Smartphones have become the biggest computing platform ever and it’s going to take quite some time before any other computing platform/device overtakes it. Smartphone manufacturers, telecom operators and app developers have all earned billions of dollars thanks to the smartphone boom. But that growth is now largely over.
A handful of app developers, especially game developers dominate the vast majority of revenue pie in the app industry. Apple dominates almost all the profits in the smartphone industry. Telecom operators have largely become dumb pipes. Apart from all this, smartphones themselves are showing signs of maturity. Smartphone shipments are largely flat in most developed markets and are only expected to post single digit growth as a whole in the coming years.
With smartphone peaking, the search for the next big computing platform/device is at an all time high. We’ll be discussing Augmented Reality/Virtual Reality in this article, which as per money, are the next big thing.
VR/AR is something that every tech company wants to have a piece of. Different companies have had different approaches to it, but every major tech company seems to be involved in it and everyone has their own advantages. Let’s look at the major ones.
1. Facebook / Oculus
Facebook has taken the acquisition route when it comes to VR. Facebook’s acquisition of Oculus means that they currently have the best consumer VR device rivaled only by HTC’s Vive. However the prowess of Oculus Rift comes with the requirement of enormous processing power which pretty much limits Rift’s target market. Even if someone decides to put down $600 for an Oculus Rift, they still need to spend more for an external PC to do all the processing.
But despite the initial target market of Oculus Rift being highly limited, Oculus has the power of Facebook’s newsfeed with it. Facebook has already dipped its toe in the 3D-360 degree camera market with Facebook Surround 360 which it plans to open source for other developers to make use of. As of now cameras that can record 360 degree videos are few and limited, however if 360 degree videos do indeed become popular in the years to come then be assured that most of it would be shared on Facebook.
With around 1.6 billion users, there’s hardly any other social media company that matches Facebook’s scale. You go on a family vacation and shoot a 360 degree video, or a video of your marriage or vacation, all of this is most likely to be shared on Facebook’s newsfeed. Apart from computational processing, VR content is scarce right now and possibly a limiting factor behind people’s willingness to buy a VR headset. If Facebook has lots of people sharing 360 degree videos, then Oculus’ content problem would be solved. Although as of now, Oculus’ set up is big and messy, improvements in processing power and software over the years can reduce the setup size greatly or maybe even eliminate the need for an external device altogether.
Google has done a great job in making VR mass market. The announcement of Google Cardboard in November 2014 had automatically let millions of Android users experience VR overnight. Granted that the experience was nowhere near what Oculus Rift provided, but it was still Awe-inspiring for many. Contrary to Oculus’ top to bottom approach, Google is taking a bottom to top approach. While Oculus plans to target the high end first with a high performance VR device, Google wants to first make VR as accessible as possible and then gradually improve it.
While Cardboard helped bring on board millions of people to the VR train, DayDream is going to greatly improve it. Google is planning an advanced headset that provides a much richer VR experience than Cardboard in the form of DayDream. Also DayDream would be licensed to any manufacturer who’s interested. The biggest strength of Google in its VR Play are Android and Youtube. Google has been able to make changes in Android N to properly support DayDream. Youtube is the default destination for many people wanting to watch videos on mobile, Google has been able to leverage Youtube to make a lot of VR videos available to end consumers.
Despite Google’s push to bring VR mass market, the company’s taking the exact opposite approach when it comes to AR. Google Glass was one of the most high profile AR devices of its time however due to privacy concerns and other issues, Google Glass is pretty much dead. However Google’s enthusiasm in AR is still continuing in the form of Magic Leap. Google’s the major shareholder in Magic Leap which is developing a “revolutionary” AR device secretly.
3. Smartphone manufacturers
While some smartphone manufacturers like HTC have decided to spin off an entire division for their VR efforts, others like Samsung are taking a more integrated approach whereby they’re making VR headsets more of an accessory for smartphones. VR is currently something that very few apart from the tech enthusiasts care about. By bundling VR headsets with smartphones, smartphone makers have two advantages.
The first being that the addition of free (or subsidized) VR headset makes their smartphone more attractive especially now that smartphones are becoming more and more indistinguishable. The second being that smartphone manufacturers are able to gain a footing in VR market more easily than others. Although most of the general public is unaware of VR, almost all of them buy smartphones and when they get a free VR headset along with it they are bound to give VR a try. Samsung for example has sold a free VR headset with its Samsung Galaxy S7 and S7 Edge smartphones and might continue to do the same with Note 7 as well. To be clear, Samsung’s Gear VR was made in partnership with Oculus, but it’s only a matter of time before Samsung makes its own VR headset.
