Mark Zuckerberg’s “We’re making the camera the first augmented reality platform” was the first major step towards mass market AR. Apple’s launch of ARkit for iOS as “the largest AR platform in the world” was the second. Where Pokémon Go gave consumers their first taste of mobile AR, and Google Tango ushered in the race towards high end mobile AR phones, Facebook’s AR Platform and iOS ARkit now democratize mobile AR software regardless of hardware. Together with Apple launching an AR enabled iPhone this year or next year, Facebook and Apple have now turned mobile AR into the next great platform war. Consumers will win as usual, but there will be blood (as detailed in Digi-Capital’s Augmented/Virtual Reality Report).
The burning platform question
Hardware and software platforms are so intertwined that it can be hard to tell the difference, and if you’re Apple this played in your favor for the last decade. But Apple, Samsung and other phone makers have done such a great job with existing hardware, that they might have stacked the deck against mobile AR hardware. Facebook’s AR Platform and Apple’s ARkit for iOS have shown exactly how the major messaging and OS platforms can play the game using nothing more than a standard smartphone camera. So while device manufacturers roll out new hardware to build an installed base for AR phones, established messaging and OS platforms could build a mobile AR software ecosystem and user base in a fraction of the time at a fraction of the cost. They’ll also be able to leverage this advantage as dedicated AR phones come to market.
What is mobile AR anyway?
At one end Pokémon Go is what some industry insiders call “the best worst example of AR”, because its mobile AR software is pretty basic. Lovely graphics positioned approximately against the real world on your phone screen, using basic computer vision and positional tracking. Nonetheless mass consumers think it’s mobile AR, and they’ve loved playing with it.
At the other end of the spectrum is Google Tango, with mobile AR hardware driven by integrated hardware and software. Without diving into the technical weeds, Tango phones enable accurate motion tracking, area learning and depth perception in a device that looks much like any other smartphone. The difference comes from a motion tracking camera, a depth sensing camera, an infrared projector, computer vision and simultaneous localization and mapping (SLAM) software. So virtual objects superimposed on the real world appear as you would expect them to if they were really there. But Tango’s time is yet to come in terms of consumer awareness and app ecosystem (no disrespect to Google, Lenovo or Asus).
Facebook, Apple and Snap’s mobile AR software is a serious contender, as it combines the ubiquity of messaging/OS software with some of the computer vision and SLAM that previously required dedicated hardware. While Google Tango’s sensors enable heavier duty mobile AR apps, that’s not the problem Facebook, Apple and Snap are solving. By plugging mobile AR software into the largest consumer platforms on the planet, they’re democratizing mobile AR for everyone for free. And free is a good price point. This hasn’t escaped the notice of Tencent in China either. Mark Zuckerberg, Evan Spiegel and Pony Ma didn’t get to where they are by being dummies, and so it is with mobile AR software.
The cool kids
There’s another factor in the democratization of mobile AR that Pokémon Go highlighted – demographics. 68% of Pokémon Go users are between 13 and 29 years old. Even though that came from a very specific set of circumstances, it is the largest sample set of mobile AR mass adoption to date.
For comparison in terms of major consumer platforms: 88% of Americans from 18 to 29 use Facebook (2/3 of them use Messenger), 76% of US teens own an iPhone (81% want their next phone to be one), 75% of WeChat users are between 20 and 30, and 60% of Snapchat users are between 13 and 24. Spot the pattern?
Mobile AR will be adopted by the young. Platforms that can scale mobile AR with 13 to 29 year olds will win.
Apple of my eye
We wrote back in January that Apple could launch an iPhone AR this year or next year, with Samsung and others following. And now that Apple has announced its ARkit for iOS, we know how they’re going to play the mobile AR software game until that device launches.
For the last two years we’ve said that Apple is the best-placed of all major tech companies to drive AR, with its end-to-end ecosystem of hardware, software, app store, developers and retail. Combined with ARkit for iOS, iMessage and its renewed push with stickers, an iPhone AR looks like a pretty compelling proposition.
But Apple has a problem in terms of hardware. Apple.
Apple’s closed ecosystem is a huge advantage, but it’s also a weakness. Apple could provide the best and most complete experience for mobile AR hardware, but only for folks who’ve bought a new iPhone AR. Apple expects users to replace iPhones every 3 years, which is a major driver of 200 million plus annual sales. But iPhone 7/7 Plus only makes up around 2/3 of the total. Assuming the iPhone AR is a range-topper that stimulates growth (converting Android users, reducing replacement cycles), we’re looking at an installed base of at first tens and then hundreds of millions of iPhone ARs in a few short years.
