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Digi-Capital: Augmented Reality Like HoloLens to Outpace Virtual Reality Like Oculus

AR may be a more natural evolution of phones and tablets.

Microsoft

Virtual reality will be a $30 billion market by 2020, but the parallel industry of augmented reality will be four times bigger, digital M&A firm Digi-Capital forecasted today.

The difference between VR and AR is significant, but sometimes hard to grok given that both technologies are not currently in a lot of consumers’ hands. A simplified explanation: Virtual reality, as seen in the Oculus Rift or Project Morpheus, surrounds the user in a virtual experience like an immersive video game or a movie; augmented reality, as seen in Google Glass or Microsoft’s HoloLens, layers virtual information or graphics on top of the real world.

That difference is why Digi-Capital said it expects AR to reach $120 billion in the next five years. The ability to use AR wearables while out and about, rather than just at home, may make them useful to a broader range of consumers, like direct evolutions of existing mobile devices.

“We think AR’s addressable market is similar to the smartphone/tablet market,” managing director Tim Merel wrote in the firm’s new report. “So AR could have hundreds of millions of users, with hardware price points similar to smartphones and tablets. This could drive large hardware revenues for device makers.”

Potential uses for AR, according to the report, include commerce, voice calls, Web browsing, film/TV streaming, enterprise apps, advertising, consumer apps, games and theme park rides.

Merel acknowledged, however, that both technologies have potential limitations: Motion sickness in VR and privacy concerns in AR, something Glass struggled with before shuffling back to the drawing board at Google.

This article originally appeared on Recode.net.