The Metaverse – Dark Horse of WWDC

A winning product with almost no sales. 

• While Apple Intelligence got all of the attention at WWDC, an extraordinary amount of content was provided to developers on how to develop apps for VisionOS for a product that has almost no users.
• This would appear to be counterintuitive until one considers that in the very long-term some form of augmented reality (AR) may end up replacing the smartphone meaning that Apple needs something ready to go or face going the way of Nokia, Ericsson, Blackberry and many others.
• The Apple Vision Pro is Apple’s first foray into the Metaverse and although it is without doubt the best experience available by far, sales have been disappointing.
• I don’t think that this is necessarily due to the price tag but more to do with the horrible compromises that Apple was forced to make to get the experience where it wanted.
• These include a large device that is front-heavy, 2 hour battery life meaning that it needs to be plugged in most of the time and the fact that Apple was forced to implement its experience back to front.
• Apple thinks of this device as AR but the reality is that the Vision Pro is a VR device in that reality is superimposed on the virtual world rather than the other way around.
• True AR is where the virtual world is superimposed on the real world, but this is so technically difficult to do right now, that Apple had to do it the other way around which is what I mean by back to front.
• Despite all of these problems and weak sales, Apple dedicated many of its WWDC sessions to teaching developers how to write apps for Vision OS as well as upgrading its tools and capabilities which appears strange for a device that has very few users.
• I think that Apple’s strategy is to prime its ecosystem to be ready to switch to AR should The Metaverse start to take off to ensure that whatever it loses in smartphone sales is made up by Metaverse devices.
• Furthermore, I think that Apple is also leading the way in terms of how AR should be implemented by splitting the processing of the virtual and real world into two completely different systems.
• This is because interpreting reality is very latency intolerant and hence requires a real-time system whereas the virtual world is much more forgiving.
• Hence, the optimal solution is two systems which create the two worlds separately and then overlay one over the other.
• This will also make it much easier for Apple to switch from VR to AR when the technology is ready for it to do so which I think will be around the 2026-to-2028 time frame.
• I think that the Apple Vision Pro is successful because it is fulfilling its function which is to be an insurance policy to prevent the kind of implosion that Nokia suffered between 2007 and 2012.
• If developers are familiar with how the system works and how to program for it, then Apple will be one step ahead of the competition for AR.
• The current leader is Meta which makes devices that are far cheaper which means that it has sold far more devices and has a much larger installed base but its system is not that well suited to be migrated to AR.
• Consequently, I expect that Apple is not about to ditch the Vision Pro system but will continue developing it just in case it is needed.
• Given the gargantuan size of the iPhone business and the peripheral businesses that it enables, spending a few billion a year on developing a Metaverse offering just in case it is needed is a worthy and successful investment in my opinion.
• Furthermore, it is a rounding error in the accounts and investors will barely notice its impact.
• That being said, Apple is not suddenly an AI company and the recent rally only serves to reinforce my view that the valuation of the company is too high and that there are much better bargains to be had elsewhere.