VR (virtual reality) and AR (augmented reality) are exciting – Google Glass coming and going, Facebook’s $2 billion for Oculus, Google’s $542 million into Magic Leap, not to mention Microsoft’s delightful HoloLens. There are amazing early stage platforms and apps, but VR/AR in 2015 feels a bit like the smartphone market before the iPhone. We’re waiting for someone to say “One more thing…” in a way that has everyone thinking “so that’s where the market’s going!”.

VR and AR headsets both provide stereo 3D high definition video and audio, but there’s a big difference. VR is closed and fully immersive, while AR is open and partly immersive – you can see through and around it. Where VR puts users inside virtual worlds, immersing them, AR puts virtual things into users’ real worlds, augmenting them..

We forecast that AR/VR could hit $150B revenue by 2020, with AR taking the lion’s share around $120 billion and VR at $30 billion.

We think VR’s addressable market is primarily core games and 3D films, plus niche enterprise users. VR could have tens of millions of users, with hardware price points similar to console. We anticipate consumer software/services economics similar to current games, films and theme parks, but don’t expect substantial additional data or voice revenues from VR. There could be meaningful enterprise VR revenues, but we think that AR could take more of that market.

We think AR’s addressable market is similar to the smartphone/tablet market. 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.

AR software and services could have similar economics to today’s mobile market, as they both cannibalize and grow it. A large AR user base would be a major revenue source for TV/film, enterprise, advertising, and consumer apps from Facebook to Uber to Clash of Clans. Amazon and Alibaba would have an entirely new platform for selling to a mass audience. Together with innovative applications nobody has thought of yet, AR’s scale could prove a bonanza for mobile networks’ voice and data businesses. Someone has to pay for all that mobile data.

From the perspective of current giants, there are pluses and minuses. Facebook placed an early bet on Oculus, which might win VR but not address the larger AR market. Google learned from Glass, and had the foresight to invest in Magic Leap. HoloLens could allow Microsoft to regain the glory it lost to Apple in the last decade. And Apple? We would love to see an augmented “One more thing…”