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The sudden success of "Poké mon Go" is introducing consumers to augmented reality, a technology that blends the digital and physical worlds where many in Silicon Valley are placing big bets.

Augmented reality displays digital images on a view of the real world, such as Poké mon characters on a city sidewalk. "Poké mon Go" shows digital characters on a smartphone screen, overlaid on the phone's view of its surroundings.

Even before "Poké mon Go," many consumers tried a type of augmented reality via Snapchat Inc.'s filters, which overlay masks or dog noses onto users' faces in their smartphone screens as they take snapshots of themselves.

Others are testing the technology. Microsoft Corp. is building an augmented-reality headset called HoloLens. Google parent Alphabet Inc.'s Project Tango adds sensors and software to smartphones to make them better augmented-reality devices. Facebook Inc. Chief Executive Mark Zuckerberg has said "immersive augmented reality will become a part of daily life for billions of people."

The success of "Poké mon Go"—it has been the most-downloaded mobile app since its launch last week—is exciting other backers of the technology.

"We love what they're doing. We think it is a gateway to the whole new future we're building," Rony Abovitz, chief executive of augmented-reality startup Magic Leap Inc., said at a Fortune conference on Tuesday. Google and others have invested nearly $1.4 billion in Magic Leap, which has more than 600 employees building a headset that projects images into users' eyes so the digital world appears to interact with real life.

With Magic Leap's headset, "I would see Poké mon just like I see real people—not looking through a screen," Mr. Abovitz said. "You could have small Poké mon running around, hiding behind chairs…It would be pretty epic."

Early versions of augmented reality, such as Google's Glass headset, place a partly transparent screen in a user's field of view. Smartphone versions of augmented reality show digital objects in the phone's view of the real world. Several tech companies are working toward head-worn devices that could display animations, calendar reminders and emails alongside real objects, a more advanced version of the technology many call mixed reality.

For those uses, the devices must understand the physical world around them to seamlessly integrate the digital objects and provide users with relevant information about their surroundings, such as showing reviews when users look at a restaurant.

That next level of augmented reality faces major technical hurdles. The technology requires multiple sensors and substantial computing power to constantly interpret its surroundings. That has made early versions of head-worn devices hot, heavy, inefficient and expensive. Moreover, many people are reluctant to wear computers on their faces.

Wider adoption of augmented reality may start with businesses. Microsoft is working with Volvo AB to develop a virtual showroom where prospective buyers can select features and colors of prospective cars. Microsoft also is working with Trimble Navigation Ltd. to feed 3-D building models into an application that architects and engineers can view with a HoloLens, and developing a version of its Skype video-messaging application to let co-workers collaborate on product designs sharing holographic images. The company envisions home-repair professionals helping HoloLens-wearing homeowners remotely fix simple plumbing or wiring problems.

Other startups, such as Atheer Inc. and Osterhout Design Group, are selling augmented-reality headsets for use in health care or engineering, such as overlaying a repair manual in workers' field of view.

Microsoft this spring began selling a developer version of HoloLens for $3,000 but it hasn't offered a timeline for a consumer launch. Osterhout's headset sells for $2,750, Atheer's for $4,000.

The craze around "Poké mon Go" also could spark more investment in augmented reality, said Mike Rothenberg, whose firm Rothenberg Ventures already has several such investments.

"It will move everyone forward a bit," Mr. Rothenberg said. He compared the game's popularity to Facebook's 2014 acquisition of Oculus VR Inc. for $2 billion, which triggered a wave of funding for virtual-reality startups.

Other investors said the impact of the game may be more limited, because it is tied to a well-known brand that appeals both to children and to young adults who grew up with the characters.

First Round Capital Partner Chris Fralic pointed out that the project is based on "world class" intellectual property. "I think that is pretty unique," he said of the game's success.

Meta Co., a startup building an augmented-reality headset, is selling a developer kit for $950 but isn't sure when it can release a consumer version. Ryan Pamplin, the company's vice president of partnerships, said "Poké mon Go" is "creating a lust for (augmented reality) that hasn't existed outside some niches in the U.S."

Will the company accelerate its product's launch as a result? "I don't know," he said. "Everyone's outside playing 'Poké mon Go.'"

Write to Jack Nicas at jack.nicas@wsj.com, Cat Zakrzewski at cat.zakrzewski@wsj.com and Jay Greene at Jay.Greene@wsj.com

(END) Dow Jones Newswires

July 13, 2016 08:25 ET (12:25 GMT)

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