When it comes to the metaverse, there has been plenty of debate among Wall Street analysts and consumers alike. Do people want fully immersive virtual experiences? Could they spend as much time in virtual worlds as they spend on their smartphones? And, perhaps most importantly, can those virtual experiences be monetized effectively?
The concept might have the attention of the world's largest company, Apple (AAPL 1.27%). It's yet to confirm rumors it's working on a virtual (or mixed) reality headset, but in a recent interview with GQ magazine, CEO Tim Cook appeared upbeat about the potential of such a device. Some pundits even think Apple could reveal one as soon as June 5, at the company's Worldwide Developer Conference.
Cook particularly likes the idea of the physical world being overlayed with the digital one, which could enhance people's communication and connection. He even said he thinks that combined experience could be better than the real world itself!
His optimism is perhaps unsurprising, considering one estimate by Bloomberg pegs the metaverse opportunity at $800 billion as soon as 2024.
Before Apple potentially disrupts the virtual reality party, here are two stocks investors might want to buy now -- and they could already have a technological advantage over the $2.5 trillion giant.
Image source: Getty Images.
1. Meta Platforms is leading the charge
Meta Platforms (META -0.52%) owns some of the most successful social media applications in the world, including Facebook, Instagram, and WhatsApp. But investors have grown frustrated with the company over the last 18 months for its spending on the metaverse.
It burned $13.7 billion developing its vision for the virtual world in 2022, while the economic downturn was simultaneously sucking advertising dollars away from its social media apps. While the company has since committed to cut costs (much to the delight of investors), metaverse enthusiasts will be pleased to know that isn't an area it plans to stop spending on.
Meta's greatest challenge over the last decade has been its lack of control over the hardware devices people use to access its social media platforms. For example, in 2021, Apple decided to enforce new privacy rules that crushed Meta's ability to accurately track its users, meaning it could no longer sell highly targeted advertising spots to businesses.
The company won't let that happen again, which is why it acquired virtual reality headset maker Oculus for $2 billion in 2014. Meta continues developing its portfolio of virtual and mixed reality hardware alongside its metaverse software.
CEO Mark Zuckerberg envisions 1 billion people using Meta's virtual worlds in the future, each of whom could be spending hundreds of dollars on digital goods and services. But professional use cases might gain the most traction initially. Meta first previewed its Project Cambria mixed reality headset last year, which could replace the typical office workstation by beaming interactive digital content into workers' vision, while they remain engaged with the physical environment around them (often referred to as augmented reality, or AR).
Theoretically, the headset wearer would be able to view digital pages just like they would on a laptop computer, except they could observe several at once, and shuffle through them more quickly -- all while walking around in the real world.
Without knowing exactly what Apple is up to, Meta is the clear leader in the metaverse industry right now. But even in the shorter term, there are plenty of other reasons to own Meta Platforms stock today.
2. Snap has a unique take on the virtual world
While Meta Platforms is experimenting with the potential of mixed reality, it's definitely more focused on developing fully immersive virtual reality -- or a "true" metaverse -- for social connections. Snapchat parent company Snap (SNAP -2.72%), on the other hand, has become a leader in augmented reality, to the point it has started selling AR-based advertising to businesses with spectacular results.
One of the questions I cited at the beginning of this piece related to consumer demand for virtual experiences. Well, Snap doesn't believe immersive virtual reality is the way to go at all. The company thinks real, physical human connection is key to a healthy experience in the digital world, so it wants to give users the ability to go about their daily lives as normal.
It designed a pair of wearable glasses (actual glasses, not a headset) called Spectacles, which will simply enhance the everyday environment surrounding the user by overlaying AR into their vision in the real world.
Snap already has a healthy lead in the space through its Snapchat platform, transforming users' smartphone cameras into powerful AR experiences. Over 250 million of Snap's users are already engaging with AR on the platform daily, and it's catching the attention of advertisers. It's capable of turning a user's smartphone into a digital changing room, for example, where they can try on different clothes and accessories virtually.
European fashion giant Zalando recently introduced AR try-on Lenses, which reduced its cost per order by 46% compared to non-AR advertising campaigns. In other words, AR-based ads have the potential to generate almost twice as many sales for the same financial outlay.
Snap stock has been crushed amid the tough economic climate and the sell-off in the tech sector, and it remains down 86% from its all-time high. But Snapchat continues to steadily grow its daily active user base suggesting the platform will remain attractive to advertisers, and it's in the box seat when it comes to augmented reality. This could be a great time to buy Snap stock for the long term, particularly as different metaverse experiences gain traction over time.
