Surface Laptop and Microsoft’s Hardware Long Game

on June 23, 2017
Reading Time: 3 minutes

I’ve been testing Microsoft’s recently launched Surface Laptop, and it’s an extremely well-designed piece of hardware. Microsoft seems to have obsessed over every detail in its first laptop, save perhaps the shipping OS (Windows 10S), and the result is a product that an awful lot of people are going to like. The Surface Laptop is also notable because even at its relatively high starting price of $999 it has the potential to drive shipment volumes well beyond what Microsoft has seen before, and it represents yet another step forward in the company’s slow-but-steady move towards becoming a hardware heavyweight.

World-Class Hardware
Most reviewers are infatuated with the Alcantara-covered keyboard, but they key design element for me is the touch-enabled 13.5-inch, 3:2 aspect ratio screen. It mimics the ratio of Microsoft’s Surface Pro and Surface Book, and I like it because it offers more vertical screen real estate than your typical widescreen (16:9) aspect ratio notebook. It’s not an OLED, but it is still beautiful with a 2256 by 1504 resolution and 201 pixels per inch.

Microsoft has been honing its out-of-box experience since the first Surface tablets shipped, and here again, the company brings a top-notch experience augmented by Cortana during setup. Using just my voice I was able to get through much, but not all, of the initial setup. It’s a smart way to remind people that Cortana is on Surface, and getting more useful all the time.
Fit and finish is quite good, the Alcantara does feel nice (longevity TBD), and the touchpad is large and highly responsive. Microsoft’s decision to forego USB Type-C ports feels uncharacteristically backward looking but is undoubtedly rooted in user feedback. Finally, the Windows Hello face sign-in camera on the notebook is amazingly fast. Once you get used to signing into your notebook this way, even a lightning-fast fingerprint scan seems old school.

Windows 10S: The Challenge of Subtraction
While I have very few complaints about the Surface Laptop hardware, I’m afraid my take on Windows 10S is less charitable. Some have called this a pared-down version of Windows 10, but that’s not exactly accurate. It’s the same Windows 10, just more restricted. I fully understand what Microsoft is trying to accomplish here, and respect it. By only allowing us to install apps from the Windows Store, Microsoft says it can ensure a fast, stable operating system that won’t face the inevitable slowdown that occurs when you install (and uninstall) legacy Windows apps. The problem is that many of the legacy apps that longtime Windows users depend upon will never make it into the Windows Store. For me, the inability to run a third-party browser and my company’s use of proprietary software means Windows 10S is a non-starter for me. Happily, Microsoft lets Surface Laptop users switch to Windows 10 Pro for free (at least through the end of the year). I’ll be making that switch, immediately. Near-term Windows 10S might make sense on low-cost education hardware competing with Chrome. Long term, to find mainstream acceptance, Windows 10S will require a much more robust offering within the Windows store.

High-Value Vs. High Volume
With the launch of the Surface Laptop Microsoft now has a very well-rounded hardware lineup. It joins a newly refreshed Surface Pro, the high-powered Surface Book, and the creator-focused Surface Studio desktop. With the launch of each new piece of hardware, Microsoft has further burnished its reputation for shipping high-end, well-designed hardware. Rather than focusing on selling high volumes, the Surface team is clearly focusing on selling high-value. And by focusing first on the nascent detachable space, Microsoft built a sizeable hardware business without taking share away from partners such as Dell, HP, and Lenovo, who only entered the space after Microsoft helped establish it. However, looking at IDC’s first quarter 2017 detachable numbers brings to light an interesting detail: While Microsoft’s share of the category has dropped as the market has grown, it still has by far the highest average selling price (ASP) among top vendors at nearly $1,200. So its 15.1% unit market share drives a healthy 27.7% of the detachable market’s total revenues. (Apple’s iPad Pro is number one in units with 32.5% of the market and 38.6% of revenues; Samsung is third with 10.3% of the unit market share but just 7.8% of the revenues). Meanwhile, nobody expects Surface Studio to ship tens of millions of units, but with a price range of $2,999-$4,199, it’s certainly going to drive some enviable ASPs.

Windows 10S challenges aside, Surface Laptop could drive decent unit volumes for Microsoft, especially if the company successfully utilizes its retail stores. And while the starting price may be $999, few will settle for this entry level product, which means ASPs will be higher (my test system sells for $1299; a maxed-out system is $2,199). Among the top five notebook vendors in Q1 2017, only Apple had a notebook ASP North of a grand ($1,560), while the rest landed in the high $500s to low $700s. Volume is the name of the game for most of these players. But market watchers and competitors should pay close attention to how well Surface Laptop does over the next 18-24 months. Microsoft may have just fielded a laptop line that will eventually grab a small piece of the overall share of the notebook market, but an outsized chunk of the the revenue pie.

How a Silent Data Center Trend Could Bring Modular Computing to the Masses

on June 22, 2017
Reading Time: 5 minutes

I’m about to do something that will shock many of you. I’m going to talk about servers and the data center. If you follow my writing closely you know my main focus is consumer technology. But this interest in a data center trend was driven by my curiosity for anything interesting at a technical level.

