Metaplatforms (META -4.04%)formerly Facebook, has been frustrated for 15 years with having to play by Appleit is and Alphabetit is rules on iOS and Android.
Meta’s first attempt to circumvent the duo’s smartphone dominance, the Facebook phone, ended in dismal failure in 2013. But the company’s second bite at the apple has a much better chance of working.
Here’s how Meta Platforms plans to disrupt the two smartphone empires.
Love at first sight
Meta founder Mark Zuckerberg first formed the seed of a plan to overthrow the iOS and Android empires after Google co-founder Sergey Brin presented him with a Google Glass prototype on the sidelines of an awards ceremony. Project Glass was Google’s first attempt at augmented reality (AR), a technology that superimposes computer-generated visual content on a user’s real-world view. And Zuckerberg’s first look at Glass was love at first sight.
Once Zuckerberg got a pair and took a closer look at what the tech could do, he was quick to visualize his company creating its own smartglasses hardware platform, where it would be free to follow the rules. of other companies.
The platform of tomorrow
Facebook missed the birth of the mobile phone era. But once it was clear that the world was close to the dawn of new computing technology, Zuckerberg began to make aggressive bets.
His first bet was the acquisition of Oculus in 2014 for $2 billion. It was a promising small company developing virtual reality (VR), an interactive computer-generated simulation of a three-dimensional environment. When the company first announced the acquisition of Oculus, Zuckerberg was quick to say that mobile is the platform of today, but the company was preparing for the platforms of tomorrow. .
Meta is relatively early in its VR opportunity, with massive growth to come. Fortune Business Insights predicts that the global virtual reality market will grow from $16.67 billion in 2022 to $227.34 billion by 2029, a compound annual growth rate of 45.2%.
Zuckerberg also has an AR vision
With virtual reality expected to become a massive market over the next decade, Apple CEO Tim Cook said in a 2016 interview with ABC News that he preferred augmented reality over virtual reality and believed that augmented reality would ultimately be the greater of the two.
Then you might wonder why Zuckerberg didn’t go after AR first. The answer is that VR technology was far ahead of augmented reality in becoming a viable consumer product in 2014.
But in 2022, industry analysts believe the AR market is ready to take off. Market research firm Insider Intelligence predicts that this country’s AR market will reach 89.4 million users by the end of 2022 and reach 100 million users in 2025, or 35.5% of all American Internet users.
And during the World Economic Forum earlier this year, CNBC reported that nokia CEO Pekka Lundmark believes smart glasses will replace smartphones by 2030, a belief growing among some tech executives. If that happens, it could potentially end iOS and Android’s stranglehold on wireless mobile technology, a desirable scenario for Meta.
Therefore, Zuckerberg’s second bet is a big investment in AR. Meta’s division that develops AR and VR products, Reality Labs, began introducing AR products in 2021. It started with Ray-Ban Stories, a limited-functionality smart glass produced in collaboration with the EssilorLuxottica Ray Ban brand. Users can take photos and videos, listen to music and take phone calls with these glasses.
His full AR is called Project Nazare, which will likely take many years to develop into a finished product. According to tech news website The Information, Meta wanted to release its first consumer version of Nazare in 2024. But it has since scrapped those plans, likely due to the global economic crisis.
A murky short-term picture
In May, Reuters reported that Meta chief technology officer Andrew Bosworth told Reality Labs employees that he would not be able to fund some projects and that the company may postpone other projects. And things have only gotten worse since May.
Meta’s total second-quarter revenue decreased 1% year-over-year due to unfavorable foreign exchange rates, war in Ukraine, changes to Apple’s iOS, weak e-commerce and a sluggish economy. And Reality Labs posted an operating loss of $2.8 billion in the quarter. If the economy deteriorates, management could decide on further cuts. So there are reasons to avoid Meta’s actions, which include rumors that Apple will start releasing its AR/VR products in 2023, potentially overtaking Meta.
However, shares of Meta are now trading at a price-earnings ratio of 11.6, near an all-time low, which compensates investors for taking some risk. So if you’re a long-term investor who believes in Zuckerberg’s vision, now might be the time to grab some stocks. If the company succeeds in building a smart glass platform, today’s valuation might look low 10 years from now.
Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Rob Starks Jr holds positions in Alphabet (A shares). The Motley Fool has positions and recommends Alphabet (A-shares), Alphabet (C-shares), Apple and Meta Platforms, Inc. The Motley Fool recommends the following options: $120 long calls in March 2023 on Apple and 130 short calls $ in March 2023 on Apple. The Motley Fool has a disclosure policy.
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