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The Biggest Threat to Meta in the Metaverse

By Travis Hoium – Dec 1, 2021 at 7:25AM

Key Points

  • Meta is building industry-leading VR tools, but they're used primarily by consumers.
  • If enterprises find value in meeting in virtual spaces, the tools provided by Microsoft may be of more value.

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If the enterprise markets leads metaverse development, Meta may not be the leader.

I don't think there's any doubt that the metaverse is on our horizon. Whether that means we'll be living in a Ready Player One-like world, wearing AR/VR glasses around town, or just advancing the internet that we know today is an open question. But I think it's clear that the concept of digital ownership and some kind of virtual and augmented reality will continue to improve and be normalized in time. 

Meta Platforms (META 1.97%) has made such a big move into the metaverse that the formerly Facebook company renamed itself. But there's another tech giant that could have a leg up in building a functional metaverse if technology plays out differently than Meta anticipates, and that's Microsoft (MSFT 1.50%)

Droid workers operating augmented reality table.

Image source: Getty Images.

Microsoft has the business use cases

One of the questions facing developers and builders in the metaverse is whether consumers or businesses will be the early adopters. With the PC, businesses found use cases that added value and bought PCs well before consumers found uses for expensive computers at home. With the smartphone, the opposite was true, with consumers buying Apple (AAPL 1.56%) iPhones personally and effectively forcing enterprises to make the software they needed work on them. 

So far, VR has been dominated by consumers, with Meta's Oculus brand gearing toward consumers from both a pricing and operational perspective. That's led to millions of devices sold, so it's hard to argue with the strategy right now.

One company taking a different angle on VR and AR is Microsoft. The company is an enterprise giant, and it has geared its VR and AR strategy to business use cases like engineering and construction, with a higher price point to match. These are high-value use cases for immersive technology that are already helping build out the high end of the industry, but they're lower volume than consumer VR today. 

If Mark Zuckerberg is right and people want to meet in the metaverse, Microsoft seems like a natural fit given its enterprise product Teams. The company could add metaverse features to Teams and add the personal profiles and data it already has within the Microsoft ecosystem, which early reports say it will do next year.

Hardware isn't the problem here

Microsoft isn't new to the virtual and augmented hardware business either. It makes the Hololens, a leading AR headset, while providing technology to third-party manufacturers for its VR technology, which is known as mixed reality. 

While Microsoft isn't currently a big player in AR and VR hardware, it could acquire a company like HTC or Pico and almost instantly have hardware to compete with Meta in the enterprise market, or lean on third-party manufacturers to get hardware to the market while focusing on software. 

Microsoft the platform company

As the metaverse is built, it's also important that as a platform company Microsoft works well with other developers. Microsoft headsets work on the Steam platform from Valve, and as a company, Microsoft has built its business by creating an operating system for developers to build on. 

Meta's content strategy has been to either build content itself or buy the biggest developers for its platform. In the last two years, it's bought Beat Games, Ready at Dawn, and BigBox VR, three of the most successful VR developers. This can create exclusive content for a platform, but it also puts Meta and Oculus in direct competition with other developers on its app store. 

As the metaverse develops, I don't think it's the hardware that will differentiate companies -- it's the company that can attract developers that will win. Oculus has an advantage in attracting developers in the consumer market, but enterprises may prefer a Microsoft platform long-term. If enterprises lead the metaverse push, Microsoft could be well-positioned to succeed. 

Meta has competition in the metaverse

Meta may have changed its name to signal that it's taking the metaverse seriously, but Microsoft has been investing in the space for years in areas of high value for businesses. If those areas of value extend to widely used products like Teams, Microsoft could have a better position in the metaverse than investors think. 

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Travis Hoium owns shares of Apple. The Motley Fool owns shares of and recommends Apple, Meta Platforms, Inc., and Microsoft. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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