How the Cryptocurrency Gold Rush Could Backfire on NVIDIA and AMD

on June 22, 2017
Reading Time: 5 minutes

The effects of the most recent cryptocurrency mining phase are having a direct impact on various markets, most notably on the GPU product lines from NVIDIA and AMD. Without going into the details of what a cryptocurrency is or how it is created and distributed on a shared network, you only need to understand that it is a highly speculative market and gold rush that is accelerated and profitable because of its ability to run efficiently on graphics cards usually intended for the PC gaming markets. Potential investors need only purchase basic PC components and as many GPUs as they can afford to begin a mining operation with the intent to turn a profit.

As we look at the sales channels today, AMD Radeon graphics cards from the current and previous generation of GPU are nearly impossible to find in stock, and when you do come across them, they are priced well above the expected MSRP. This trend has caused the likes of the Radeon RX 580, RX 570, RX 480, and RX 470 to essentially disappear from online and retail shelves. This impact directly hit AMD products first because its architecture was slightly better suited for the coin mining task while remaining power efficient (the secondary cost of the mining process). But as the well dries up around the Radeon products, users are turning their attention to NVIDIA GeForce cards from the Pascal-based 10-series product line and we are already seeing the resulting low inventory and spiking prices for them as well.

Positive Impacts

For AMD and NVIDIA, as well as their add-in card partners that build the products based on each company’s GPU technology, the coin mining epidemic is a boon for sales. Inventory that might have sat on store shelves for weeks or months now flies from them as soon as they are put out or listed online, and reports of channel employee-driven side sales are rampant. From the perspective of this chain, GPU vendor, card vendor and reseller, a sale of a card is never seen as a negative. Products are moving from manufacturers to stores and to customers; the goal of this business from the outset. Cryptocurrency has kept the AMD Radeon brand selling even when its product stack might not be as competitive with NVIDIA as it would like.

This trend of GPU sales for coin mining is not going unnoticed by the market either. Just today a prominent securities fund moved NVIDIA’s stock to “underweight” after speaking with add-in card vendors about stronger than expected Q2 sales. AMD’s stock has seen similar improvement and all relevant indicators show continued GPU sales increases through the next fiscal quarter.

Negative Impacts

With all that is going right for AMD and NVIDIA because of this repurposed used of current graphics card products lines, there is a significant risk at play for all involved. Browse into any gaming forum or subreddit and you’ll find just as many people unhappy with the cryptocurrency craze as you will happy with its potential for profit. The PC gamers of the world that simply want to buy the most cost-effective product for their own machines are no longer able to do so, with inventory snapped up the instant it shows up. And when they can find a card for sale, they are significantly higher prices. A look at today for Radeon RX 580 cards show starting prices at the $499 mark but stretching to as high as $699. This product launched with an expected MSRP of just $199-$239, making the current prices a more than 2x increase.

As AMD was the first target of this most recent coin mining boon, the Radeon brand is seeing a migration of its gaming ecosystem to NVIDIA and the GeForce brand. A gamer that decides a $250 card is in their budget for a new PC would find that the Radeon RX 580 is no longer available to them. The GeForce GTX 1060, with similar performance levels and price points, is on the next (virtual) shelf over, so that becomes the defacto selection. This brings the consumer into NVIDIA’s entire ecosystem, using its software like GeForce Experience, looking at drivers, game optimizations, free game codes, inviting research into GeForce-specific technology like G-Sync. For Radeon, it has not lost a sale this generation (as the original graphics card that consumer would have bought has been purchased for mining) but it may have lost a long-term customer to its competitor.

Even if the above problem fades as NVIDIA cards also become harder to find, NVIDIA has the advantage of offering current generation, higher cost products as an option to PC gamers. If a user has a budget of $250 and finds that both the GeForce and Radeon options are gone to the crypto-craze, NVIDIA has GeForce GPUs like the GTX 1070 and GTX 1080 that are higher priced, but more likely to be at their expected price point (for now). AMD has been stagnant at the high end for quite some time, leaving the Radeon RX 580 as the highest performing current generation product.

Alienating the gaming audience that maintains both Radeon and GeForce from year to year is a risky venture, but one that appears to be impacting AMD more than NVIDIA, for now.

Other potential pitfalls from this cryptocurrency market come into play when the inevitable bubble reaches its peak. All mining operations get more difficult over time, on the order of months, and make the profitability of mining coins much lower and requires significantly more upfront investment to turn a profit. The craze surrounding mining is driven in large part by the many “small” miners, those that run 10-30 cards in their home. Once the dollar figures start dropping and the hassle and cost of upkeep becomes a strain, these users will (and have in the past) halt operations.

