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.

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.

Facebook Pushes Further Into AR

In an interview with Recode following Facebook’s F8 conference, Mark Zuckerberg laid out his rationale for Facebook’s big bet on augmented reality:

“Think about how many of the things you use [that] don’t actually need to be physical. You want to play a board game? You snap your fingers, and here’s the board game. You want to watch TV? You don’t need a physical hardware TV, you buy a one-dollar app ‘TV’ and put it on the wall.” – Mark Zuckerberg

To push towards this future – and in an attempt to own the underlying technology – Facebook launched its “Camera Effects Platform,” an open platform for developers to build AR-features and lenses for the Facebook in-app camera. Zuckerberg also confirmed to Recode that Facebook is building “AR hardware” and shared his thoughts on the future of AR and VR; among them:

  • There will be demand for separate VR and AR products in the future.
  • The technology doesn’t yet exist to create the AR glasses that industry leaders are envisioning.
  • Building VR products today will help build the AR products of the future.
  • AR will be a bigger business than VR.

Our take: AR will enhance the smartphone, then replace it. It’s consensus that AR will be bigger than VR over at least the next 10 years — and we agree. AR will enhance the smartphone, then replace it in that time frame. But if you look out further than that, perhaps 30+ years, the immersiveness of VR has the potential to be so good that it rivals base reality. This will require advances in both artificial intelligence and neuroscience, not just digital enhancement. If VR can create alternate worlds as rich as the real one, we think the opportunity would surpass anything humans have created to date.

Facebook gets it, and they are investing accordingly. In fact, the biggest players in the space will collectively spend over $51B on R&D in 2017, of which we estimate $4B will be AR-related spend.

From Google’s work on Glass (2013) and Tango (2014) to Microsoft’s investment in Hololens to Apple’s uncharacteristically vocal pursuit of AR as a core technology, the biggest players are determined not to miss out on the next dominant computing platform and the AR technology underneath it. In fact, in our assessment, Facebook lags behind other incumbents including Google, Apple and Microsoft. But they’ve got a foothold in social and, today, AR is expanding through social – the most forward-thinking AR application is Snapchat. Everyone else is following fast and F8 is a clear indicator that Facebook is doubling down on AR in the race to own the OS of the future.

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.

Don’t Miss the Importance of Diminished Reality

Written by guest author Lindsay Boyajian, CMO at Augment 

Pairing augmented reality with diminished reality provides a superior visual experience and could help grow the AR market.

Augmented reality, virtual reality and mixed reality are three realities that exist on the reality-virtuality continuum—and they are probably the three terms you have heard again and again.  However, there is a fourth reality you probably haven’t heard of—diminished reality.

Diminished reality can be thought of as the opposite of augmented reality. Augmented reality (AR) enhances our reality by overlaying digital elements like 3D models on the physical world.  Contrary to that, diminished reality (DR) diminishes parts of the physical world. It removes unwanted objects in our view.
Karen E. Hamilton (CC BY-NC-SA 3.0)

How does diminished reality enhance augmented reality?

Although DR doesn’t lie on the virtuality continuum, it can be used in combination with AR for a greater visual impact.

Let’s take the example of interior design. AR lends itself well to interior design because it allows us to try different pieces of furniture in our homes. Thanks to AR, we can see exactly how a new chair would fit and complement our existing space.

However, often the space we are trying to redesign is already crowded with old furniture. Placing the new chair in AR on top of the old chair doesn’t serve much value. You can’t appreciate it. If you first use DR to hide the old chair from view, then use AR to place the chair in the seemingly empty space, the visual experience is much improved and valuable for the end user.

 

This combination of augmented and diminished reality is referred to as mediated reality. The term mediated reality is attributed to MIT researcher Steven Mann in 1994. Mediated reality alters our perception of reality by adding and removing information through a device such as a headset or smartphone in real time.

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Don’t Write Microsoft Off

Typically, when we talk about the future of AR and VR, the first companies that come to mind are Apple, Google, Facebook, and Snapchat; however, Microsoft does not receive enough credit for the strong positioning it has already built.

As shown in our Jump Ball for the Next OS chart, Microsoft sits in third place behind Google and Apple in terms of elements necessary for a complete AR OS.

In the past week, Microsoft has made three important announcements that show the advances it’s making in order to better position itself as a key platform for VR and AR the future.

Project Scorpio. Last week, Microsoft unveiled its final Xbox Project Scorpio specifications through Digital Foundry. Project Scorpio is a mid-generation console with 4K output and VR gaming capabilities. Gaming is one of the first areas where VR will have a big impact, and Microsoft is poised to benefit from it.

Of all of the companies vying to own VR and AR platforms of the future, Microsoft is the only one to have a gaming console. In January, Microsoft shared that it had reached 55 million monthly active users on its Xbox Live platform, up 15% from the previous year. The Project Scorpio console, set to be released this fall, is powerful enough to display VR content. Microsoft’s main competition in console gaming is Sony, who released an early VR system in November of 2016. Sony has since announced that Playstation VR has sold over 915,000 units as of late February. We view Playstation VR as a step behind the HTC Vive and Oculus Rift, but ahead of smartphone-powered experiences.

While Microsoft doesn’t produce any VR hardware, it sells the Oculus Rift headset in its stores and has included the Xbox controller in Oculus Rift bundles. Oculus seems like the logical choice for a VR headset partner for Project Scorpio, but Microsoft shared that the next console will also support the Mixed Reality Headsets from Microsoft in 2018, which include headsets manufactured by Lenovo, Dell, Acer, and HP.

Mixed Reality OS Support. Microsoft recently announced that its latest Windows 10 update, the Creator’s Update, will start rolling out to users beginning on April 11th. This update will include support for Mixed Reality (MR) headsets. While this doesn’t mean much to consumers now since MR headsets won’t be available until the holiday season, developers that are soon to receive their MR development kits will be able to work on creating content and applications now. Providing developers with this early window should lead to high-quality MR content being available on day one of the MR headset releases.

It’s also important to remember that Microsoft is leading the way when it comes to MR hardware, with the Hololens. While there are improvements that can be made, Microsoft has a commanding lead in the category. Its updates to Windows 10 will further benefit Hololens developers as well. We continue to view mixed reality as true augmented reality.

Sprinkles. Microsoft has also released a photo application for iOS called Sprinkles, which is a foray into AR on a mobile platform. Sprinkles gives users photo editing tools, allowing them to add filters, stickers, and emojis. In addition, it utilizes facial recognition to position stickers and recommend celebrity look-a-likes. This app is similar to Apple’s recently released Clips.

While Microsoft clearly missed an opportunity in the shift to the mobile computing paradigm, it seems heavily invested in positioning itself as a strong company in the future computing paradigm based on its investments in AR and VR.

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.