Augmented and virtual reality to reach $150B by 2020

Steven Loeb · April 6, 2015 · Short URL:

Companies like Google, Facebook and Microsoft have been making big investments in the space

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Augmented reality, and virtual reality, are two spaces that we've all been hearing a lot about in recent years, and which some of the major tech companies have been investing in, but which has not quite yet come to the masses.

In the next five years, though, they are going to explode, according to areport out from Digi-Capital on Monday, which says that by 2020, the augmented reality and virtual reality will combine for a $150 billion business, according to a report out from Digi-Capital on Monday. That is up from what looks to be around $5 billion in 2016.

As you can see, AR be dominating VR, $120 billion to $30 billion. 

So what exactly is the difference between VR and AR?

They both "provide headsets both provide stereo 3D high definition video and audio," Digi-Capital explains, but there’s also a big difference between the two.

"VR is closed and fully immersive, while AR is open and partly immersive – you can see through and around it. Where VR puts users inside virtual worlds, immersing them, AR puts virtual things into users’ real worlds, augmenting them," the firm wrote. Basically VR is something you wear on your face, like Oculus VR, while AR is like wearing a phone on your face, like Google Glass.

"You might think this distinction is splitting hairs, but that difference could give AR the edge over not just VR, but the entire smartphone and tablet market."

Those difference will affect how AR and VR are used differently.

Virtual reality is built for games and 3D films, but "it is primarily a living room, office or seated experience, as you might bump into things if you walked down the street wearing a closed headset."

Augmented reality, meanwhile, doesn't have the full immersive experience as virtual reality does, "but that possible weakness for gamers is exactly why AR has the potential to play the same role in our lives as mobile phones with hundreds of millions of users."

Here is how they are expected to break down:

The biggest seller of AR will be in hardware, along with aCommerce, and data, while VR will be dominated by gaming, hardware, film, theme parks and "niche markets."

Investments in the space

As I said, some major companies have been putting major dollars into this space.

The most famous, of course, is Google with its Google Glass headset. The devices raised privacy concerns before anyone even had a chance to use them. The devices didn't make the splash that everyone thought they would though, and earlier this year Google announced it was dropping the Google Glass Explorers project, in favor of a focus on the enterprise.

Google has also gotten into virtual reality as well, leading a $542 million round in Magic Leap late last year.

While not much is yet known about Magic Leap, here is how it describes itself "Magic Leap is going beyond the current perception of mobile computing, augmented reality, and virtual reality. We are transcending all three, and will revolutionize the way people communicate, purchase, learn, share and play."

Facebook spent a total of $2 billion on virtual reality company Oculus in March of last year. That included $400 million in cash and 23.1 million shares of Facebook common stock, which are valued at $1.6 billion. In addition, the agreement also provided for an additional $300 million earn-out in cash and stock based on the achievement of certain milestones.

Most recently, Microsoft revealed that it was developing its own AR device, called Hololens.  It works by basically turning a person's entire living room into a giant Gameroom, though they are meant for all consumers, not just gamers or app developers.

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