This has several dangers for AMD and NVIDIA. First, inventory that may be trying to “catch up” to the cryptocurrency mining levels of sales rates could be caught in the line of fire, leaving both GPU vendors and their partners holding product in their hands than they cannot sell. Second, the massive amounts of hardware used for mining purposes will be found on the resale markets like eBay, Amazon, and enthusiast forums. Miners no longer interested in cryptocurrency will be in competition now to sell the RX 580s they have amassed as quickly as possible, dropping the value of the product significantly. If AMD or NVIDIA are in a roll-out mode for a new generation of product at that time, that means new product sales will be directly impacted as slightly older hardware at a great value is suddenly available to that eager gaming audience.

As for a more direct financial risk, both company’s stocks risk corrections when this mining bubble breaks down.

The disappointing part of this situation is that neither AMD or NVIDIA can do anything to prevent the fallout from occurring. They could verbally request miners leave products for gamers, but it would obviously stop nothing. A price hike would only hurt the gaming community more as miners are clearly willing to invest in GPUs when they are used for profit. And trying to limit mining performance with firmware or driver changes would be thwarted by an audience of highly intelligent mining groups with re-flashes and workarounds.

The rumors of both vendors offering mining-specific hardware appear to be true, selling headless (without display connectors) graphics cards is perfect for crypto mining and makes them unusable for gaming. This allows NVIDIA and AMD to use previously wasted GPUs that might have had a fault in the display engine for example. But would not be enough of a jump in inventory to open standard cards for gamers. If anything, the mining community would simply swallow that as well.

The cryptocurrency market may not be a bubble, but the GPU-based mining operations that exist today certainly are. And the long-term impact that it will have on both AMD and NVIDIA will be a negative one. For today, all parties involved will enjoy high sell through, increased ASPs, and happy investors. But the writing is on the wall from previous instances of this trend to know that there will be fallout. The question is only how much it will impact future product and which GPU vendor is capable of balancing current benefits with long-term detriment.

Retailers Play a Key Role in the Success of Smart Homes

on June 21, 2017
Reading Time: 5 minutes

Connected home products are grabbing floor space and early tech adopters’ attention. Sales are growing, and big brands are investing more and more. But moving from early tech adopters to the mainstream will not just be about lower prices. A better shopping experience is a must when consumers are still confused about what works with what and the overall benefits of a connected home.

Tech savvy consumers know what they want. They have researched the product category, they read tech reviews, they asked friends, and they are happy to purchase online. Tech-savvy buyers are also glad to go through any pain the set-up of a device might bring. They see the pain as part of the process of being early tech users. It’s their duty to pave the way for the masses.

Mainstream consumers, on the other hand, want a pain-free setup and most of all a worry-free purchase experience. In our research into early connected home adoption, mainstream consumers expressed the need to have someone to go to in a store and the peace of mind that if something went wrong, they can bring the device back to the store and talk to a human. In our focus groups, consumers seemed to prefer home-improvement stores to electronic stores mainly because that is how they see these connected devices. A connected bulb is still a bulb!

Sadly though, if you go to a Home Depot or Lowes you are left facing a bunch of connected products lump together on a shelf with very little information on what they do let alone of the experience they can deliver.

It’s about the Experience, not the Specs

Whenever I play mystery shopper, I am faced with a high degree of ignorance on the topic of smart accessories. Most sales assistants know about specs and what is spelled out on the box, but unless you have someone who went through their own set up at home, it is rare to talk about an experience. Yet, I find that when you can envision what a particular device can do for you the sale is much easier.

Last week I moderated a panel on ambient computing at the Target Open House in San Francisco, and I was pleased to see how it had evolved since I first visited it after its grand opening over a year ago. The space gives the ability to potential buyers to see products in a large room called the Playground as well as walk through a living room, a bedroom and a garage to experience some of these in a home context. Target has 500 stores across the country that have smart products displayed in context.

While, as you can expect, the experience is still quite show-roomie, it does attempt to deliver an experience. What I liked is how Target focused on guests’ personality and preferences rather than the products. So, for instance, if you are a sports enthusiast or a music lover they show how your living room can be optimized for your ultimate viewing or listening experience. I think this is interesting as it attempts to put the consumer first rather than the product. In other words, it is about helping you find the products that deliver what you want instead of telling you about products and let you discover how they fit into your life once you get them home.

A few months ago, I spent some time in a model home that was installed with HomeKit compatible products. Needless to say, the experience was pretty compelling as there is nothing more convincing than sitting on what could be your own sofa and open the door to a guest, lower the blinds to have the perfect light to watch TV and set the temperature in the room. Over time this will become the norm for buyers of new homes. I expect you will be able to pick a Siri, Google Assistant, Cortana and Alexa home. For now, however, not every vendor in the market can have a real life home to welcome potential buyers, so store experiences are important. Your average consumer is also not necessarily going to attend a home show where many of these solutions have been showcased this far.

Interestingly, setting up experience rooms is how large TV and projectors are displayed in electronic stores. If you walk into a BestBuy you will quickly find the room with the cinema chairs and the projector or the large screen TV that disappear behind a portrait above the fireplace in front of the couch or the speakers that are disguised as rocks for your patio. Showcasing video and audio solutions in a real-life setting has been done for years, yet showcasing a connected home is not something that retailers are rushing into and I think it is because the opportunity is more limited for them at least for now. It might all boil down to how many connected devices will I need to sell to equal the sale of a $7000 video projector?

