Skip to content Skip to footer

The Technology That Could Disrupt the Smartphone

Most augmented reality products have flopped. But a new crop of smart glasses have more practical uses.

12 Minute Read

CONTENT

Augmented reality wearables are an untapped, $100B market.

Yet so far, no one has figured out this technology in any meaningful way. Google Glass floundered. Snap Spectacles were a letdown. And Magic Leap is scrambling.

But recent studies show a shift in the market. Companies big and small have started to pick up on this undercurrent of opportunity and are cashing in.

  • Microsoft just won a contract to provide up to 100,000 pairs of its Hololens glasses to the U.S. military.
  • Walmart is partnering with Oculus to train thousands of its store-level employees.
  • And there are consulting opportunities to teach companies how to use AR as they adopt the new technology.

Meanwhile, augmented reality glasses have a growing list of consumer uses, including:

  1. helping people navigate their way around cities
  2. visualize large purchases for their homes, or
  3. view historical landmarks, museums, or sports events in new ways.

In this report, we’ll show you what’s failed (and why), what’s succeeding (and how), and what’s coming next.

You’ll learn everything you need to get ahead of the competition and develop a successful AR smart glasses strategy for your home or business.QUICK FACTS

  • The global augmented reality industry is expected to jump from $4B (2016) to $161B (2022), according to Consultancy.uk.
  • Pokémon GO, one of the first hit consumer AR applications, brought in $104m in one month in 2018, reaching nearly 150m monthly active users.
  • Augmented reality headset developer Magic Leap has raised $2.3B in funding. 

01 Sizing up the market

I first became interested in this business about a year ago, when I met the founder of an AR smart-glasses startup in Richmond, Virginia. The company, ARtGlass, makes AR wearable experiences for museums and cultural sites.

I had demoed several virtual reality (VR) headsets in the past, but when I took a tour of ARtGlass’s headquarters and donned its headset, I saw only possibilities (full disclosure: I’ve done some writing work for the company).

I read everything I could about the AR smart glasses industry, stumbling on a trend that has the potential to transform a number of industries.

It didn’t take long to figure out that augmented reality is leaving virtual reality in the dust. For starters, AR has far more applications. Say you’re looking for a restaurant in a particular part of town you’re visiting. You could use AR smart glasses to check out menus and reviews, and figure out how to navigate to your restaurant of choice.

Sports fans watching a live game could overlay live player statistics to give them a deeper understanding of what’s happening. Or gamers could enjoy a more immersive experience.

By 2022, the AR industry will be outpacing the sputtering VR market by over 9X, various reports say. Analysts predict the market size for AR will reach up to $200B—the market cap of Coca-Cola—by 2025.

(source: Colby Gallagher)

Then I learned that Apple has been secretly building an AR headset of its own, hoping to avoid the mistakes of Google Glass.

Apple knows AR smart glasses are the future of computing. Tim Cook, the company’s CEO, has publicly called AR, “a big idea, like the smartphone.”

He’s seen Apple’s ARkit 2.0, the developer toolkit to build AR mobile apps for iOS, reach over 63 million users and grow quarter over quarter since its launch in 2017.

Last September, Cook told NowThis that AR is the “future of the iPhone,” adding, “We can have a much more enhanced conversation through the power of AR.”

I’m not sure about you, but looking down at your phone while in a conversation doesn’t sound like an enhancement. As iPhone sales decline, bigger screens and better cameras aren’t going to cut it. Instead, Cook is hinting that something else less intrusive and hands-free must be coming, and Apple’s recent patent filings, acquisitions, and hiring trends back this up.

Apple has been hiring for AR engineering and artist positions since August 2018 and although the company has made no formal announcement, analysts say Apple plans to introduce “Apple Glasses” in 2020 (Apple launching AR glasses in the year 20-20 is too hilarious). Some sources say the company has multiple headsets under development.

More evidence: Apple acquired optics maker Akonia Holographics about six months ago, sparking speculation that the company is building AR glasses for the purpose of Apple Maps

Apple’s not the only one gobbling up AR technology startups. Between 2012 and 2017, 53 AR/VR companies were acquired by companies including Google, Microsoft, Facebook, Intel, GE, and other giant tech players. Experts say these acquisitions show movement and intent — a “gearing up,” if you will.

“Big tech seems insistent on propping up AR and VR tech in hopes of winning the future of computing,” Crunchbase News reported in 2017. “But so far, consumers seem very content to let them hold their breath.”

