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How augmented reality and virtual reality will generate $150 billion in revenue by 2020 – Fortune.com

According to Digi-Capital, the augmented reality market is projected to generate $120 billion in revenue, compared to just $30 billion for the virtual reality market.
Despite the failure of Google Glass to evolve into a mainstream consumer gadget, upcoming augmented reality devices like Microsoft’s HoloLens, which combines virtual objects with the real world through high-tech glasses, are forecast to become a $120 billion business by 2020 according to a new report from Digi-Capital. That’s four times more than the $30 billion business virtual reality will generate in the same five year span.
Tim Merel, managing director of Digi-Capital, believes augmented reality technology like HoloLens, Magic Leap (which is backed by Google, Legendary Entertainment, and venture capital) and Meta is driving this sector into the mainstream.
The good news for investors is that Merel believes both the AR and VR markets will become mainstream by 2020, even if he sees more opportunities for AR with a larger audience. In today’s $88.4 billion global video game landscape, the PC, console, and mobile industries all thrive. And AR and VR hardware, games and apps are poised to become part of this growing ecosystem in the coming years.
“Augmented reality is great fun for games, but maybe not as much fun as virtual reality when true immersion is required—think mobile versus console games,” Merel says. “But that possible weakness for gamers is exactly why augmented reality has the potential to play the same role in our lives as smartphones with hundreds of millions of users. You could wear it anywhere, doing anything. Where virtual reality is like wearing a console on your face (Oculus VR), augmented reality (Magic Leap, Hololens) is like wearing a transparent mobile phone on it. We think AR could fundamentally disrupt mobile, and the next Apple might come out of AR—depending on if and when Apple enters the AR market.”
Merel believes augmented reality’s addressable market is similar to today’s smartphone and tablet market, where there could be hundreds of millions of users and price points similar to smartphones and tablets. This could drive large hardware revenues for device makers and open up a similar software and services economy to today’s mobile market.
“A large AR user base would be a major revenue source for TV and film, enterprise, advertising, and consumer apps from Facebook to Uber to Clash of Clans,” Merel says. “Amazon and Alibaba would have an additional platform for selling in new ways to a mass audience. Together with innovative applications nobody has thought of yet, AR’s scale could prove a bonanza for mobile networks’ voice and data businesses because somebody has to pay for all that mobile data.”
The virtual reality market has major players like Oculus Rift (which Facebook acquired last year for $2 billion), Sony, Samsung, HTC, and Valve. There are also smaller entrants like MergeVR, which enters the space with a $130 mobile headset and controller this fall.
Merel believes virtual reality’s addressable market is primarily core games and 3D films, plus niche enterprise users. VR could have tens of millions of users, with hardware price points similar to the console games industry. He anticipates consumer software and services economics similar to current games, films, and theme parks, but doesn’t expect substantial additional data or voice revenues from VR. While there could be meaningful enterprise VR revenues, he thinks that AR could take more of that market.
“AR could disrupt the mobile market, and Microsoft’s HoloLens could be the start of regaining the glory lost to Apple in the last decade,” Merel says. “Apple’s legacy of innovation and smartphone and tablet strength puts it in a great place to enter the AR market, and we would love to see an augmented ‘One more thing.’”

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