• Alphabet is betting on Virtual and Augmented Reality, and Google Glass AR viewer has been revived as Project Aura this year.
• Other VR/AR projects include the low cost VR viewer Cardboard, the Project Soli interface technology, and a strategic investment in the secretive Florida AR startup Magic Leap.
• Currently 89% of Alphabet's revenue comes from advertising.
• It seems likely that Alphabet will be able to carry its very successful business model into AR and become a leader in virtual advertising.

In September Amigobulls reported that Alphabet Inc-C (NASDAQ:GOOG) is accelerating its efforts to develop wearable technology and reviving Google Glass as Project Aura. Now Alphabet, the new holding company that became Google's (GOOGL) parent company after the recent restructuring, is continuing to bet on visionary futurist projects in a wide range of sectors including including Virtual Reality (VR) and Augmented Reality (AR).

VR technology exploits headsets and other interface devices to place the user in a virtual world with full 360-degree visual and auditory immersion, which permits creating uniquely compelling video-games, VR movies, and next generation theme park experiences. In contrast, AR technology augments the user's perception of the real world with virtual annotations, such as street maps and directions, through interface devices like Google Glass.

Some VR and AR initiatives were presented at the annual Google I/O event in June. Google Cardboard is a simple, low-cost head mounted VR viewer, powered by any smartphone, with stereoscopic display and on-board accelerometer. The expected renaissance of the VR market, triggered by high-end devices like the Oculus Rift, could create a niche for low-cost viewers based on Cardboard technology as well. But Alphabet's ambition in the VR and AR sectors aims much higher.

Project Soli, a futuristic "moonshot" project, is developing a radar sensor on-a-chip for precise detection of hand and finger motion, with associated interpretation software. Once fully developed, the project, described by Business Insider as “straight out of a science fiction movie,” could spearhead a new user-interface paradigm based on free hand and finger motion in 3D.

Perhaps the most ambitious of Alphabet's projects in VR and AR is the company's investment in Magic Leap, a secretive Florida AR startup that is developing a new VR/AR headset and related technologies. The company raised $542 million in October 2014 and $827 million last week. Google led the first funding round, and Google's CEO Sundar Pichai sits on the Magic Leap board.

"Magic Leap is bringing physics, biology, code, and design together to build a system that is going to blow doors open for people who create things," said science fiction writer Neal Stephenson, considered as one of the founding fathers of VR, who was hired by Magic Leap as Chief Futurist. "Anyone who reads, watches, studies, or plays on screens today is going to enjoy and benefit from the results. I've never seen or heard of a company that brings scientists, engineers, and artists together in the way that Magic Leap is doing and I'm excited to be part of it."

TechCrunch notes that the VR/AR push is not a visionary moonshot with yet unclear aims, but fits perfectly in Alphabet's existing business strategy. 89 percent per cent of Alphabet's revenue comes from advertising. The company "might like you to think of it as an alphabetic spectrum of moonshot technology bets - whether that’s hacking death, accelerating life science research, building autonomous cars or making terrifying robots - but at base Google’s business is all about profiling people for ad delivery. So its business model is all about your eyeballs."

In fact, life-like virtual ads could represent the future of advertising. In a world where always-on connected users spend more and more time wearing AR interface devices like Google Glass and live in a "mixed reality" that seamlessly blends the real and the virtual, there will be countless opportunities to deliver visually compelling ads that really catch the attention of the viewers.

Some companies will exaggerate with overly invasive and annoying virtual ads, but Google is skilled in minimally invasive forms of advertising, and its Artificial Intelligence (AI) powered techniques to profile consumers and deliver personalized ads that matter to them is second to none. It seems likely, therefore, that Alphabet will be able to carry its very successful business model into AR and become a leader in virtual advertising, with a positive impact on its stock in the mid-term.