The start of a new year brings with it the Consumer Electronics Show in Las Vegas, where stunning TVs, robot tractors, and cars that can change colour were all on display. It was also unsurprisingly quieter than normal, with c40k physical visitors compared to c170k in 2020, which was eerily fitting given the growing focus on the metaverse.

The metaverse wasn’t hugely familiar to many through most of 2021, with over 30x more searches on Google for VR vs metaverse for the first 9 months of the year. However, that changed in October when Facebook rebranded to Meta, and the metaverse has now transformed itself into one of the most talked about themes in tech in 2022. It’s founded on extended reality (XR), which we handily explained in depth in our February 2021 sector report, and it also looks set to draw on another of the most talked about themes in tech in 2022 – web 3.0, with its foundations in blockchain and distributed ledgers, which we also explained in depth in our March 2020 sector report.

To unlock the potential of the metaverse, adoption of XR devices will need to scale dramatically through the 2020s. Meta/Facebook’s Oculus is currently one of the most popular devices, and app download data points to early but potentially exponential traction. Between 24th-26th December for the past few years, downloads of the Oculus app have scaled from c50k in 2018, to c100k in 2019, to c250k in 2020, to c650k in 2021.

As we cover in our February 2021 report, there are technological challenges for XR devices that still need to be overcome including screens, processing power, and weight, and for XR adoption we believe that we are currently in the equivalent phase to the iPod in 2002-06 for smartphone adoption. The iPod launched in 2001 with a focus on changing how we listen to music, paved the way for the technologies required for the iPhone, and the iPhone then launched in 2007 and drove mass adoption of the smartphone.

Looking ahead to these new XR devices, Facebook/Meta and Ray-Ban have now launched their Ray-Ban Stories Smart Glasses, which are only likely to scale in capability alongside Oculus. Following Apple CEO Tim Cook saying in October 2016 that ‘it [AR] will happen in a big way and we will wonder when it does how we lived without it – kind of like we wonder how we lived without our phone today,’ you can imagine that Apple is not going to leave XR to Meta, and Apple has reportedly been working on a VR device and XR glasses with release expected in the next 1-3 years. Amongst numerous others, Microsoft’s CEO Satya Nadella highlighted in November 2021 that ‘the metaverse is not just transforming how we see the world, it’s changing how all of us actively participate in it,’ and it’s likely to build on its enterprise-focused HoloLens 2 following its launch in 2019, while scaling the capabilities of its mixed reality services such as Mesh into Teams (and driving greater usage of Azure).

In a similar way to the desktop and smartphone, the hardware and platforms developed by mega-cap tech will enable a range of other companies to thrive, and this is where we see opportunities for companies in our universe. ENGAGE XR is an early mover as it announced plans to develop its metaverse alongside its June 2021 fundraising, and we look forward to seeing its ENGAGE communications platform and enterprise-focused metaverse scale through 2022, with customers including Meta itself. Immotion has similarly been developing its presence in VR through the growing adoption and traction of its immersive experiences in venues, and is well-positioned to leverage its existing expertise to expand into new areas. Meanwhile, through the course of 2021 Dev Clever announced numerous global partnerships to scale its careers-focused, immersive ed-tech platform with support from numerous governments, and we expect it will be excellently positioned to scale through the 2020s and enrich the lives of young people.

We only expect more UK TMT companies will emerge and scale in XR and the metaverse in the coming decade, and as events like CES bring all of this new tech into focus, it is worth reflecting that other tech is becoming obsolete. On January 4th 2022 Blackberry decommissioned its legacy mobile OS and services after launch in 1999, and last January Adobe withdrew support for Flash after launch in 1996. Which does make you wonder, after the 15th anniversary of the launch of the iPhone on January 9th, how much longer might this transformational device have left? After all, does it really make sense to put your hand in your pocket, tilt your head down, and touch a 6 inch screen to live your digital life?

Happy Friday