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AR Is Going to Be Apple’s Next Hit

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.

Apple, Augmented Reality, Facebook, Google, Microsoft
4 min. read Show less
Feedback Loup: Clips

Feedback Loup: Clips

Yesterday Apple released Clips, a new app for iPhone users. Apple describes Clips as, “A new iOS app for making and sharing fun videos with text, effects, graphics, and more.” And Clips is fun, but it doesn’t show us the kind of augmented reality lenses and layers that we were hoping to see from Apple.

We’ve written a lot about how AR will change the way we interact with computers. Over the next several years, the smartphone will increasingly become a window through which users can see an augmented world. Players like Apple and Google are well-positioned to win the jump ball to own the dominant operating systems in that new paradigm. Google’s leadership in core disciplines like maps, data, and content make it an important incumbent. Apple’s leadership among app developers and payments will be important, but we think design is Apple’s trump card in AR. But Clips is more filters and effects than lenses and layers. There is an interesting real-time transcription capability, but unfortunately Clips is short on true AR.

In about 5 min. I was able to put together a short video with text, effects, filters, and music. Clips uses fairly rudimentary real-time computer imaging, but this could be the beginning of the underlying technology that will one day direct you to your seat in a stadium, overlay talking points during a presentation, or provide instructions as you assemble new furniture.

We’re surprised that Apple isn’t pushing the features in Clips to more users faster by integrating those features with iOS core functions like Camera or Messages. With Clips, Apple had three options:

  1. Fully integrate it into an existing iOS app (like photo filters in the Camera app).
  2. Release it as a standalone app pre-installed on iOS devices (like the Home app).
  3. Release it as a standalone app available for download in the App Store (like Remote app).

Apple chose option 3 for Clips. Eventually, we think AR functions will be fully integrated into not only the Camera app, but any app that wants to access the iPhones camera to overlay app-specific information over the real world. Clearly, Clips doesn’t give us much direction as to what Apple’s plans are for AR on the iPhone, but we expect more hints to drop soon. We expect Apple to reveal some AR capabilities when the company shows iOS 11 for the first time at WWDC in June. And we expect to see even more of an AR focus when the new iPhone is released this fall.

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, Augmented Reality, Feedback Loup
2 min. read Show less
Would You Let a Robot Do These 12 Jobs?

Would You Let a Robot Do These 12 Jobs?

This week we attended Automate, a robotics trade show in Chicago focused on manufacturing and fulfillment. As we explored the show floor, we saw a number of robots able to work next to humans for an affordable cost of $30-$40k each. Most vendors claimed less than a 12 month payback period. Automation is now in reach for many businesses, and they are slowly becoming comfortable implementing robots, in part for the cost advantage and part out of necessity to find labor.

We left the show with two questions. First, are we too conservative to believe it will take 30 years for 70% of human jobs to be replaced by robots?  Short answer: we’re optimistic and should have a better idea of how quickly automation will come over the next few years.  Second, how comfortable are consumers allowing robots to do certain jobs? To address this question, we surveyed 500 average consumers in the US and asked them to rate their comfort level with robots performing 12 specific tasks.

Survey methodology. We asked survey takers across a mix of age and income demographics to rate their comfort level with robots performing various tasks on a scale of 1-5: 1 being extremely uncomfortable, 3 being neutral, and 5 being extremely comfortable. We surveyed jobs in four categories: time-consuming chores, transportation, personal/family livelihood, and professional services.

Time-consuming chores. We found general acceptance in robots performing daily, relatively safe, time-consuming chores such as vacuuming, mowing the lawn, or preparing food.  Of all of the four categories of jobs we surveyed, the time-consuming chore category was the most positively viewed. This may be because these tasks have low downside if a robot fails to do them well; you just end up with a poorly vacuumed house, a butchered lawn, or a bad meal. The 30-44 age bracket, or loosely late millennials, consistently indicated the highest levels of comfort with this category (and most categories), while the 18-29 demo, or early millennials, surprisingly saw less benefit to robot vacuums or meal-makers – perhaps because many in this demo don’t perform the tasks themselves (see tables below).

Transportation. Our survey results indicated a general indifference to a robot controlling a subway or train ride, but less comfort with driving a car or piloting a plane. We believe this relates to the relative risk of downside due to robotic failure as mentioned in the prior section. It’s hard to imagine a catastrophic subway accident, but easy to imagine a major car accident or downed plane. Interestingly, the 40-59 demo, or Gen X, was the most uncomfortable of the demo groups, with on average 65% of responses indicating uncomfortable or extremely uncomfortable.  We suspect relatively risk-averse Gen X upbringings and presence of young or teenage children may account for these results.

Personal/family livelihood. Given the discomfort in letting a robot drive a car, it’s not surprising that most people aren’t ready to let robots do even more personal tasks like perform surgery or babysit. Again, downside risk to robotic failure is very apparent for both of these tasks, thus the lean toward discomfort. While babysitting requires empathy, which we view a one of the three key advantages humans hold over robots in addition to creativity and community, robots should theoretically be better surgeons than humans. Robo-surgeons have steadier and more precise instruments and can process more data about the body simultaneously than a human surgeon. Consistent high levels of discomfort to this category are seen across all demographics. Robo-babysitters scored an average of 20 points higher on the discomfort scale vs robo-surgeons.

Professional Services. Survey respondents were generally uncomfortable in relying on robots to perform professional services aside from personal training. We feel this again relates to risk. While there is no mortal risk to poorly performed taxes or legal services, there is a risk of financial cost from those failures. The 18-29 year old demographic showed the most comfort using robo-accountants or robo-lawyers.

Overall, we have some trust to build between consumers and robots to get to the automated future we envision, particularly with tasks perceived to be “dangerous.” As humans come to accept that robots can perform almost all “dangerous” tasks with greater safety than humans, the associated comfort levels should rise.

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.

Robotics
3 min. read Show less