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Digital Assistants: The Tech We Love to Hate

Digital Assistants: The Tech We Love to Hate

Alexa – you can’t live with her, you can’t live without her. Digital assistants are some of the most widely used and convenient technologies, but also some of the most frustrating tech we use. We can confirm that Alexa is “everywhere” at CES, now being integrated into third-party hardware. And Siri, undoubtedly, is the most present digital assistant without an official CES presence. Google Assistant, the technology driving Google Home, has also expanded its reach with several new integrations announced at CES.

We’ve seen how hard it is to use CES as a gauge for the new technologies we’ll be using in five years, or even next year, so we collected responses from 355 consumers across the US about what technologies they find most frustrating today. Unprompted (in an open-ended response), here’s what they had to say:

Slow and glitchy devices (mainly phones), spotty internet connections, and the well-loathed automated phone systems lead the way. It’s not surprising that our phones frustrate us the most, given how much we use them. However, we were surprised to see that digital assistants (Siri, Alexa and Google Home) were the fourth most frustrating technology for consumers. More than twice as many people find Digital Assistants more frustrating than credit card chips and printers!

Maybe we shouldn’t be surprised. Digital assistance is a field that benefits proportionally more early in the AI learning curve, because the products learn from consumer use. Google and Amazon are more comfortable releasing early tech and even Apple chose to release Siri before she was perfect. The space is too interesting to sit out, and the early part of the learning curve is perhaps the most important time for AIs to start learning. But it is clear that the technology is not yet where it needs to be for the average tech consumer that expects products to just work. We love what we’re seeing in the natural language processing space and the advancements Apple, Amazon and Google are each making, but there’s clearly an opportunity for these systems to improve before people fire their assistants.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. 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.  

Amazon, Apple, Artificial Intelligence, Google
2 min. read Show less
Reinventing Oneself: Apple and Loup Ventures

Reinventing Oneself: Apple and Loup Ventures

We are believers that every 10-15 years people need to reinvent themselves. It’s a natural progression. As the world changes, we need to change with it. We believe the world is about to undergo a major change in how we interact and interface with machines. Because of this coming change, after many years as sell-side stock analysts, we are reinventing ourselves as venture capitalists.

The 10-15 year reinvention plan applies to companies too. During our time on the sell-side, we were most well known for our coverage of Apple. We started covering Apple in the early 2000s as it began its first reinvention from a computer company to a portable electronics and digital media company with the iPod. We are getting close to the 15 year mark of that reinvention, which suggests it may be time to think about the next reinvention. In the past we’ve written about Apple’s focus on its Services segment (App Store, iTunes, Apple Music, etc.), and that’s where it makes the most sense for the company to reinvent itself — as a world class digital services company.

Reinventing yourself is a careful balance. We think the best way to do it is to keep some of the best qualities you developed previously and use them to vault yourself into being best in breed at something completely new. Hardware is what Apple does best. We know that they have always viewed hardware and software as a cohesive unit. They combine to deliver a special experience that can’t be matched by only doing one or the other. Historically, the company’s services helped it sell hardware to new users and, probably more importantly, retain current hardware users. iTunes and the App Store are examples. But the company’s newer efforts in services, including Apple Music and an eventual TV streaming service, seem to be more about monetizing their large hardware user base. We expect Apple to eventually lower the price of the iPhone and reduce its gross margins in the next 3-5 years, which are about 40% today. This will trigger an expansion in the Apple hardware user base from 1 billion people today to what could be 1.5 billion in 5 years.  This larger user base will build a more profitable, predictable services business, with about 60% gross margins.  Apple may be under pressure in the near term as this transition starts, but the company will be rewarded long term.

There are many music streaming and TV streaming services, so Apple has to do them better by leveraging their platform ownership advantage. The careful balance here is making sure that they continue to innovate on the hardware side while becoming a great services company, and that is where the reinvention story gets truly interesting.

The iPhone is going to go away. Not next year and maybe not five years from now, but it’s unlikely we see an iPhone 20. At least it won’t be a thin sheet of aluminum and glass that you keep in your pocket. We think VR and AR will combine to replace all of the computer interfaces we use today, so its critical for Apple to innovate in those areas with hardware; however, more than any other digital media device in the past, services and content will sell VR and AR devices because they are all about the experiences they deliver. So the future for Apple will mean leading with great services supported by hardware instead of the other way around.

