What Google I/O Means for Immersive Computing

This week Google hosted it’s annual I/O developer conference. On day one, the company focused on their innovation in the artificial intelligence space. On day two, they talked about new VR products. Here’s our take on what the latest out of Mountain View means for the future of AI and VR.

  • Day One: AI. At Google I/O, Google lived up to it’s commitment to be an AI-first company. The company announced a slew of AI innovations focused on making their platform easier to use with more natural interfaces including voice (Google Assistant) and vision (Google Lens). For example, Google Assistant now includes support for calendars, phone communication, and proactive alerts, closing a gap we identified in our work on home assistants. Proactive alerts for voice-based assistants is a big step towards a screenless future. Google Home now flashes when it has relevant and timely information. For example: [*Google Home flashes*] “Traffic is heavier than usual. Leave in the next five minutes to be sure you make it to Anna’s soccer game on time.” In the screenless future, friction-less information push represents the future of search technology. Google is still in the best position to own the category given its organization of the world’s information. Google’s progress in the fields of computer vision (Google Lens) and cloud-based supercomputing/machine learning (Google Compute Engine) positions the company for success as we transition to more natural and immersive computing. It’s no coincidence that day one ended with a tease for a standalone VR headset, untethered to a PC or a smartphone. For more, see the 10 min condensed version of all the day one announcements here.
  • Day Two: VR. The big news on day two was the announcement of a standalone VR headset untethered to a PC or smartphone for computing power. Google is partnering with Qualcomm to build a reference headset and announced partnerships with HTC and Lenovo to bring standalone VR headsets to market later this year. Google also addressed a common knock on VR: given the full enclosure of VR headsets, VR experiences are hard to share with others. Google is making VR more social with shared rooms and voice chat as replacements for the text-based comments familiar to PC users. These advancements will help make VR mainstream faster. The transition from PC- and smartphone-driven VR to standalone VR will take 3-5 years (we don’t expect real traction – 1m units – until 2019), but the transition has clearly begun.

Bottom line: Google’s investments in AI and VR will accelerate the transition from computing on PCs and touchscreen devices into the future marked by immersive computing.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Snap’s Pain is AR’s Gain

On Wednesday, Snap reported earnings for the first time. Most investors saw Snap’s results as a disappointment, primarily because they missed on revenue and didn’t meet DAU expectations. Investors expected Snapchat to reach about 168 million DAUs, but they only reached 166 million DAUs. That’s bad news for Snap, but good news for the field of Augmented Reality.

Competition is Heating Up in AR. Facebook is going directly at Snapchat with Instagram Stories. Since launching in August 2016, Instagram Stories has eclipsed Snapchat in DAUs. Facebook and Instagram understand the importance of AR in the future, and made a commitment to invest heavily in the area.

At F8, Mark Zuckerberg threw down the gauntlet, making it very clear that AR was an important area for Facebook and Instagram in the future. Facebook has taken an open approach to its camera, giving developers a set of tools with which they can create apps that run on Facebook’s camera platform. By opening this up, Facebook will see more, and better AR content within its application. Snapchat will likely follow suit and open up its camera for other developers as well.

Ultimately, the increase in competition between Snapchat and Facebook will push AR forward faster.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Feedback Loup: Snapchat Announces Diminished Reality

On Tuesday, Snapchat rolled out new features to its platform, including an infinite snap timer, looped videos, emoji drawing, and a magic eraser. With the new snap timer and looped videos, recipients will now be able to see a picture or video until they choose to exit the snap. Once the recipient exits the snap, it is deleted. These are nominal improvements but they show the direction and emphasis of Snap’s R&D as well as it’s technical chops in the field of Augmented Reality.

We are most excited about the Magic Eraser feature, an example of Diminished Reality. The Magic Eraser allows users to remove objects from a photo, by scanning the surrounding colors and filling in over a selected area. Let’s play a quick game of Photo Hunt. How many changes do you see?

Read More

Facebook Planting A Flag In AR

Facebook reported Q1 earnings last night and briefly discussed its augmented reality and virtual reality efforts on the call. Following the trend of F8 last month, CEO Mark Zuckerberg spent more time talking about augmented reality than virtual reality. Zuckerberg reiterated that the camera is the focal point of near-term AR and made it sound like Facebook is unashamedly taking a page out of Snapchat’s playbook as a “camera company.” Facebook’s opening up of the camera to third-party developers is a play to establish the company as the platform where AR developers go to create applications, although we believe that Apple and Google’s ownership at the OS layer will enable the richest application development.

Zuckerberg also highlighted computer vision applications beyond the type of facial manipulation that is so popular in social now. He mentioned the ability of the camera in Facebook to recognize objects in the real world and then give the user the ability to interact with them to receive information or even make a purchase. Facebook, like Google and Apple, should have a real play in object recognition, but the interesting thing about this concept is that it expands the use cases of Facebook beyond communication.

The reason that filters and facial masks work well in social is because they’re meant to be shared. Using the camera within Facebook or Instagram to get product information or make purchases is a departure from the core use case of the platform. It will be interesting to see how Facebook’s vision differs from Google’s given their natural play on organizing the world’s information.

While we expect Facebook to keep investing in both platforms, the slight tone shift says that Facebook intends to be a major player in AR despite being late to the game.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Apple Results Reinforce Importance of AR

Apple reported Mar-17 quarterly results below Wall Street – and Loup Ventures’ – expectations. Judging by the mild negative reaction of the stock in after-market trading, it appears that investors are focused on the coming iPhone X product cycle and beyond. We agree with the market that a bet on shares of AAPL is a bet on the company’s ability to transition from their existing iPhone platform to an augmented reality-driven platform in the future. Underlying this transition is the Services business, which was solid in Mar-17 ($7.0B vs. our estimate of $7.1B) despite lower-than-expected iPhone units (50.8m units vs. our estimate of 54.8m). This shows Services revenue has resilience in the face of relatively soft iPhone growth.

The Beginning of the Transition to AR-Driven Computing. Tim Cook attributed the “pause” in iPhone sales to earlier and more prevalent rumors of future iPhones, but we see something bigger going on. Every 10-15 years we’ve seen a shift in the dominant computing platform: from the PC in the 80s, to the internet in the 90s, to the smartphone in the mid-2000s. And we think we are in the early stages of the next big shift – to augmented reality-driven computing. In short, wearables and other AR-devices will eventually replace the smartphone. Apple’s Mar-17 iPhone growth rates (-1% y/y in Mar-17), and growth rates in the global smartphone market, are slowing; however, we note that channel-adjusted iPhone growth was +1% y/y in Mar-17. Regardless, slowing iPhone growth will compel Apple to accelerate its development of wearables and AR-driven devices to ensure it’s position as a leader in the next dominant computing platform.

Slowing iPhone growth will compel Apple to accelerate its development of wearables and AR-driven devices.

Supply issues aside, the success of AirPods represents an early win for Apple in its exploration of wearables. We expect the company to continue its development of hardware products (e.g., Apple Watch and AirPods) along with the core technologies that will facilitate the emergence of AR-driven computing. We’ve outlined our thesis on why Apple is well positioned to win the jump ball for the next dominant computing platform. And the recent trend in iPhone growth rates only serves to emphasize the importance of this transition for Apple.

Read More