The metaverse may be nascent right now, but it is expected to become humongous in the long run given its potential to blur the boundaries between real and virtual worlds.
Third-party estimates put the size of the metaverse market at nearly $830 billion in 2028, which may not be surprising as the technology would allow people to interact with each other in real-time in a three-dimensional virtual world from the comfort of their homes.
Not surprisingly, several tech giants are in a race to corner a share of the lucrative opportunity that the metaverse could present. Apple (AAPL 5.98%) and Microsoft (MSFT 2.22%) are no different. While one of them has already started tapping the massive metaverse market, the other one is reportedly working on new devices so it doesn't miss out on this opportunity.
Let's take a closer look at the metaverse prospects of Apple and Microsoft and see which of these two tech titans could use this tech trend to their advantage.
Image source: Getty Images.
The case for Apple
Apple's products are used by billions of users around the world, which means that it has an existing ecosystem that could naturally adopt its metaverse-related offerings. This indicates why CEO Tim Cook said on the January earnings conference call that Apple is "exploring new and emerging technologies" and the metaverse is "very interesting to us" when asked about the company's thoughts on this tech trend.
One way Apple may be looking to benefit from the metaverse is through its expertise in making consumer electronics devices. The company's iPhones, iPads, and wearables are used by a huge installed base of users across the globe -- roughly 1.8 billion -- which means that it can introduce a metaverse device and cross-sell the same to its large existing ecosystem.
That's probably the reason why Apple is reportedly working on a mixed-reality headset combining both augmented reality (AR) and virtual reality (VR). This could be a smart move; a headset would be the window into the metaverse for millions of users who will need to wear one to get transported into the virtual world where they could work, play, learn, or socialize.
IDC estimates that shipments of AR/VR headsets could increase at an annual rate of nearly 46% through 2025 to nearly 44 million units. The potential price point of Apple's headset indicates that the company could dominate this market in the long run. Ming-Chi Kuo of TF International Securities estimates that Apple could launch its first headset by the end of this year.
Kuo isn't the only analyst who anticipates an AR/VR headset from Apple. Mark Gurman of Bloomberg had said in 2020 that Apple may release a headset in 2022. And now, leaks indicate that Apple has reportedly designed a new operating system that would power the headset. The company may also be working on a separate app store for the device to target three key areas -- video gaming, communication, and media consumption.
So, Apple seems to be going after the most obvious route through which it could tap into the metaverse by building a device that would play a critical role in helping consumers experience this concept. Additionally, a headset could help Apple expand its services business as it would be able to offer specific applications that consumers may use in the metaverse.
The case for Microsoft
Microsoft can take advantage of the metaverse in several ways, ranging from cloud computing to video gaming to workplace collaboration software.
Just after Meta Platforms had announced its intention of betting big on the metaverse in October 2021, Microsoft announced that it would be rolling out Mesh for Microsoft Teams. The software giant said that Mesh for Teams could be accessed by anyone with a smartphone, laptop, or mixed-reality headset, and it could act as a gateway to the metaverse for organizations.
A Microsoft press release describing Mesh for Teams had said that "users can take their avatars into these spaces to mix and mingle, collaborate on projects and experience those serendipitous encounters that spark innovation." Organizations would be able to create their metaverses within Teams. So, Microsoft is aiming to quickly scale up its presence in the metaverse with the help of Teams, which has a monthly active user base of 270 million.
On the other hand, Microsoft's gaming division could unlock yet another massive metaverse opportunity for the company. Cryptocurrency investment firm Grayscale estimates that metaverse gaming could become a $400 billion market by 2025, driven mainly by spending on in-game items. Microsoft is one of the best ways to play this opportunity as it has a solid subscriber base for its game streaming service and has aggressively expanded its gaming library to attract more gamers.
The company believes that its acquisition of Activision Blizzard for $68.7 billion would "accelerate the growth in Microsoft's gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse." Throw in the fact that Microsoft's Xbox Game Pass service has over 25 million subscribers, and the company already has a huge installed base of gamers to whom it can offer metaverse-optimized games.
In all, it can be said that Microsoft could milk the metaverse in more than one way. The good part is that the company is already on its way to doing so thanks to Mesh for Teams, and things could get better with time as Microsoft pursues more metaverse applications.
The verdict
While Apple's quest for metaverse glory seems to be in the incubation phase, Microsoft has already made moves in this space. The market has yet to see what Apple's headset would look like, while Microsoft users can feel and experience the metaverse with Mesh. What's more, Microsoft is chasing a massive opportunity in the form of video gaming in the metaverse.
Additionally, investors shouldn't forget that Microsoft is growing at a faster pace than Apple right now. The company's fiscal 2022 revenue is expected to increase 18%, followed by a 14% jump next year. Apple's top line is expected to increase at a much slower pace of 8% in fiscal 2022 and 5.7% in fiscal 2023. Microsoft's early metaverse advantage and its broader opportunity could help it outpace Apple's growth for a long time to come, which makes Microsoft a better metaverse bet right now.