Facebook, Apple, Amazon, Netflix, and Google all want the lion’s share of the “future of computing.” But as we saw with Google Glass, size and reach don’t matter. It all depends on who can find a viable use case first.

02 The power of mobile AR

When Pokémon GO brought in $470m for its development company, Niantic Labs, in the first 80 days, heads snapped. The adventurous game was one of the first AR applications, demonstrating that with the right product-market fit, viral consumer adoption was possible.

Pokemon Go Image

While nascent, there are some interesting opportunities for mobile AR apps, beyond Pokémon GO, that have yet to experience a breakout.

AR Insider, an AR news publication by ARtillery Intelligence, produced an interesting list of mobile AR use cases:

  • In-store retail: Obtain product information or help shoppers better navigate stores
  • Sports: Overlay live stats and player information during games
  • Home shopping: Visualize large items in your home like a couch or refrigerator
  • City guides: View menus and reviews, and navigate while walking
  • Education: Learn while viewing historical landmarks or touring museums

Despite the youth of mobile AR, it presents a sizable opportunity. AR wearables (i.e., headsets, glasses, or head-mounted displays) offer a massive advantage over mobile devices: they provide a hands-free experience.That’s not an insignificant advantage. Researchers at Purdue University found a disproportionate increase in crashes and associated vehicular damage, injuries, and fatalities in vicinities where users played Pokémon GO while driving. In one Indiana county, car accidents caused by people playing Pokémon GO while driving caused between $5m and $25m in unnecessary costs in a five-month period.

Head-mounted displays (HMDs) open up a much broader range of applications than smartphones, such as on-the-job skills training and immersive 3D gaming. Unlike an experience limited to the size of a handheld screen, HMDs are panoramic and match the human eye’s field of view, creating the potential to integrate seamlessly and non-invasively into a variety of two-handed behaviors, like biking, driving, assembling, and gaming—or no-handed behaviors, like conversations.

03 Lessons from Past Failures

Before going any further, let’s address the obvious. It’s no secret AR glasses have had their foibles, but a lot can be learned from these previous unsuccessful attempts. Here are five companies that came close but didn’t make it.

Google Glass Image

Google Glass, $1,500 (2012-2015). One Forbes writer put Google Glass’s problem like this: “Unless your customer has a mouse problem, they don’t care if you have a better mousetrap.” It seems Google Glass failed to first find a problem that real people were experiencing and then build a product to solve it. Google has relaunched Google Glass for enterprises, where it’s had more success (more on that below).

Intel Vaunt Glasses

Intel Vaunt, $999 (2017-2018). With the goal of creating AR glasses with “zero social cost,” Intel got into and out of the AR glasses game quickly. The Verge described Vaunt as “a Pebble smartwatch on your face” designed non-intrusively to make the technology disappear. Well, it did. Intel shut Vaunt down after perceiving that “market dynamics did not support further investment.” A new company, North Focals, acquired Vaunt’s assets and is striving to become the “Warby Parker of smart glasses.”

CastAR Glasses

CastAR, $250-$400 (2013-2017). CastAR made a headset that transformed a tabletop mat into a 3D animated board game. While it had what Google Glass did not — a niche market —  the tabletop AR wearables company shut down due to two factors: cost and social issues, according to a VentureBeat analysis. CastAR was creating a $250-$400 solution that was replacing tabletop card and board games that might have cost $25. The creepy factor also didn’t help: Some people weren’t comfortable with being constantly surveilled from a video camera-equipped headset. Ultimately, CastAR chose not to pursue additional funding and shut down.

Meta Glasses

Meta, $1,500 (2013-2019). A Y-combinator alumnus, Meta targeted its AR glasses at the workplace and showcased some impressive technology. However, the company experienced hardware issues including flickering displays during the manufacturing process and became insolvent after selling only a few thousand Meta 2s, Variety reports. Its assets were bought by an unknown buyer, and the company closed in early 2019. If he had a do-over, founder Meron Gribetz said he would focus on a “killer app” — a must-have use for the product that clearly differentiates it from existing technology.

Magic Leap Glasses

Magic Leap, $2,295 (2010-present). The Verge conducted a deep review of the Magic Leap One headset and found it powerful and compelling relative to the rest of the industry. And it certainly is from a computing perspective (someone tweeted a video of a cool prototype he made with Magic Leap). But it’s still not all the way there. “Magic Leap One is cooler than the vast majority of mixed reality in 2018,” The Verge said. “But it still seems a long way from realizing the promise of the medium.” Magic Leap has not disclosed its sales numbers, but some estimate that it sold some 3k units its first month of sales, in August 2018.