It’s safe to say that HTC’s Vive is one of the best VR headsets in the market right now. But how far this will go remains to be seen. HTC’s current financial situation is pretty dire, on the other hand Vive’s competitor Oculus Rift is being funded by cash rich Facebook. Samsung sells millions of smartphones every year giving it a comfortable base for its VR devices like Gear VR. HTC on the other hand is selling fewer and fewer devices every passing quarter, so even if it decides to build a VR device that uses the smartphone as a base, there are very few smartphones HTC can bundle it with. Their scale is nowhere near what Samsung or Apple command in the smartphone market. HTC neither has a well of content like Facebook’s newsfeed nor an operating system that’s running on a billion devices like Google’s Android. All in all, HTC hardly has any competitive moat in the VR race apart from their tech. One thing that does help HTC is their partnership with Valve. Early adoption of VR devices like Vive and Rift would be mostly by gamers that already have high specced PC configurations and Valve’s game catalog should help in this regard. But beyond the Valve partnership, any other meaningful competitive advantages don’t seem apparent.
Apple’s plan regarding VR and AR are largely unknown but that’s expected of Apple considering the amount of secrecy the company likes to keep regarding its plans. In 2015, Apple significantly stepped up its AR/VR plans. Apple bought German startup Metaio in May 2015. Apple also bought the company behind Microsoft’s Kinect and acquired a facial mapping company called FaceShift. Apart from these acquisitions, Apple also has a lot of patents related to AR and VR.
Considering the current AR and VR scenario, Apple has a lot of up side if it’s working on an AR or VR device. AR and VR require significant processing power, while at the same time, if someone wants to make a standalone AR or VR headset, the space for battery is very low. This calls in need for chipset that’s powerful, while at the same time, power efficient. Apple currently has one of the best silicon teams amongst tech companies. On a performance per watt basis, Apple’s custom SoCs are some of the best in the market right now and are only bound to get better in the years to come. Hardly is any other company mentioned in this article as good as Apple in making SoCs that have the best combination of processing power as well as power consumption. Apple’s prowess in chip designing is going to go a long way in helping it design a standalone AR or VR device.
Apart from Silicon, Apple’s ability to make beautiful as well as ergonomic products is also going to help it. Most of the current AR and VR devices are bulky and ugly to look at. Apple can fix this to some extent considering that the company has a special emphasis on the design of its products. The last thing to help Apple would be its brand power. Apple’s entrance into any product category gives the entire category a lift. Take smartwatches for example. Before Apple’s entrance, smartwatches were something limited to geeks wearing Pebble or FitBit. But after Apple’s entrance, even luxurious watch brands that had earlier dismissed smartwatches as a gimmick have jumped into the smartwatch bandwagon.
5. Startups and Beta versions
While we have consumer facing VR products from Oculus, Google, HTC and Samsung, there are companies that are still in stealth mode. Magic Leap is a company that claims to have an amazing product. Except for a select group of people, no one has been able to see Magic Leap’s product, but the company already has a $4.5 billion valuation. Similarly, Microsoft also has a AR headset in the form of Hololens that’s yet to be available for end users although a version of Hololens is ready for developers to make use of.
There are several small startups as well that are vying a piece of the AR/VR market. After Magic Leap, Matterport is the second most funded VR company in the market right now. It primarily targets businesses and sells solutions to help capture interiors in 3D. Matterport is tapping into real estate which is one of the most profitable verticals in the VR industry right now. Razer, the gaming hardware focused company, creating things like keyboards, mice, controllers, and laptops has officially stepped into the virtual reality space with Open Source Virtual Reality (OSVR) with the aim of being the Android of VR space. Razer has released a modular ‘Hacker Dev Kit’ of the OSVR hardware, which is currently available for $299.99. Founded in 2013, Jaunt is targeting the professional cinematic level of content creation with their projects using an advance proprietary camera dubbed Neo.
There are various startups with a lot of money poured into them. For a holistic view on some of the most funded startups in the AR/VR space I recommend reading this article from UploadVR.
The search for the next big computing platform is at an all time high. Unexpected players are finding successes in unexpected places. Take Amazon’s Echo for example, of all tech companies on earth, Amazon was the least expected to find success with a Voice assistant. VR/AR are still in their infancy. All major tech companies have come on board the AR/VR train. All of these tech companies have their own strengths and weaknesses. Apart from these tech companies, a lot of startups are also vying a piece of the AR/VR market. The coming years will decide which company or startup succeeds.