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.

Face Off: Siri vs. Google Assistant vs. Cortana

The importance of voice assistants in the screenless future is hard to overestimate. We see speech-driven user interfaces as a key component of the next computing paradigm, so it’s helpful to understand empirically where each platform stands today. In February, we compared Amazon Echo and Google Home to see which assistant was winning the race to become the centerpiece of the home. Google Home won that battle, but it was close. For our next digital assistant face off, we tested the three most prevalent digital assistants available for mobile devices: Siri, Google Assistant, and Cortana. This time, Google Assistant came out on top.

Methodology

We asked the same 800 queries to each assistant that we asked Amazon Echo and Google Home. We graded the queries on two metrics: First, did the assistant correctly understand the query? Second, did the assistant answer the query correctly?

The queries break down into five categories:

  • Local – Where is the nearest McDonald’s?
  • Commerce – Where can I buy more printer paper?
  • Navigation – How do I get to REI from here?
  • Information – What is Apple’s stock price?
  • Command – Remind me to call Mom at 2pm today.

Results

Google Assistant, the clear winner, understood 99.9% of the queries we asked and answered 74.8% of them correctly. Siri understood 94.4% of the queries we asked and answered 66.1% of them correctly. Finally, Cortana understood 97.3% of the queries we asked and answered 48.8% of them correctly.

By category, Google’s lead in navigation and information is demonstrable, but there’ more parity between Siri and Google Assistant in local, commerce and command related queries. Cortana lagged both Siri and Google Assistant in all categories, narrowly coming in second only in information.

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Google Earnings Reiterates AI, VR, AR Ambitions

Google CEO Sundar Pichai used tonight’s Q1 call to double-down on his “AI-first” mantra.  Several areas were highlighted, where Google will lead and define its mission to organize the world’s information with machine learning.  Beyond AI initiatives to enhance core consumer products like search, mail, maps, and Google Play, increased machine learning investment was highlighted in at least two segments of Google’s ad model.  These include ‘Smart Bidding’ where machines predict in real-time how an ad should perform in front of a particular target and adjust advertiser bids to maximize ROI.  Separately, in Google’s highly profitable app install ad business, namely Universal App Campaigns, machine learning is being used to best promote developer apps across Google properties including Search, YouTube, and the Display Network.

Management also made a couple of callouts on VR.  Google’s VR platform Daydream is seeing more than half its usage consuming video, with YouTube VR being its #1 app by time spent.  At a recent event, we heard from Google that people are using the Daydream headset to “hold the phone” for them as they watch video laying down.  While not an exciting VR use case, we heard that users are spending multiple hours in VR this way, so it is getting users comfortable with the experience.  VR investment near-term still appears focused on mainstream products like Daydream and accompanied VR produced content such as YouTube VR, Google Earth VR, and Tilt Brush.  We suspect Google is also experimenting with advanced VR and AR hardware, although no mention was made on the earnings call.  We continue to believe Google is the best positioned player to provide the AR operating system of the future, and the company’s leadership position in machine learning and AI only reinforces that view.

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.

Can Anyone Catch Alexa?

Amazon’s third-party developer strategy has Alexa looking like the Gingerbread Man of digital assistants. After taking over CES in January with multiple Alexa-enable devices, there’s been little pause in Alexa skills and device-enabled growth. As of this writing, we count more than 12,000 Alexa skills (apps) and roughly 100 manufacturers with integrated Alexa IP across multiple smart home categories. And yesterday, Amazon opened its Echo voice processing IP to third party developers, extending Alexa’s lead in smart devices. Given our belief that natural language processing is one of a few core technologies that will enable the screen-less future of computing, we think it’s important to track the pace of the key players in the field.

Source: Amazon

Skills growth impressive, but getting the basics right remains the key for scale.

One measure of Alexa’s increasing utility is the growth in skills that can be downloaded to Echo devices. In just the last 3 months, nearly 5,000 skills have been added to Alexa’s repertoire, which now tops 12,000. Roughly a third of Alexa’s skills are knowledge-based – from education apps like the Old Farmer’s Almanac to trivia categories like Lesser Known Star Wars Facts. Other growth categories include health and fitness with skills like answers to common medical questions and workout suggestions. In addition, nearly 100 smart home skills are available today, an important catalyst for scaling the Alexa-enabled device ecosystem. It’s too early to tell how much scalable utility these skills bring to Alexa usage, particularly the nearly 500 knowledge/trivia skills categories. There is a fun-factor with a lot of these skills and voice access is seamless relative to paging through dozens of apps on your phone. However, Alexa needs to get better at answering basic information-related queries, which we believe will produce sustained utility and growth in Alexa-enabled devices. In a recent test, we found the Echo answered only 41% of information queries correctly.

We found the Echo answered only 41% of information queries correctly.

Device integration pacing well ahead of Google Home.

