Beyond VR and AR: Why The Real Metaverse MVPs Will Be Silicon Companies and Cloud Providers

February 18, 2022 / Olivier Blanchard

The term “metaverse” was originally coined by science fiction author Neal Stephenson in his 1992 novel Snow Crash. In the book, the metaverse was a virtual three-dimensional space that users could access via virtual reality goggles and experience through first-person virtual avatars. Virtual real-estate and other virtual assets could be sold and purchased by users in the metaverse, and so on. Even if you aren’t familiar with Neal Stephenson’s seminal book on the subject of hypothetical metaverses, you are probably familiar with Ready Player One (at least the 2018 movie if not the 2011 novel by Ernest Cline), and perhaps even Linden Labs’ Second Life, the multiplayer virtual world launched in 2003, which in many ways serves as precursor to whatever broader and more mainstream version of the metaverse many of us will be likely be interfacing with in the not-so-distant future. 

Technology has evolved since Snow Crash and even Ready Player One were written, however, and one significant change brought on by this evolution is that the concept of virtual reality that inspired the metaverse has now expanded to Augmented reality (AR) and Mixed Reality (MR) – which allow users to interact with virtual objects layered onto the physical world instead of being immersed in a virtual one. The significance of this expansion of the metaverse from VR into AR and MR is that it is likely to both accelerate and scale adoption of the multiverse to user tiers that may not initially be interested in immersive VR experiences, or that may be looking for more useful everyday functionality from virtual technologies. (As with any new technology, success depends on utility: What problem does this solve? How does this make my life better? What new value does this bring to our collective lives?)

For VR, gaming is a given as a use case, and has driven most of the growth in the category. Other scalable uses include education, entertainment outside of gaming, engineering and design, healthcare, defense, but also productivity and communications. Caveat: Because VR headsets tend to be a little uncomfortable and restricting, the value that VR experiences bring to users has to exceed the cost of that discomfort and hassle, meaning that VR is unlikely to be able to, on its own, serve all of the metaverse needs of technology users. AR and MR, partly because of lighter, smaller hardware form factors, and partly because the experiences they provide is built on augmenting the utility of the real world around users as they sit, walk, drive, play and work, seem better suited to address the less immersive, more naturally social and ambulatory daily needs of technology users. Because of this, I suspect that as AR begins to mature, it will eventually bypass VR to become the dominant metaverse interface, both for consumer and enterprise use cases, particularly if Apple chooses to enter the AR space.    

The case can therefore be made for a spectrum of use cases including VR, MR, and AR, with many consumers opting to use VR for some applications, like gaming, education, and entertainment, for example and MR/AR for other applications, like work productivity, shopping, fitness, and travel. In other words, don’t think of the metaverse technology equation as a binary battle between VR and AR/MR, but rather a more additive VR+AR+MR calculation, with all three coexisting and serving different purposes for users. 

The additive nature of that equation has implications not just for hardware sales but for monetization opportunities by a broad ecosystem of critical metaverse players, which we can break down into the following categories: 

  • VR, AR, and MR hardware vendors like Oculus/Meta, HTC, DPVR, Pico, Microsoft, Alphabet, Samsung, and Apple (eventually)
  • Silicon and SOC companies like Qualcomm, Intel, and Nvidia
  • Application platform providers like Meta, Alphabet, Amazon, Apple, Sony, and Microsoft
  • A bubbling ocean of software and app developers
  • Network and service providers like Verizon, AT&T, T-Mobile, and Comcast
  • Secure payment and banking solutions providers
  • Cloud providers that will power the metaverse, among them AWS, Microsoft Azure, Google Cloud, IBM Blue, and so on
  • Retail partners and advertisers 

Although we tend to focus on metaverse interfaces, like VR headsets, AR/MR glasses, and applications because they’re cool and fun and tangible, the real MVPs of the metaverse may ultimately be chipmakers and Cloud providers. That’s because there’s no metaverse without them. They provide the foundation for it all. And for some of them, it won’t really matter who sells the most headsets or glasses or apps or subscriptions, or whether AR adoption outpaces VR adoption, or which platform attracts the most daily active users. Some metaverse players will win no matter what happens in the consumer-facing market-share war, and the more brand and category-agnostic they are, the healthier their bottom-line is likely to be. 

On the silicon side, since VR headsets and AR/MR glasses hardware needs CPUs, GPUs, and connectivity solutions, the more hardware ships, the more SOCs and RF modules will ship as well. Qualcomm seems especially well positioned here, especially in the premium tier, since it can provide end-to-end VR, XR, and MR solutions that include CPU, GPU and low-latency wireless connectivity, but the market is wide open for silicon companies to help drive the growth of the category with highly specialized solutions across all price tiers. Key chipmakers like Nvidia, MediaTek, and Intel also stand to win big in the space.

On the infrastructure side, Edge computing aside, all of that VR, MR and AR usage is going to require a lot of cloud compute power and data storage, meaning that cloud providers like AWS, Microsoft, Google, and IBM are also very well positioned to reap the rewards of broad metaverse adoption. Circling back to silicon, more demand on Cloud providers also means more chipsets, so silicon companies are set to win on the front end of the metaverse and on the back end as well.

It is also important to acknowledge that since network capacity, bandwidth, and low latency will be crucial to the metaverse’s user experience, 5G networks and robust new Wi-Fi solutions will also play an essential role in that ecosystem. This means that ISPs, carriers, and OEMs delivering consumer and enterprise Wi-Fi solutions are also extremely well positioned to make the most of the monetization opportunities that broad metaverse adoption is likely to bring. 

To be continued.

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