Smart Experience Showcases Can Help Retailers and Brands

In this early stage of the connected home, it is not just consumers who need help in buying. Brands too need help in selling. Information on what message resonates with consumers, what features close the deal, what is the job to be done…Retailers can help with that information when they set up a smart environment. Target Open House, for instance, has sensors that connect information on foot traffic, product views and likes, touches on digital screens. Information is collected about sales and direct feedback shared with the team of experts who work in the house, and the information is used to decide what products should be displayed in the Playground area as well as what may make sense to sell at Target stores nationwide. Some of the insights are also shared with companies on the shelf to help them understand how guests are experiencing their products.

Big data is such a trend in tech right now that retailers should start talking more about what kind of data they are prepared to share with brands. This can be a competitive advantage in securing product exclusives, and co-marketing spend.

A Platform for Smaller Brands

The connected home space is benefitting from Amazon, Google and Microsoft, opening up Alexa, Google Assistant and Cortana respectively to be integrated into different ways into apps and devices. While Apps have an easy go to market through apps stores, most device manufacturers still need a distribution channel that is online or in store. Kickstarter and Indigogo can help startups to get to market but once there getting noticed might be harder than they thought.

Target Open House offers startups a stage through their Garage space where a dozen of products at the time are showcased before they get to market. Some of the products that guests are particularly excited about and offer a somewhat unique proposition are then moved to the Playground area and on Target’s shelves.

Other stores should follow in the steps of Target and offer a stage for startups especially if local. A community-feel always speaks to consumers, look at how popular farmers market and farm to table restaurants are!

A Connected Home is not built on One Device Alone

Connected homes in their true sense of home automation are complicated concepts that will take years to develop fully. They are also going to be quite different from one home to another. Some consumers might like to be in a single brand home; others will like to pick best of breed brands in the many areas they will decide to connect. Experiencing that home will matter to all but especially to the ones who will pick and mix. This is why experiencing the best way one can, what how technology changes your home is important. While consumers today think about it regarding home improvement I believe that home design will also play a key role in shaping the connected home. Maybe over time Pottery Barn rather than Home Depot is where consumers will turn.

How the iPhone impacted Five Major Industries

on June 21, 2017
Reading Time: 4 minutes

On June 29th, Apple will celebrate the 10th anniversary of shipping the iPhone. Although the iPhone was introduced at MacWorld in January of 2007, the iPhone did not actually ship until the latter part of June of that year. I was lucky enough to get a preview of the iPhone the day before it was introduced at MacWorld and Apple SR VP of Marketing Phill Schiller put the iPhone on a coffee table and asked me what I saw.

I told him I saw a piece of glass in a metal case. He told me that is what Apple’s wants you to see. In off mode that is exactly what it is. But once turned on, that is where the magic is. Apple sees themselves as a software company first and creates devices, like Mac’s, MacBooks, iPods, iPhones, Apple TV and Apple Watch to run their innovative software.

Amazon, Whole Foods, and a Fresh Opportunity

on June 20, 2017
Reading Time: 4 minutes

One of the more distinct angles for Amazon’s purchase of Whole Foods has been how this move will help them accelerate their grocery efforts. It has been clear for some time that the fresh/grocery market was one that Amazon had been eyeing, but also one that would allude them without a broader physical retail strategy. Amazon needs prime real estate in the major areas where Prime customers may exist. Without question, they will acquire this exact thing if this deal is approved.

Whole Foods has strategically placed their nearly 450 stores in areas concentrated with people making over $100,000 a year. An interesting stat I found in a Morgan Stanley research note was 62% of Prime members are also regular Whole Foods shoppers.

The Power of Hidden Tech

on June 20, 2017
Reading Time: 3 minutes

The tech world is dominated by some of the most powerful brands in the world. Companies like Apple, Amazon, Google, Facebook, Netflix, Intel, Samsung and others are featured in the mainstream and business media as much, if not more, than the industrial giants of old. In fact, they’ve become common household names.

They’ve earned their solid reputations through successful products, hard work, and their ability to deliver the kinds of financial results that have made them the darlings of the investment community too.

As impressive and powerful as this group may be, however, they certainly aren’t the only companies in tech doing important work. Though it’s easy to forget, there’s an enormous number of lesser-known tech players that are helping to enable the amazing tech-driven advances that we all enjoy.

At the core, there is an entire range of companies creating the semiconductor chips that sit at the heart not only of our connected devices, but the servers and other infrastructure that enable the cloud-based services to which we’ve all become accustomed. Companies that offer the designs and intellectual property that are used in chip designs, most notably UK-based ARM, but also Synopsys and Imagination Technologies, play an extremely important, but often overlooked, role in driving the modern architectures behind everything from IoT to VR and AI.

Another often ignored step in the chain is for test and measurement technologies. Lesser-known companies like National Instruments are helping drive the components, core technologies, and final products for everything from 5G radios to autonomous cars to industrial IoT and much more.

