After all the promises, Facebook (NASDAQ:FB) finally announced what gamers everywhere have been waiting to hear: The Oculus Rift virtual reality headset is about ready for primetime and you can now order the device. CEO Mark Zuckerberg has been fielding questions for the past year about when Rift would hit the streets, and the first quarter of 2016 was set as the target. That proved true as pre-orders for the $599 device started Jan. 6, with initial deliveries scheduled for late March.
It's not just gamers who have been waiting for Rift with bated breath. Investors have also been champing at the bit as estimates about the future size of the VR market continue to climb. The potential is certainly huge, which explains why VR -- even in its infancy -- has already become hyper-competitive.
What may come as a surprise to some is that Facebook's biggest competitor most likely won't be Samsung with its mobile Gear VR headset, nor other similar alternatives. Instead, it's Microsoft (NASDAQ:MSFT) and its augmented reality wonder HoloLens that Zuckerberg and team should keep the closest tabs on.
The same, only different
Both Facebook's Rift VR headset and Microsoft's HoloLens augmented-reality solution transport users into virtual worlds, though each goes about it in its own unique way. The distinction between the two futuristic technologies is one reason HoloLens may have a leg up on Rift and all the other VR solutions on the horizon.
Think of the VR experience as placing users into an alternative, closed world. An augmented-reality experience, on the other hand, overlays that alternative reality on the real world. Its displayed imagery surrounds the user is a way that's similar to VR, but it does not completely close the user off from seeing the real world. That difference allows a user to enjoy an augmented-reality experience while remaining in touch with the world around them, unlike VR, which is immersive.
The case for HoloLens
Because of this, the practical applications for the HoloLens beyond gaming are nearly limitless. Augmented reality has potential commercial applications in fields from engineering to healthcare to education, just to name a few obvious candidates. There are doubtless a host of possibilities in fields not even being considered yet.
Sure, Facebook has plans to expand its VR solution beyond gaming, but a fully immersive virtual world is inherently limiting. Imagine a user trying to negotiate their own living room, let alone something like a commercial building site, with a Rift strapped on their head. That's no problem with HoloLens since the user remains in touch with reality.
But make no mistake, augmented reality will also command its share of the gaming market. Whether Microsoft had synergy with HoloLens in mind when it dropped $2.5 billion for Minecraft in September 2014 is debatable, but the two are an ideal match, and the combination will almost certainly find its way to an Xbox near you before long.
The case for Rift
Priced at $599, Facebook's Rift is taking pre-orders and if early interest is any indication, consumers don't have a problem with its cost. Though some pundits have lamented its price, compared to the $3,000 Microsoft is charging for a developer's version of HoloLens, Rift is downright cheap, even with the additional money buyers will have to shell out for a computer with the high-end specs to power it. (Though it's uncertain what the mass-market version of HoloLens will cost.)
Another thing Rift has going for it is that, initially anyway, both virtual and augmented reality will be all about gamers. So in the near term, Rift and its VR ilk will command most of consumers' interest, giving it a jump-start on what one research firm suggests will become a combined $150 billion market in just four years. There's an advantage to being first to market, and that edge goes to Facebook.
But down the line, HoloLens could leave Rift and others like it in the dust. Of the aforementioned $150 billion combined market, a whopping $120 billion of that is estimated to be from the AR world where Hololens plays, with "just" $30 billion from VR.
Tim Brugger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.