quest VR headset is expected to account for 25% of annual game console shipments by 2026, according to Kagan estimates. Kagan classifies Quest as a game console because it acts as a conduit for games and other content, much like a traditional console.
By releasing VR and AR hardware, Meta and Snap create a market-entry point for more consumers to try the metaverse, and analysts expect they will use that platform to monetize gaming experiences on their social platforms.
"Eventually, they will have a metaverse in-app purchase revenue generation ecosystem," Barbour said.
Growth projections
The market for AR and VR devices is expected to grow about 45% from 11 million devices in 2021 to 15 million to 16 million devices in 2022, said CFRA Research analyst Angelo Zino.
An Oculus virtual reality headset is displayed at the new Meta |
Snap's flagship hardware product, Spectacles, is one of just a few options in the AR glasses space today. Snap also benefits from a youthful and iOS-savvy Snapchat user base that might be more willing to experiment with new tech.
"Those are going to be the early adopters," Zino said.
Snap's recent release of new AR offerings included experiences like virtual retail try-ons and interactive games and tutorials. The "gamification" of everyday life is among the most distinguishing features of the new offerings, said 451 Research analyst Ian Hughes. 451 is part of S&P Global Market Intelligence.
Snap is pitching its Snapchat platform and Spectacles hardware as the building blocks for interactive events, with potential overlays of geotag filters and computer-generated imagery in venues like stadiums and museums. The company is partnering with events company Live Nation to bring AR technology to various concerts and festivals like the Electric Daisy Carnival in Las Vegas, Chicago's Lollapalooza and The Governors Ball in New York.
Snap's fourth-generation AR Spectacles are not yet available to the public but have been released to developers and content creators.
"Being able to use the physical space and the digital space together with other people kind of elevates the physical space to more," Hughes said. "Being able to engage with that extra layer of information and have some relevance to all the people around you makes it a much more interesting approach."
Snap also signed on several retailers for its virtual try-on experience, including American Eagle Outfitters and Puma as well as eyewear companies Goodr and Zenni Optical.
"One of the biggest revenue opportunities out there for a lot of these players that are investing heavily in AR is definitely on the shopping side of things," Zino said. "That's absolutely at the top of the list."
Snap executives highlighted the advertising potential for the company's AR initiatives in a recent earnings call, with CEO Evan Spiegel pointing to "the intersection between augmented reality and commerce" as a key focus.
Meta hurdles
Pricing and perception concerns remain a hurdle for all AR/VR headset manufacturers. While Meta's headsets are becoming less expensive, with prices starting at $299 instead of $500, the product category is still seen by some as reserved for tech early adopters.
"[Quest] is much cheaper than a smartphone, and much cheaper than a gaming PC and cheaper than a game console, even," said 451's Hughes. "But you have to get people to put it on in the first place. And lots of people don't want to because they think that it looks silly, or it might not be very good."
Meta is also experimenting with co-branded hardware. Last year, the company announced a partnership with the popular sunglasses-maker Ray-Ban to create a new line of smart glasses.
Meanwhile, the standard Spectacles 3, Snap's latest camera-enabled glasses, start at $500, even for a basic model that lacks the higher-end AR/VR capabilities. The AR-capable Spectacles still in development could be another year or two away from a market release, analysts said.
"When they're serious about having a mass-market device, maybe those are a little more price-friendly," Barbour said.
Competition concerns
While Meta and Snap lead for now, analysts expect Apple Inc. and Sony Corp. will soon follow. Apple, in particular, could shake up the market, given its iOS user base of 1.8 billion active devices.
"They have an uncanny ability to speak to that market and say, this is the next thing you're going to buy," Barbour said. "That will ricochet out or echo out into the broader market."
Other likely next movers include Microsoft Corp. and Alphabet Inc.'s Google. Google has been adding more practical AR functionality into its ecosystem, including Google Lens image recognition technology, Google Maps and Google Search. An earlier attempt by Google to crack the consumer smart glasses market flopped, but the company may be ready to try again, analysts said.
Meanwhile, Microsoft's lead role in gaming makes it unlikely to stay on the sidelines. It already sells a mixed reality headset targeted at enterprise customers.
Ultimately, more competition could prove useful for this emerging market. Meta, for instance, could find new ways to generate ad revenue.
"Getting others more embedded into the AR hardware market, it provides more opportunities across broader platforms," Zino said.