But Facebook Messenger has 1.2 billion MAU, WeChat has 768 million DAU, Instagram has 400M DAU, WhatsApp Status has 175 million DAU, Snapchat has 160 million DAU. Realizing that it could take them well over 5 years to deliver the mobile AR hardware reach that Facebook and Tencent have today, Apple launched the ARkit for iOS as its mobile AR software play. Marc Andreessen remains right – software is eating the world.
Do androids dream of tangoing sheep?
Samsung and Huawei are the largest Android phone makers globally (not forgetting Oppo and Vivo in China), and these two companies could drive the mobile AR hardware for the larger Android ecosystem. But Samsung’s S8 and Huawei’s P10 aren’t AR enabled phones, having neither Tango nor their own proprietary AR platforms. So as discussed in January, we’re looking at 2018 as the likely inflection point for Android mobile AR hardware. There is also the Android ecosystem challenge of the separate Google Play dominating outside China, and a fragmented set of changing players ruling app stores in China. In other words, none of the Android hardware players has the dominant end-to-end mobile AR potential of Apple.
Who dares wins
Sun Tzu’s “victorious warriors win first, then go to war” is a way of thinking about Mark Zuckerberg kicking off the mobile AR platform war at F8.
Facebook’s mobile AR Platform wins outside China. Its user base, platforms (Messenger, Instagram, WhatsApp Status), developer ecosystem, mobile AR developer tools, mobile market experience and financial muscle guarantee its success. Plus Mark Zuckerberg’s got something to prove, justifying his $3 billion entry into VR/AR in the first place (even if that was for a VR company). It’s a really smart move, and it’s going to pay off. Big time.
Tencent wins in China. The potential dominance of WeChat mobile AR when launched in China is as exciting as Facebook’s AR Platform outside it. The battle has already kicked off during Chinese New Year with Tencent’s versus Alibaba‘s mobile AR Hongbao (traditional red envelopes filled with cash). But the Alibaba opportunity looks very different, as it will be the AR eCommerce leader in China rather than the mobile AR platform leader. Baidu is also layering its wealth of data on the real world, but it too has a different opportunity to Tencent.
Apple could become the dominant and most profitable mobile AR hardware and software player, with up to 600 million iOS devices able to run its ARkit by the end of 2018, and scaling from zero to hundreds of millions of iPhone AR users by 2021. This could become the innovation for which Tim Cook is remembered, and potentially lead towards Apple’s long term smartglasses dominance going into the next decade (assuming smartglasses solve their 5 big challenges). Apple has been looking for a catalyst to take it beyond Steve Jobs’ legacy, and this could give it a real chance of becoming a 100 year company.
Samsung, Huawei and other phone makers could do very well when they start to sell AR phones, but don’t have Apple’s inherent ecosystem advantages. To do more than maintain the status quo, they might need to invest in or acquire totally new capabilities. Otherwise they could miss out on the profits others will make using their mobile AR phones.
Google’s Tango is currently geared to enabling a large open mobile AR ecosystem to drive its core search advertising and Google Play revenues, similarly to its current Android approach. However as with Baidu, the mobile AR opportunity to layer its data on the real world could improve its position.
Snap is already in the mobile AR business, even if it doesn’t call it that yet. But with a user base much smaller than Facebook/Instagram/WhatsApp Status and a closed platform, Evan Spiegel might think about copying Mark Zuckerberg for a change.
No dog in this fight
Microsoft still hasn’t announced any play for mobile AR. They’ve got massive assets in mixed reality (HoloLens) and VR (Windows VR), so it depends on whether they see themselves as a consumer or enterprise company long term. Steve Ballmer’s biggest regret is missing out on mobile. Hopefully mobile AR won’t become Satya Nadella’s.
Amazon has also stayed quiet on mobile AR, despite reports of experiments with AR stores. If they’re not already working on it, this might be an area where Jeff Bezos could learn from Jack Ma.
Know your enemy, know yourself
The battle lines for mobile AR have been drawn, and some of the winners were clear before the first shot was fired. While it’s not too late for incumbents and startups in mobile AR, again in the words of Sun Tzu, “I have heard that in war haste can be folly, but have never seen delay that was wise.”
Time to saddle up.
[You can read more, including how Apple and Facebook could drive mobile AR over 1 billion users and $60 billion by 2021, in Digi-Capital’s Augmented/Virtual Reality Report]
(Image credit: Father.io)