04 If you build it, they will come…maybe

The main problem that prevented these companies from creating an established AR glasses product? A bad case of a missing market. These failed startups didn’t have an explain-it like-I’m-5 answer to the question: who will use this product and what will they use it for? 

As Peter Thiel said, in Zero to One: “If you’ve invented something new but you haven’t invented an effective way to sell it, you have a bad business—no matter how good the product.”

But there are a few AR headset companies that have started to solve that problem. Here are a few ways they have attacked it:

1. Take a market-first approach, not a product-first approach. 

Google Glass’s problem: It didn’t solve one problem clearly. Was it for entertainment? Navigation? Photography? It had so many features with not many benefits. Magic Leap is teetering on the edge of the same problem. Really cool tech, but not specifically helpful.

A market-first approach identifies one problem/opportunity within one niche and solves for it. For example, Greg and Marion Werkheiser, the co-founders of ARtGlass (the startup I discovered in Richmond last year), saw an opportunity in the niche in which they specialized as attorneys: cultural heritage (i.e., museums and historic sites).

“Each year there are 1.4 billion visits to US cultural and historic sites,” said Werkheiser. “That’s more than 2 times the attendance at all live pro sports events and theme parks combined.” 

That might sound like hyperbole, but it’s true. The NFL had fewer than 18 million attendees in 2018 and Disney World had 150 million visitors in 2017. But according to the American Alliance of Museums, there are approximately 850 million visits each year to American museums.

At Mount Vernon — George Washington’s historical home, near Washington, DC, which 1m people tour every year — visitors can pay an additional $12.50 to add an ARtGlass tour to their visit.

A representative from Mount Vernon told me that AR glasses have helped its business. Since Mount Vernon started offering the glasses in late February, a couple of thousand augmented-reality tours have been purchased. Mount Vernon expects the numbers to continue climbing into the summer.

Augmented Reality App for Tablet enhances Museum Tour

“The augmented-reality tour enables us to do things we cannot do every day,” said Matt Briney, vice president of new media at Mount Vernon, “[such as] show primary sources next to places and objects, do large-scale reenactments of key events, and take guests back through time to show them what Mount Vernon looked like throughout Washington’s entire lifetime.”

Werkheiser said he’s been approached by large companies that would like to apply ARtGlass technology in other verticals such as sports, music concerts, logistics, and military. However, his co-founders and team of seven are “staying in our lane,” he says, focusing on the historical market for now.

He also has a robust business overseas. So far, over 1m people have paid for ARtGlass tours in Europe. And Werkheiser recently raised a $1m seed round to begin scaling ARtGlass across the United States.

This market-first approach is not unique to ARtGlass. 

  • Apple is targeting its AR glasses specifically on mapping (so says this article).
  • Solos Wearables, a brand of optical manufacturer Kopin, is targeting its smart glasses on bicycling.

By restraining their focus to one niche, ARtGlass, Apple, and Solos are able to continually hone their technology and improve its value for its customers. Instead of raising $1B in stealth mode and launching widely with the world watching, these AR glasses initiatives started small and gathered detailed data and feedback on consumer uses.

2. Start with businesses first, not consumers.

Google could have avoided its initial problems with Google Glass if it had taken to heart what one VR startup founder said in the Perkins Coie 2018 Augmented and Virtual Reality Survey Report:

“It is time for the industry to move beyond the ‘new technology’ phase, and concentrate on providing solid, provable business cases to clients that show a measurable return on investment, and deliverable results.” 

After shuttering its first version, Google Glass relaunched in 2017, pivoting to sell strictly to businesses only.

The results are tangible:Google Glass annual unit sale forecast from 2014 to 2018 (in millions)2014201520162017201806121824Unit sales in millionsSources: Business Insider, Ⓒ Statista 2018

Google Glass Enterprise Edition sales doubled between 2017 and 2018, far outpacing the consumer product sales.

Other big companies have also jumped in. Walmart announced at the end of 2018 that it was rolling out 17,000 Oculus Go headsets in a nationwide VR training program for its associates. On its blog, Walmart wrote that it plans to use VR to train associates in three main areas: new technology, soft skills like empathy and customer service, and compliance. Walmart has frequently referred to AR/VR as the future of learning.