In semiconductor chips and other components, you have big names like Qualcomm and Nvidia, but there is an enormous range of lesser-known companies building key parts for all kinds of devices. From Texas Instruments (TI) and Renesas in automotive, to Silicon Labs for home networking, to South Korea-based LG Philips Display and Taiwan-based AUO for displays, to Synaptics for fingerprint readers, there’s a huge ecosystem of critical component suppliers.

Even some of the bigger names in semiconductors are branching off into new areas for which they aren’t commonly known. Later today, for example, AMD will be formally unveiling the details of its Epyc server CPU, the first credible threat to Intel’s dominance in the data center in about 10 years. Not to be outdone, Intel is making significant new investments in AI silicon with Nervana and Mobileye for connected cars. Qualcomm’s audio division—part of their little-known acquisition of Cambridge Silicon Radio (CSR) a few years back—just unveiled a complete suite of components and reference designs for smart speakers, like Amazon’s Echo.

In addition to hardware, there is, of course, a huge number of lesser-known software players. Companies like VMWare and Citrix continue to drive cloud-based computing and more efficient use of local data centers through server and application virtualization and other critical technologies. Application development and delivery in the enterprise and in the cloud is being enabled by Docker, a company that offers the ability to split applications into multiple pieces called containers, that can be virtualized, replicated, and much more.

Vendors like Ubuntu are not only enabling user-friendly Linux-based desktops for developers and other enthusiasts, they are also offering powerful Microsoft OS alternatives for servers. In the case of software-defined storage and hyperconverged infrastructure (HCI) server appliances, companies like Nutanix, Pivot3, and others are enabling entirely new software-defined data centers that promise to revolutionize how computing power is created and delivered from public, private, and hybrid clouds.

Though they will likely never get the kind of recognition that the big brand tech players do, the products, technologies, and contributions of these and thousands more lesser-known tech companies play an incredibly critical role in the tech world. By driving many of the key behind-the-scenes developments, these types of companies provide the efficient, safe, and effective tech products and services that have enabled the bigger brands to become such an essential part of our daily lives.

Technology and Human Augmentation

on June 19, 2017
Reading Time: 3 minutes

One of the core premises of our research is to understand technology from a deeper human level. We too often get caught up in the technology itself and may lose sight of the basic human needs or desires technology is serving. With all the tech of Artificial Intelligence, Augmented Reality, and any number of other buzz words, I sense the human angle is again being lost while we chase technological advancements for the sake of the technology rather than the sake of the human.

To frame my perspective, I think it is helpful to use the idea of human augmentation as a basis for our understanding of how technology serves humans and will always do so. The core definition of augment is to make something greater by adding to it. Using this framework from a historical perspective, we can observe how nearly every human technological invention was designed to augment a fundamental weakness of human beings. Tools were invented to augment our hands so we can build faster, bigger, more complex things. Cars were invented to augment the limitations of the distance humans can travel. Planes were invented to augment humans lack of ability to fly. The telephone was invented to augment the limitations of human communications. Nearly every example of technological innovation we can think of had something to do with extending or making greater some aspect of a human limitation or weakness. This was true of historical innovation, and it will be true of future innovation as well. Everything we invent in the future will find a home augmenting some shortcoming of our human bodies. Technology, at its best, will extend human capabilities and allows to do things we could not do before.

While we can analyze many different angles in which technology will augment our human abilities, there is one I think may be one of the more compelling things to augment—our memory.

Memory Augmentation
My family and I took a recent vacation to Maui. It is always nice to get out of the bubble of Silicon Valley for a more natural atmosphere to observe human behavior and technology. Going to a place where most people are on vacation provides an even deeper atmospheric layer to observe.

On vacation, I saw how critical and transformative the smartphone camera has been when it comes to memory augmentation. I’ve long thought that one of technologies greatest values to humans is in the assistance of capturing memories. For sure, this is the single driving motivation behind most people purchasing of digital cameras and video cameras through the years. Now with most people in developed markets owning a memory capture device, and comparable apps on their smartphones to enhance these memories, observing memory augmentation is now a frequent activity.

It was fascinating to see the lengths people on vacation would go through with their phones, drones (I was surprised how many drones I saw), GoPro’s, waterproof smartphone cases, and more to capture and preserve their memories.

I saw people climb trees, brave cliffs, and hike extreme conditions with their phones to get a unique selfie. Fly their drone overhead as they jumped off waterfalls. Put their phones in waterproof cases to get pics of kids snorkeling. And obviously, lots of uses for GoPro’s to capture unique photos and videos of undersea creatures and experiences.

As often was the case, most of the memories captured are designed to share on social media, but the point remains, these pervasive capture devices enable us to create and capture memories we would most likely forget, or have a hard time recalling if left to our memory.

I’ve argued before the camera sensor is, and will remain for some time, one of the most important parts of our mobile computing capabilities. The desire to preserve, or capture a unique memory will remain a deeply emotional and powerful motivator for humans.

