This week saw the culmination of what I think of as developer season, as Apple held the last of the big developer conferences of the year, following earlier events from Facebook, Microsoft, and Google. Augmented and virtual reality were themes at each of those earlier conferences, as I outlined for subscribers on Monday, but Apple had been silent on each of these two big areas until now at its public events. Monday’s keynote, though, saw big announcements around both these areas, giving Apple a role in AR and VR, and yet its approach to these two markets is very different, and it’s worth looking at how and why.
The State of the Market
As I wrote on Monday, VR and AR were big themes at the other three big developer conferences, with more time devoted to those than any other topic at F8 and I/O and significant time given over to them at Build too. These are hot topics, as is the whole question of whether AR and VR are even the right names, with Microsoft preferring to talk about Mixed Reality (and in the process arguably sending some mixed messages), and Google’s VR lead talking about Immersive Computing, with both arguing that there’s a spectrum here.
The reality is that AR and VR as terms are the only ones many mainstream consumers can relate to, so for all the hand wringing about terminology and the attempts to introduce new terms into the lexicon, those are the terms worth using. But even within each of those two overarching categories, there are at least two sub-categories each. On the VR side, the interface – a headset – is the same across the board, but there are significant differences in price and performance between the PC and console variants on the one hand and the mobile flavors on the other. On the AR side, meanwhile, the separation is the interface itself – headsets on the one hand, and smartphones on the other. The diagram below outlines how I think about these in terms of the short-to-medium term addressable markets (think 2-3 years out), and it’s worth noting the chart is not to scale but rather shows relative differences only:
To summarize, AR sits at the two ends of the spectrum today, while VR sits in the middle. Headset-based AR is in its infancy today, with Microsoft’s HoloLens one of the few commercial products launched into the market, but very much a niche proposition and far from being a consumer product, while Magic Leap’s technology may well be the first significant consumer-grade product later this year. In the VR realm, console and PC-based VR provides the best and most powerful experiences today, but is tied to the relatively small installed bases of high-end gaming PCs and consoles. As such, Sony is the market leader with the one million sales it announced this week, but that’s far fewer than the 5 million Gear VR headsets that had been sold back in January by Samsung, and which also incorporates Google’s Cardboard and Daydream platforms and a number of others. But even these pale in comparison with smartphone-based AR, which even prior to this week was available on hundreds of millions of smartphones running Snapchat, Facebook, Instagram, Pokemon Go, and a variety of other apps with AR features.
Smartphone-based AR is therefore the one mainstream value proposition among a set of mostly niche and small markets today, and that’s therefore where you’d expect many of the major companies to be putting their money and placing product bets. And of course we saw some of that at Facebook’s F8, with a big investment in its vision of AR, which is absolutely smartphone-centric in the short term but leaves room for a roadmap around eventual glasses-based AR down the line. Microsoft and Google, though, remain very focused on other aspects, with Google’s biggest bets on Daydream VR in both mobile and standalone varieties, and only a side bet on Tango smartphone-based AR, which is available in so few phone models as to be basically irrelevant as a consumer value proposition, while Microsoft is exclusively focused on headset-based experiences across the board. (It’s worth noting that the Daydream standalone VR experience doesn’t have a slot on my chart above, but would form a third VR category, though it’s uncertain where it will eventually fit around the other two in terms of size – much depends on the price/performance ratio we see in devices later this year).
Apple’s Entries into VR and AR
Now, along comes Apple’s entry into VR and AR, which are quite different not only from each other but from what we’ve seen from the other major companies already playing in each of these markets. For context, it’s worth noting that despite the lack of official comment at Apple’s own events, Tim Cook hasn’t been shy about articulating a vision in which AR is far more appealing than VR, and that certainly seems to have informed its announcements this week.
VR – Creation and the Mac
First off, on the VR side, Apple is clearly committed to being a player here, but almost entirely on the content creation side. With the enhancements to Metal and other elements of macOS and some accompanying new hardware options, Apple is attempting to enable developers and other content creators to work on VR and other immersive experiences using Macs. It’s explicitly supporting 360° video and 3D creation on new Macs running High Sierra, and has partnered with a number of both hardware and software companies to build a set of tools for creating and testing VR content.
But in all the announcements about VR this week, Apple stopped short of promising that Macs would become an important platform for consuming VR content, and it said nothing about VR on iPhones – there’s no VRKit for third party headset manufacturers to work with or anything of that nature. This is almost entirely a Mac and creation-centric approach to VR from Apple. And that shouldn’t surprise us given those remarks from Tim Cook, which have downplayed VR as a mainstream technology. Apple understands that many of its developers and users of apps like Final Cut Pro want to be able to create immersive content on Macs, but it isn’t yet ready to commit to supporting the actual end user experiences in a big way across its platforms. That means it’ll be able to hold onto some developers and creators that might otherwise have abandoned the Mac as a platform, but it’s unlikely to do much to dispel the notion that Macs are poor devices for hardcore or VR gaming. And the entirety of Apple’s announcements here were around the Mac, a platform that has an order of magnitude fewer users than iOS.
AR – Consumption and the iPhone
By contrast, Apple’s AR announcements were all about its biggest platform and the end user. Given that the smartphone AR space today is dominated by photo and video filters and lenses, two possible entry points for Apple would have been logical: either adding its own lenses and filters to the Camera and Photos app in iOS, or opening up the ability for third party developers to create them instead (or both). Instead, what we have is a much more expansive vision for smartphone-based AR from Apple, opening up ARKit as a framework for AR in any conceivable context on the iPhone and iPad. So yes, I’ve no doubt we’ll see photo and video lenses and filters that make use of the new AR tools, but we’ll also see much more. Apple demoed several games at WWDC, but it goes even beyond that, as a tweet from just one day after the keynote demonstrated.
Apple isn’t exaggerating when it says it’s just created the largest AR platform out there – though Facebook’s user base is about twice as big as Apple’s, Apple’s developer base is far larger and the monetization opportunities far clearer than around Facebook’s AR platform, which has no monetization options at all today. And Apple’s vision for AR today is far broader than anything we’ve seen from any other player, encompassing not just the very similar visions of Facebook and Snapchat, but also the Pokemon Go AR view and many as yet undiscovered implementations. And whereas Facebook only showed canned demos of much of its AR functionality on stage and released a more basic subset, Apple’s ARKit does much the same stuff in production today.
So yes, Apple showed us its first forays into both VR and AR at WWDC, but those first steps into each market look very different. Apple’s VR strategy is indicative of its desire to support creators and developers as they mostly build products for consumption on other platforms, while Apple’s AR bet is very much about supporting its own users on its own platforms. The latter is a vastly bigger market today than the former, and much better aligned with Apple’s existing strengths and its user base. That’s going to make it a big player in AR by the end of the year even as it takes much slower more subtle steps into VR.
And of course none of this closes the door to an eventual entry by Apple into that other flavor of AR, the headset market, or as I think it will actually be by the time Apple enters: the glasses-based variety. Everything it and its developers are learning and building today will be applicable to that eventual more immersive version of AR too.