We count close to 100 manufacturers across several categories that are compatible with Alexa IP today. Smart home coverage, perhaps the most seamless hands free utility Alexa offers, continues to grow – from lighting to locks to thermostat control. Included on this list is Google’s own Nest device, a collaboration that began early last year; however, the relationship has been anything but seamless as a preponderance of Nest skill reviews suggest. We wonder if after a year of collaboration, whether Alexa and Google will ever nest together. Contrasting Echo’s ~100 smart home partners with Google Home, we find a much shorter list. Only around two dozen device manufacturers are integrated with Google’s Assistant IP. Amazon has taken advantage of Echo’s head start on Google Home by pushing integration across many manufacturers and platforms. Google Home will likely follow, but has a long road ahead.

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AR Is Going to Be Apple’s Next Hit

Apple is increasingly focused on being a dominant player in augmented reality (AR), and for good reason: The future of the company depends on it.

AR includes any technology that uses digital information to seamlessly enhance the real world. Over the next 10 years, AR will replace the screen as we know it, including those of smartphones and tablets. Apple generated 69% of its revenue from the iPhone and 7% from the iPad last quarter; additionally, the company takes a cut of all software sold on those platforms. If Apple doesn’t find a way to dominate AR, it could see three-quarters or more of its business disappear as new AR-focused hardware supplants the smartphone as our interface to the world.

The good news for Apple is that it’s culturally built to make the move from the smartphones of today to the AR-optimized smartphones and wearables of the future.

AR is delivered through our smartphones, and many of us use the technology without even thinking about it. For example, Snapchat’s lenses allow users to change what their face looks like in messages, adding dog ears or an aquarium background. Another example is the Pokemon Go craze of 2016; gamers visited real-world locations to catch characters in the game.

These early applications may seem gimmicky, but the AR of the future will enable far more utility. Use cases like dynamic visual how-to manuals for hands-on work, facial recognition to help recall details about a relationship with someone you’re with, earphones that filter out background noise so you can only hear your conversation in a noisy environment, and clothing that adjusts its temperature based on the weather will make us wonder how we ever lived without true AR.

Google, Microsoft, and Facebook are also competing in the AR space. While Google holds an advantage in building up a data base to use with the technology, Apple holds a trump card over all the others: design.

To enable persistent, seamless augmentation of the real world, compelling AR will require the adoption of wearables. The most talked about device for AR delivery is some form of connected glasses. While glasses will likely be an enabler of AR beyond the smartphone, audio devices, watches, and even connected clothing also belong in the AR category. As with all clothing and accessories, consumers will require wearable AR devices to look fashionable, unobtrusive, and not obviously a computer (Google Glass failed at all of these). Therefore, design, not function, is the most important factor for AR to make the leap from a smartphone feature to the computing interface of the future.

No one makes more fashionable electronics than Apple. Neither Google nor Microsoft has the core design competency to create compelling consumer product designs for wearables, which means they will most likely be relegated to primarily providing software. That puts Apple in the familiar position of integrating premium hardware and software.

We’ve seen this game before. Microsoft dominates PC market share, with Apple a distant second. Google’s Android dominates smartphone market share, with Apple again a distant second. In both cases, Apple offers the best user experience by controlling both the hardware and software, which allows the company to capture an outsized portion of industry profits relative to their total unit share.

So what’s next for Apple in AR? True to their typical pattern of innovation, Apple is taking baby steps. First, AirPods, the company’s new wireless earphones, represent an early AR product that enables a constant connection with the voice-activated personal assistant Siri. The AirPods show Apple’s design advantage and remain limited in supply given the high demand for them. Second, Apple announced its Clips video app last week, which lets users add effects to video messages like they can with Snapchat’s lenses. Third, the next iPhone, coming this fall, is rumored to include a 3D mapping chip that would enable Apple and third-party developers to interact with a user’s environment in new ways—Apple’s first AR-optimized smartphone. The AR-optimized smartphone bridges the gap from the smartphones of today to the AR wearables of tomorrow, extending the runway of the smartphone as the predominant AR device for the next three to five years.

Beyond these baby steps, Apple has been uncharacteristically vocal about its interest in AR. In February, CEO Tim Cook said he views AR as “a big idea like the smartphone.” However, Cook also admitted, “AR is going to take a while because there are some really hard technology challenges there.” The main challenges include miniaturization of the components necessary to deliver a high-quality experience and battery capacity. Apple is probably already working on a wearable glasses product, but 2019 would likely be the earliest we see Apple Glasses for one reason: user experience. Apple will not release a product that is half-baked and provides a poor user experience. A two-year wait for Apple Glasses may be disappointing, but Apple has shown that it is comfortable entering a market well after its competitors so long as it offers a better product.

Steve Jobs killed off Apple products that weren’t exceptional because he knew that if he didn’t do it, someone else would. That guidance remains deeply ingrained in the company’s DNA. Apple’s AR dilemma isn’t whether or not to kill the iPhone, but how long it will take the company to viably do so. It’ll be worth the wait.

This note was originally published on Fortune.com

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.