Meta invests in Ray-Ban maker but what's the plan for payments?
Augmented reality, China's Five Little Dragons, and the new paradigm
Disclaimer: Views expressed here are my own and do not represent any other organisation.
Before this week's long-read I wanted to highlight a new tab in the navigation of this Substack. The new tab is Essentials, and it features ten of the most popular, or most impactful posts on this Substack so far. These posts are outside of the paywall, and every few months I’ll rotate some of the posts listed under essentials. Feel free to read my Essentials collection, featuring a mix of posts from the past two years. Even with any older posts any feedback or comments are much appreciated.
Meta makes its move
Finally, it happened. Meta has bought a 3% stake in Ray-Ban's parent company, EssilorLuxottica. This transaction had been mentioned as a possibility by the Financial Times almost a year ago. The Verge followed on from the FT's report by hinting that Meta was looking to buy a stake of approximately 5%. As it turned out, Meta’s initial stake is 3%, but may rise to 5%. According to Bloomberg:
Facebook parent Meta acquired just under 3% of Ray-Ban maker EssilorLuxottica, a stake worth around €3 billion ($3.5 billion) at the current market price, said the people, who asked not to be identified because deliberations are private. Menlo Park, California-based Meta is considering further investment that could build the stake to around 5% over time, the people added, though those plans could still change.
The investment is part of the long-term partnership that the two companies announced last year. The announcement spoke of wanting to “write history of wearables together,” and Mark Zuckerberg commented “We have the opportunity to turn glasses into the next major technology platform, and make it fashionable in the process,”. The momentum is clear. Smart glasses are gaining in popularity and new collaborations are on the way.
In addition to the Ray-Ban Meta Glasses (to give them their official name), a collaboration with Oakley was recently announced. The product will be called the Oakley Meta HSTN and comes with essentially the same functionality as the most recent Ray-Ban smart glasses. Pre-orders for the Oakley Meta HSTN start tomorrow, Friday, July 11th, in some markets.
The Oakley smart glasses are positioned for athletes. The new line forms part of Meta’s wearables strategy to sell 10 million pairs of what it calls “AI glasses” each year, starting from 2026. Such a sales target will be a big leap, given that only 2 million pairs have been sold to date.
However, the product line has garnered good reviews, with the second generation Meta Ray-Bans, launched in late 2023, seen as a substantial improvement over the first effort. A third generation of Meta Ray-Bans is expected towards the end of this year, and a collaboration with Prada is also in the works. The Prada collaboration is made possible by EssilorLuxottica’s licensing agreement to manufacture Prada eyewear, which was recently renewed.
Meanwhile in China
In the West, Augmented Reality (AR) glasses are, at this stage, dominated by Meta’s RayBans. Google have recently demoed their Android XR smart glasses, but they’ve not yet launched. While the Apple Vision Pro was released last year, this is not AR but MR (Mixed Reality). It’s mainly intended for use at home for short periods, and not as a fashion accessory like a pair of Ray-Bans. However, Apple is reportedly working on Ray-Ban-like smart glasses, but we won’t see them for another year or so.
On the other side of the world, in China, as ever, there’s a lot of technical innovation happening, including in the wearables space. The China Talk newsletter recently featured a fascinating piece on this topic.
The five leading companies operating in this area have become known as the Five Little Dragons of the AR industry. They are XREAL (优奈柯恩), RayNeo (雷鸟创新), Rokid (灵伴科技), INMO (影目科技), and the Xi-endorsed Meizu (星纪魅族). The China Talk post goes into more detail on each of these companies, and it’s well worth reading to gain more insight into the specific strengths and focus of these businesses.
Recently, two of the Five Little Dragons have made interesting moves in the payments space. Meizu, with their StarV Snap smart glasses, have partnered with Alipay+ for payments. The first transaction was completed in Hong Kong, but the solution will also launch in other markets where the Alipay+ wallet is available. Payment involves scanning a QR code with the smart glasses and then confirming the payment amount via voice recognition.
In mainland China, Alipay’s mobile wallet is one of the two most-common means of payment (alongside WeChat Pay, another mobile wallet). Almost all businesses feature an Alipay QR code at the point of sale that users scan to pay. Rokid Glasses, similar to the Meizu example above, also feature a combination of scanning a QR code alongside voice recognition as the means to enable and authenticate payment. Over 250,000 Rokid Glasses have been pre-ordered so far with deliveries to begin imminently.