So, as venture capitalists, why do we care about Apple’s efforts to transition to a services company? Because we believe it means they will be investing heavily in improving its services offering. What we don’t expect them to do is buy a bunch of content businesses. Observers like to debate what major companies Apple should buy given their balance sheet. We’ve heard everything over the years. Netflix. Twitter. Time Warner. Snapchat. We don’t think any of those happen.

More likely? Apple buys a handful of emerging companies trying to build unique platforms. Companies that have a kernel of something special that Apple can put its significant resources behind to build into something even more amazing. That is Apple’s acquisition playbook. They did it with P.A. Semi to build better processors for the iPhone. They did it with Siri to build Siri. They did it with Authentec to build Touch ID. They used Beats, both the executive team and the technology, to build Apple Music. Aside from Beats, none of these deals exceeded $1 billion in value. We don’t think Apple is afraid to make a large acquisition, but we do think they are well aware that it will be harder to utilize and integrate a large acquisition as well as they do smaller ones.

In our reinvention, we will maintain the thing that we do best: research. As venture capitalists, we will keep sharing our tech industry thoughts with the world. We will keep talking about the companies we know best, including Apple, who also happen to be major players in our four investment themes: VR, AR, AI, and robotics. We will keep conducting surveys to figure out what average consumers think of our emerging themes and where hidden opportunities lie. Reinvention is scary, but it’s also exciting. It’s easy to stay in a place where you are comfortable, but being uncomfortable is how you reach new heights. We’re hungry and foolish.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. 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, Philosophy
4 min. read Show less
VR Excitement Index: 10.2

VR Excitement Index: 10.2

While we are big believers in virtual reality, along with many in the tech space, public perception of it is still a question mark. VR is far from mainstream with only a few million users globally today. We developed our VR Excitement Index to measure and track the average consumer’s interest in virtual reality. We asked over 500 US consumers about topics ranging from their interest level in various VR use cases to what’s held them back from trying VR. Then we distilled the data down to an index value that we will publish regularly. An index value of 100 suggests widespread usage of and peak excitement for VR; an index value of 0 suggests no public interest in VR.

So, what does a VR Excitement Index value of 10.2 mean? We think it quantifies consensus thinking that “VR is in its early stages”. We’re probably at the bottom of the first or top of the second inning. There’s a lot of game left to be played.

To that point only 1 in 10 US consumers have tried VR with a limited few trying more than one type of headset. Samsung’s Gear VR platform is the most widely used platform, which we view as surprising given that there are significantly more Google Cardboard units in the wild. The reason for the gap may be that Samsung, along with many US retailers and carriers, have made efforts over the past year to promote the VR as a must have gadget for Galaxy smartphone owners. By comparison, Google Cardboard is not as well-known as a consumer brand and, given most Google Cardboards are made out of cardboard instead of plastic, they might end up being recycled.

Access to VR headsets is the biggest limitation to consumer’s trying it. Of those who have not tried VR, 45% say that it’s because they don’t have access to a VR headset. Price isn’t a dominant concern – only 25% indicated that price is holding them back from trying VR. 36% of consumers say they simply aren’t interested in VR.  These consumers may be harder to convince longer term, but also are likely the typical tech late adopters and not core to the success of VR.

Breaking down interest by use case, we were surprised to see that gaming was not at the top of the list. Highest interest lies in entertainment (movies, television and other passive VR content), training and education, and gaming, in that order. Perhaps freely available content from YouTube and the New York Times’ NYTVR is driving user interest in entertainment. While interest in any single VR use case did not exceed a 6 on a 10 point rating scale in our survey, we expect this rating to rise as better content becomes mainstream. The first “blockbuster” VR movie would likely generate a significant increase in consumer interest.

Mild interest across the board for VR use cases isn’t all that surprising. We think the data underscores VR’s early stages, while showing healthy signs of adoption and interest. For now, entertainment lies at the center of the VR value proposition for the average consumer, but gaming will provide the carrot for hardcore users that drive the technology forward. The high level of interest in training and education in a virtual environment was also surprising. Perhaps it’s driven by the fact that in-person training is usually so boring. It’s also terribly inefficient and costly – all of which VR will improve.

To recap, we see three drivers to near-term VR interest:

  1. Improving consumer awareness – see Samsung Gear VR’s holiday campaign
  2. Increasing the amount and quality of VR entertainment content
  3. Headset adoption

We’ll update the VR Excitement Index regularly as we track the progress of the VR theme on the road to 100.

 

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. 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.  

Virtual Reality
3 min. read Show less