Allowing technology to take this idea a step further we have things like Apple Photos and Google Photos which look over our memories and make short videos to not just augment but to automate our memory creation process. As machine learning gets even better, these technologies will make creating memories from moments even easier.

As technology continues to augment more and more of our human capabilities my hope is that the technological tool or process involved will fade so deeply into the background that it nearly disappears. This way we can get the most out our time whether at work, school, play, or vacation, and spend less time fidgeting with technology. Ultimately we will be able to do more with technology but also spend less time with the technology itself and more time doing the things we love.

What can Whole Foods Market do for Amazon?

on June 19, 2017
Reading Time: 4 minutes

On Friday Amazon announced it will be buying Whole Foods Market for $13.7bn in cash. The transaction still needs to be approved, of course, and it is supposed to close in the second half of 2017. There is a lot of opportunity in this deal for Amazon and the time was right for Whole Foods to sell.

Podcast: Microsoft Surface Laptop, Windows 10S, iPad Pro, Amazon and Whole Foods

on June 17, 2017
Reading Time: 1 minute

This week’s Tech.pinions podcast features Carolina Milanesi, Tom Mainelli and Bob O’Donnell discussing Microsoft’s new Surface Laptop and Windows 10S, the Apple iPad Pro and some of Tim Cook’s comments in his Bloomberg interview, and Amazon’s purchase of Whole Foods.

If you happen to use a podcast aggregator or want to add it to iTunes manually the feed to our podcast is:

Five Internet Companies That Need Better Consumer-Facing Customer Service

on June 16, 2017
Reading Time: 4 minutes

A year ago, when Google announced an aggressive push into the consumer hardware business, I wrote that the company needs a better consumer-facing customer service infrastructure. The column was published in Recode and received quite a bit of attention.

I’ve been thinking about some other consumer-oriented Internet companies and brands that also need to improve their customer service. My bias is toward actually being able to talk to a human being, in real-time, by phone or via live chat. Because sometimes, in certain situations, the miasma of e-mail, help forums, Zendesk and the like, just doesn’t cut it. A common approach of many Internet companies is to shift the burden of customer support to the customers themselves, which means that Mary from Kentucky might be telling you how to connect your bank to Mint.

Companies that do this well — Amazon, Apple, Netflix, and even some of the cellular operators such as T-Mobile — have higher levels of customer satisfaction and loyalty. Some have shown marked improvement (Dell, Microsoft), while others, such as some of the airlines, have started to use Twitter fairly effectively, especially during times of high call volume.

So, here are five companies in the B2C realm that need to make improvements in their customer service infrastructure.

Mint. If you read the help forums, the tens of millions of people who use this web-based personal finance management service have a love-hate relationship with the company. Mint has email and the Zendeskian support site, but there is no way to actually talk to a human being at Mint. The types of problems and questions that can come up – bank can’t connect, wacky duplicate entries, transactions that suddenly get lost – require an immediate and often quick discussion and not the multi-threaded email that can stretch out over several days. Curiously Mint is owned by Intuit (Quicken, TurboTax), so there’s no shortage of customer support infrastructure there. Perhaps they can dispatch some of that army of folks who staff the support lines at TurboTax during the “off-season”!

Uber and Lyft. If you ever have a problem with one of these popular ride-sharing services, you might be wistful for that cranky local taxi dispatcher you used to call when the cab didn’t show up. Because unless it’s a real emergency, there is basically no way to contact a human customer support person at Uber or Lyft. If one uses these services with some frequency, there will inevitably, at some point, be an issue with an incorrect fare, being charged for a canceled trip, etc. If there’s ever an actual dispute, web/email is the only recourse – some nameless person (maybe even a robot?) is judge and jury, and there’s little opportunity for any back and forth. There are some situations where one needs to be able to talk to a person to provide some background and context. Uber and Lyft should do better here.

Airbnb. Sensing a theme? The vaunted ‘sharing economy’ operates lean and mean when it comes to customer support. Now, it is possible to contact Airbnb when there’s an emergency. But if there are any other issues or questions, as a guest or a host, there are lots of hoops to jump through in order to talk to a person. Airbnb does have a number to call, but it is hard to find on their website. My personal experience has been that hold times can be very long, with customer support generally outside the U.S. and reps not adequately trained or equipped to deal with contextual situations. This isn’t like calling your cable company to do a modem reset; each situation is unique.

Airbnb handles some 500,000 stays daily…situations are bound to come up. Even though @AirbnbHelp can be very effective, when one is in a foreign place, it would be good to know that there’s an ability to call a person at AirBnB to get help, real time.

Another frustration is that Airbnb does not provide the ability the ability for a guest to contact a host until a reservation is actually booked, other than through its internal messaging system. Again, there are situations and contexts during the ‘reservation inquiry phase’ where electronic, asynchronous communication just doesn’t cut it. Airbnb has said they withhold contact information due to privacy concerns, but I’d imagine that another reason is AirBnB doesn’t want the guest/host to ‘go around’ its system in order to avoid fees. If a host is willing to provide their phone number to a potential guest, shouldn’t they be able to?