Given China’s willingness to adopt new form factors, it will be interesting to see how successful these collaborations turn out to be. Yet, one distinguishing factor between Meta’s Ray-Bans and the Five Little Dragons is that Meta’s collaborations with EssilorLuxottica are actual sunglasses. The Chinese brands are AR glasses first and foremost. Some do offer tinted or shaded lenses, and in some cases, basic UV protection, but unlike Ray-Bans they are not designed primarily for sun protection.
Meta’s payments opportunity
Almost a year ago, on this Substack, I wrote about Meta’s underdeveloped potential to grow in the payments space. I asked whether the company was well-placed to develop a payments wallet and payments ecosystem akin to Apple Pay. This consideration was due to Meta’s unique position in the Western tech ecosystem.
From purchasing Oculus in 2014 to the EssilorLuxottica investment, Meta has been growing its presence in the hardware domain. The demo of Meta’s Orion prototype at the end of last year shows how powerful AR glasses will become. The challenge is cost of production. For Orion, it’s estimated to be in the range of $ 10,000.
The most expensive of the Chinese AR glasses sells for approximately $799, so $1,000 is potentially the upper price range for AR glasses. Additionally, on the software side, whatever you think about their methods, Meta has a strong position. As I explained, “most people in the world have an account on at least one of Meta’s flagship products”, whether that’s Facebook, WhatsApp, or Instagram - in many cases people have an account on all three.
My Social Media Habits
Incidentally, the only Meta app I’m using regularly these days is WhatsApp, it's essential for communication with friends and family. Many millions of people in Europe and other parts of the world have been using WhatsApp daily since before Meta acquired the company in 2014. But it’s getting worse. Now we have to put up with Meta AI in WhatsApp, Avatars, and other features that, I’m pretty sure, no one asked for.
I got rid of Facebook. Now and again, I’ll dip into Instagram, but the algorithmic-isation of my feed for street interviews, dog videos, and the push of short-form videos AKA Reels, has made the app no longer enjoyable. (Meta’s share price strongly disagrees with me though.)
Over time Meta has integrated and connected its apps. You can now share your status and stories to varying extents across Meta’s three main apps. Meta implicitly prefers its users to have a single identity across all its apps. The reason for this is to make it easier to track user behaviour and deliver more personalised ads. The ability to maintain a distinctive identity, say on Instagram versus Facebook, as many people initially did, has now been lost.
Yet the cross-platform approach puts Meta in a unique position. They are one of the few companies to have such a widely-used software stack, plus a small but growing hardware set. These factors could be tied together into a unique payments proposition.
From a business perspective, Apple Pay has shown the way for big tech in payments.
While Apple does not break out Apple Pay revenue directly, previous estimates suggest that Apple Pay accounts for approximately 1% of Apple’s total revenue. This may sound small, but 1% of Apple’s revenue is still in the mid-single-digit billions of dollars. Meta’s revenue is highly concentrated in ads, with around 97% of revenue linked to ads. Any move towards non-ad revenue will help diversify Meta’s income, which is also one of the reasons they are so keen on growing their hardware line.
That said, there are some challenges and considerations to bear in mind:
China and other markets in Asia have an existing network of QR codes that users are used to using. In Western markets, the predominance of card payments means that QR codes are rarely seen. Without a QR code network, it’s hard to integrate a system for smart glasses to pay at the Point of Sale (POS).
Apple Vision Pro features Optic ID, which utilises iris scanning for payment authentication (instead of Face ID), demonstrating that authentication can be completed within a headset without removing the device. However such technology is bulky and expensive (Apple Vision Pro costs $3,500). When similar technology gets small enough to fit into smart glasses, this would be ideal for e-commerce payments. But we are a long way from this.
Meta’s previous attempt at payments (Diem/Libra) undoubtedly failed. Regulators were unsupportive. Despite early backing from the likes of Visa, Mastercard, and PayPal, the project never really took off. Meta may prefer to steer away from payments for now, given the time, effort, and regulatory noise that Diem/Libra generated.