GE is also “seeing real results” in its industry sectors. For example, employees assembling wind turbines at a GE factory in Florida wear smart glasses powered by Upskill, a GE Ventures-backed company that produces enterprise software for AR wearables. 

“An initial study yielded a 34% improvement in productivity for the very first time the technician used the wearables, versus operating the standard way,” GE says.

Another GE operation in Minnesota called AGCO, an agricultural machinery manufacturer, is using the Google Glass Enterprise Edition. They reported that Glass has reduced machinery production time by 25% and inspection times by 30%.

After seeing Google have success pivoting to the B2B market, Magic Leap is following suit with a partnership with AT&T to target 5G technology at enterprises. A B2B approach is the major revenue strategy of makers themselves, such as Microsoft Hololens, Epson, and Vuzix.

3. Find partners or get ready to spend/raise a crap-ton of money.

When I walked into the conference room at ARtGlass’s office in Richmond, Werkheiser pointed to stacked cardboard boxes lining the wall. “That’s about $10,000 worth of hardware,” he said.

ARtGlass partners with Epson to provide smart glasses for its customers. Epson’s list of solution providers is small: 14 total. A list that short spells opportunity — enough players to demonstrate a market, but short enough to not get lost in the crowd.

Vuzix, a supplier of smart glasses technology, does partnerships similar to Epson but also hosts its own “app store” for developers to make, buy, and sell smart glasses apps. They’re taking an “Apple” ecosystem approach. Users can find apps by category, such as Remote Support, Warehouse Logistics, Tele-Medicine, Manufacturing, and General Business Apps. 

Microsoft’s advantage

This report would be bunk if it didn’t mention the industry heavyweight: Microsoft Hololens. Hololens 2 is expected to arrive this year, at a pre-order price point of $3,500. A price tag like that indicates that Microsoft has confidence in the market — and that it knows the value it is providing.

One of the tangible problems the Hololens solves is helping designers and engineers work together on a 3D hologram design. It provides a live collaborative function similar to Google Docs — only Hololens is used for 3D holographics for things like buildings or physical products.

Man interacting with Microsoft HoloLens

A few months ago, Microsoft won a contract with the Army to supply a minimum of 2,500 Hololens units with room for that to expand up to 100,000, according to the Motley Fool. A roughly $3,000 per unit, that could be up to a $300m contract.

The takeaway here is to not go it alone. Partnerships are the lifeblood of the business world and the same is true for the AR industry. There are plenty of needs and niches, so pick one to specialize in — hardware, software, content — and find partners for the other areas you’re not as strong in.

05 How can you make money with AR smart glasses?

Here are some possible applications you might want to consider if you’re interested in pursuing this business.

  • Education and training. This is the big one. Companies can teach and train without the headache and logistics of getting everyone in the same room at the same time. What organization in your sphere could benefit from a wearable AR education program? It could be a nonprofit, an institution, or the company you work for. How can you use AR to “get everyone in the same room?”
  • Manufacturing and industrial. Where do you see slowness or danger in a factory? Think through the possibilities of how an AR headset could offload risks for a company and make the COO’s job easier.
  • Healthcare. The riches are in the stitches. Have a chat with a medical professional and ask them about the pain points in their work. Try to uncover any opportunities for how AR smart glasses could make a task safer, easier, or faster.

06 How to get started:

  • Play around with Apple ARkit. With the arrival of Apple Glasses around the corner, it would be a worthy investment of time to familiarize yourself with Apple’s ARkit. When Apple Glasses come out, Apple will doubtlessly update its ARkit for smart glasses applications. It would be advantageous to get a leg up on how the developer kit works.
  • Partner with an engineer, find a business, and order a pair of glasses from Epson, Vusix, or Microsoft to launch a consultancy business. If you immerse yourself in the world of AR wearables, you’ll have what Mark Cuban calls, “a knowledge advantage.” You’ll have the information needed to become an expert and you can then become a deal-maker or adviser.
  • Order a pair of smart glasses, blog as you learn, and create content. Who said you had to launch an actual AR hardware or software company? The AR glasses content world is small today, but it’s only going to get bigger. Set up a website, write about the industry, and in a few years, you’ll look behind you and see thousands of people following.

Notes and links:

Comments

Leave a Reply

avatar
  Subscribe  
Notify of