LinkedIn. This is a bit more of a B2B site, but still, I think that the issue of customer support still applies. LinkedIn does not offer any phone-based support, and chat support is uneven and unpredictable. E-mail support is through the dreaded “web form, with drop down options”, which, again, put the onus on the customer and lacks the ability to provide context. Now, the issues might not be of the ‘urgent’ B2C variety as with Uber or AirBnB, but LinkedIn is a large and fairly complex site, and getting any help figuring out how to best use LinkedIn or answering FAQs can be an unwieldy and time-consuming process.

Facebook. Whether it’s help using the site, posting an ad, or dealing with a more urgent issue such as customer privacy or an emergency type situation, it is difficult, if not impossible, to talk to a human being at Facebook. The company has a very extensive Help Center, with literally hundreds of forms, and a very active Facebook community. And I understand that with some 2 billion users across many types of services, high-touch customer support might be a huge challenge to undertake. But there are a few types of situations, specifically with regard to privacy, or other types of emergencies, where it would be good to know that one can get help from someone at Facebook, and quickly. I did a little research, and found some situations where, for example, a Facebook user was reporting unauthorized usage use of their child in photos, and they were told to ‘fill out a form’ by someone on the ‘Facebook Help Team’. Not very reassuring.

Now, folks might complain about the high cost of cellular or cable service, but at least you can call them for tech support…or argue about a bill!

Does iOS 11 help fulfill Steve Jobs’ Vision of making the iPad the Next Mobile Computer

on June 15, 2017
Reading Time: 3 minutes

When Steve Jobs introduced the iPad in 2010, he made a rather bold statement. He basically stated that the iPad would become the mobile computer of tomorrow. I talked to him right after the iPad was introduced and he said that over time the iPad had the potential of replacing one’s laptop. He was really excited about this as you can imagine and while the iPhone was his biggest start, he seemed sure of the potential of the iPad to become more than just a tablet over time.

A Demo is not a Product

on June 15, 2017
Reading Time: 3 minutes

Many of us immersed in the world of consumer tech become quite excited when we see something new for the first time. Our imagination immediately races ahead to try to understand how we’ll use it and what products we’ll buy.

But our imagination rarely is tempered by the actual time it can take to turn a new technology into a product. We get ahead of ourselves with predictions about the impact that the technology will have and how it will change our lives. But from all my experience, it always takes much longer than expected.

Our excitement often leads to unreasonable expectations, impatience, and disappointment once the product finally arrives. The product is often less than we expected, and it may take several iterations before it does.

The time it takes for a new technology concept to become mainstream is measured in years or decades, rarely in months. Many things need to occur. There’s the time needed for development of the product, the time it takes to create awareness in the market, and the time for people to realize they have a need. Even then, a buying decision can take years more.

The world is not composed of people like us that are early adopters and can’t wait for the next new thing.  Most can wait and usually do. Sometimes years. There are many reasons for this, from not understanding the new technology, being cautious and skeptical about its value to them, being intimidated, not being able to afford it, or just not caring.

The table below shows just how long it took with other products.  The CD player and VCR, as examples, took ten years to reach a fifty percent penetration of US homes.

We can argue that with social media, the speed of information, and a technically more proficient population, adoption might move faster today. But our expectations are now higher, we’re more skeptical, and it often takes more to impress.

That hasn’t stopped companies’ efforts to get us excited about their new tech. We’re being inundated with news every day. Examples are self-driving cars – even some that fly, artificial intelligence, and virtual and augmented reality.

Much of the news is promoted by the companies themselves to raise investments, increase their valuation, or to scare away their competitors, all while exaggerating the time to commercialization

Just last week Uber announced an investment in a company developing flying cars. It played well on the national news that quoted a company official that they roll out a network of flying cars in Dallas by 2020. Last year Uber said they were already employing self-driving cars, when, in fact, they still have one or two employees in each car. Two years ago, Amazon demonstrated drone delivery. Yet these technologies are still years away.

Today it’s hard to open Facebook or a technology blog without seeing examples of virtual and augmented reality. We’re seeing demos from scores of companies around the world, each vying for moments of fame. We see all sorts of clever uses of how this technology will help us in education, medicine, shopping, and computing as if it’s just around the corner. Yet much of this will evolve slowly and take years to be significant.

If the past is any indication, the first-generation products will not be commercially successful, but more of a proof of concept. No one will wear huge goggles outside of their home. Enabling technologies still need to be developed, including smaller components, miniaturized optics, and faster processors to enable these devices to be practical. More importantly, new tools and an infrastructure are needed for creating affordable content.

Yes, we’ll see some small examples when we point our phone at a restaurant or a product and see reviews and can buy with a click. Tim Bajarin correctly pointed out in this piece that he doesn’t expect to see VR adopted widely for at least 5-7 years.

The point here is not to be discouraging about innovation, but to realize that it’s a long and difficult road from a prototype or demo to a successful product. The idea is always the easy part.