While Meta has a strong consumer software stack and a small but growing hardware capability, some products, such as the Meta Quest, haven’t taken off as expected. My Meta Quest 3 has been gathering dust for some time. Apple Pay succeeded because consumers take their phones everywhere. Until Meta has a device with similar ubiquity, their path into payments may be limited - at least in the current paradigm.
AI and stablecoins as the preferred path?
Yet despite Meta having the potential to bring together a payments ecosystem across their apps and hardware, so far this doesn’t seem to be on the agenda. AI is a much greater focus. In recent days, it emerged that Meta has offered packages of more than $100 million to attract the best AI talent, including a reported $200 million package for Ruoming Pang from Apple.
In addition to Meta’s heavy focus on AI, the company has reportedly been exploring the use of stablecoins for cross-border payments. With reference to Meta’s previous foray into payments with Diem/Libra, a letter jointly authored by U.S. Senators Elizabeth Warren and Richard Blumenthal - key members of the Senate Banking Committee - recently addressed Meta CEO, Mark Zuckerberg:
Meta’s pursuit of a stablecoin project raises serious concerns. The company tried to issue its own private currency in 2019 — as part of the so-called Libra stablecoin project — and was met with overwhelming bipartisan and international opposition. If Meta controlled its own stablecoin, the company could further pry into consumers’ transactions and commercial activity. The massive amounts of consumer data it would ingest could help Meta fuel surveillance pricing schemes on its platform, more intrusive targeted advertising, or otherwise help the company monetize sensitive private information through sales to third party data brokers.
This letter highlights the regulatory challenges that Meta faces when getting more into payments. But at the same time, the regulatory environment is more sanguine than it was back when Meta tried to launch Diem/Libra. This Trump administration is more pro-crypto than anything that came before, and there are other tailwinds. The GENIUS Act recently passed in the Senate, and companies such as PayPal and Stripe have successfully launched stablecoin products.
If Meta does launch a stablecoin offering, it would be easier today than it was some years back. But Elizabeth Warren is warning Meta not to repeat the same mistakes as before. Any new stablecoin offering should be built on open infrastructure, such as Solana, to alleviate privacy concerns. Additionally, zero-knowledge proofs (ZKPs) can verify payments without revealing transaction details. There has to be a limit to data collection across apps, devices, and payments.
As technology progresses, Meta's payments potential will remain.
With rapid advances in agentic payments, we could, in the next decade, be in a world where Meta can realise its potential via:
AI-native payments, for instance, "Hey Meta, pay for this coffee", using voice to authenticate.
Stablecoin infrastructure for payments across platforms, across borders, and to creators' wallets.
A solution that doesn't require QR codes and functions across all devices.
This would sidestep the hardware adoption challenge entirely. Unlike Apple Pay, which requires Apple hardware, stablecoin payments can work across any device. Pair this with a wider range of Meta AR devices, alongside AI and voice recognition, for a glimpse of the future.
Last year, I asked the question “when can I pay with my RayBans?”. A year later, the answer is still “not yet,” but one day, Ray-Bans and other related AR form factors will be open for payments.
If you enjoyed reading this post, you can connect with me on LinkedIn, X, and BlueSky.
PS. I’m currently looking for new opportunities in fintech and payments, such as consulting, writing, and advising. Message me for a conversation.
Further Reading
I am personally quite bullish on meta's glasses and the hardest Oakley launch is exciting.
I think the current glasses by Meta are close to the IPhone launch of 2007 in defining and trying to lead the device category as the iPhone did for smartphones. Smartphones existed for quite a few years before that..
I think it is meta's best shot to jump the (1) browser and (2) LLM wars which are currently the increasing access to (1) internet and (2) intelligence, respectively for most of the world.
Through a smart 🕶️ meta can bypass both of those constraints to deliver direct access to intelligence through internet and it clearly seems to be acting with the right intent and bold moves that founder led business works do - 3B plus in Exilor Luxxotica and trust if Oakley for athletes to get the right attention and marketing, with Prada later on etc. (compare that to Google and Apple's corporate motion)..
The payments angle you expanded in is very interesting and completes and important piece for Meta to effectively become the pre-dominant consumer tech company of the future including hardware and payments in the Ai age and not just a social media network company.
Kind of trying to take Apple's place but with Google's ranking against Apple.. like ios vs. android..