How to Invest and Make Money From Virtual Reality

How to Invest and Make Money From Virtual Reality

Virtual Reality (VR) is set to change the world (they say) so how do you cash in on VR? Where should you invest your money now for the next big “Apple of VR”?

In a recent report, KZero estimated total consumer VR sales in 2014 of just 200,000 units – sales of about $90 million, including software. Of those, most went to hard-core gamers and other early adopters.

By the end of this year, sales are projected to rise to 5.7 million units, a 28-fold increase.

By 2018, total sales in the consumer market will hit 56.8 million devices. That's just short of another 10-fold increase.

When you throw in software sales, KZero says the total consumer VR market will have a value of roughly $5.2 billion in 2018. Of that figure, about half is for software, including games, apps, and other uses still to be defined.

VR and Augmented Reality (AR) can venture into new and very lucrative industries such as the $3.8 trillion healthcare industry with new business models that dematerialize, demonetize and democratize today's bureaucratic and inefficient system.

Much of this will come from the players in the market we know today, such as:

Microsoft (MSFT) – Hololens
The Hololens has the potential to be amazing. Hololens and the applications that come with it could very well push Microsoft into new territory. They may also purchase other companies and take them along for the ride. Last September they bought Mojang AB, the Swedish company that makes the Minecraft video game for $2.5 billion.

Google (GOOG) - Glass, Cardboard, Ads
Google Cardboard will ultimately evolve into something more than just a cardboard device. Google is working on their Glass v2.0, but ultimately Google is primarily a software company with advertising embedded in everything they do. You can be sure that wherever VR takes us, Google will be there with new software and their ads riding along with it.

Sony (SNE) – Project Morpheus
Their VR headset will help differentiate themselves against Xbox by driving sales of consoles and games. However, Sony is so diversified in many product areas that additional sales of PS4s and games may not affect their bottom line too much.

Facebook (FB) – Oculus VR
Cat videos in VR, friends in VR, "likes" in VR. We do not know where Facebook will take VR yet. However, Facebook is one of the few companies to be successful in mobile advertising so you can bet your neighbor's cat they have a good chance of monetizing VR. Maybe not this year or the next, but they will.

HTC (2498.TW) - Vive
Vive will be the first consumer VR device (that is not crap) to hit the market. I suspect this may be a low volume device at first and probably will not affect their bottom line until Q1 2016 results. Since HTC already sell some pretty nice devices - their G4 is receiving rave reviews - HTC is a pretty good play.

Samsung (SSNLF) – Gear VR
Samsung has their Gear VR and some pretty great phones to go along with it. Perhaps people on the fence about a phone and interested in VR may opt for the S6 and a Gear VR headset, but I doubt that will nudge their stock price that much higher.
Samsung is already a pretty sound investment and the potential for VR just sweetens the deal.

Of course, there are many 
start-ups, some great, most terrible, but nearly all are not public companies. Therefore, most people are not able to invest in them. So where should the everyday investor interested in VR put their money?

One potential avenue would be the manufacturers of the parts that go into the various VR devices. At the beginning volume of these devices will be relatively small. But as volume increases sales of these parts can potentially skyrocket. Since we do not have our hands on the HTC Vive or Oculus Rift CV1 yet to tear it apart to see what makes it tick, we will just need to wait.

VRCircle will pursue this route and keep you all up to date. Would be nice if we can all grab a share of the VR pie.

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