What I Want from Apple’s HomePod

on June 14, 2017
Reading Time: 3 minutes

I got a chance to really see and listen to Apple’s HomePod during WWDC and the quality of the speaker in this device is really amazing. It was demoed compared to a comparable Sonos speaker and an Amazon Echo speaker and the HomePod beat them in overall sound quality hands down. I could not believe the audio quality I heard out of this small cylindrical speaker.

Apple watchOS 4 brings Intelligence to the Wrist

on June 14, 2017
Reading Time: 4 minutes

There was a lot unveiled during the Apple WWDC keynote last week and, as to be expected, some of the hotter and bigger products stole the limelight and relegated others to be simply an extra in the over two-hour-long production. watchOS 4 might not have seemed significant, especially to those who have been so eagerly calling Apple Watch a failure, but I saw it as one of the best examples of how Apple sees the future.

The wearable market remains a challenging market for most vendors. According to IDC, sales in the first quarter of 2017 saw Apple and Xiaomi sharing the number one position with volumes of 3.6 million units. While volumes are the same, it is when you look at average selling price (ASP) for these two brands that the real issue with the wearable markets surfaces. Apple controls the high-end of the market and Xiaomi the lower end. In between, Fitbit is losing ground and failing to move ASP up.

Delivering a clear value continues to be key in convincing consumers that wearables have a role to play and for now that value for mainstream consumers remain health and fitness.

There is More Value in a Coach than a Tracker

Since Apple Watch 2, Apple has been focusing on fitness and the release of watchOS 4 builds on it by adding to the Workout app support for the highly popular High-Intensity Interval Training, an autoset for pool swim workouts and the ability to switch and combine multiple workout types.

Apple is also attempting to turn Apple Watch into more of an active coach than a simple tracker. This might seem like a subtle differentiation, but if implemented right it could actually drive engagement and loyalty. Tracking, while clearly useful, has more a passive role and one that some users might think could be taken on by other devices. Turning Apple Watch more into a coach through daily inspiration, evening push and monthly challenges deepens the relationship a user has with the device. Delivering suggestions on how to close the circles, praising the goals achieved thus far and pushing to achieve more can make users feel that Apple Watch is more an active driver of their success which in turns increases the value they see in it.

The new GymKit which allows gym equipment to sync with Apple Watch might take a while to materialize given the required updated hardware roll out by key brands such as LifeFitness, TechnoGym StairMaster, etc. but it makes sure Apple is not losing sight of critical data. Today, some users might just rely on the gym equipment rather than their Apple Watch due to the duplication of functionalities which leaves Apple Watch missing out on valuable data to which Apple and other apps could otherwise have access to. GymKit puts Apple Watch right at the center of our fitness regime. Apple Watch talking to gym equipment via NFC also makes me believe that more devices will come in the future. Think about having your gym membership card or your hotel room card on your watch rather than having to carry a physical card.

Reinforcing the Strong Pairing of Apple Watch + AirPods

I talked about the magic that Apple Watch + AirPods can deliver to users before and I remain a believer. In a similar way to HomePod, music on the Apple Watch is the easiest way to appreciate Siri as well as the combo with AirPods. With watchOS 4, Apple is making it simpler to get to the music you want for your workout thanks to a new multi-playlist support and automatic import.

Apple also introduced the new Siri face that makes Apple Watch much more context-aware by delivering information that is relevant to you at a specific moment in time. While Apple did not talk about it, one could see how that Siri Watch face could integrate very well with voice when you are wearing AirPods. Siri could, for instance, tell you that you need to leave for your meeting while showing you the calendar appointment on Apple Watch.

So, as Apple Watch becomes more like a coach, Siri becomes more a visible but discreet assistant that is being liberated from the iPhone. I think this is a very powerful paradigm and before nay-sayers jump to point out that Apple Watch penetration is limited, I underline that Apple Watch users are highly engaged in the Apple ecosystem and represent Siri’s best opportunity. Similar to CarPlay, Apple Watch also has a captivated audience not just for Siri’s brains but also for voice-first. With Apple Watch, voice interaction is the most natural form of interaction, especially when wearing AirPods. So much so that, with watchOS 4, SiriKit adds support for apps that are used to take notes, so that now you can use Siri on Apple Watch to make changes in any note-taking app.

Smarter Watch, Smarter Apps

Some Apple Watch critics have used the news that circulated last month that Google, Amazon, and eBay were killing support of their Apple Watch apps as evidence that Apple Watch failed. The reality is, however, as I explained numerous times, that Apple Watch cannot be seen as an iPhone on your wrist and therefore its success will not be driven nor defined by the same enablers.

Don’t get me wrong, there is certainly a place for apps to play, but context is going to be much more important than it has been so far on the iPhone or the iPad. This is why I believe Apple’s latest watchOS will help in making apps not just faster and smoother to run but much more relevant for users.

First, there will be a single process that runs the app’s UI elements and code. This helps with speed and responsiveness and means developers do not need to change their code. Access to Core Bluetooth will allow apps to bypass the iPhone and connect directly to Apple Watch so that data is transmitted faster between Apple Watch and an accessory for instance. Apple also increased the number of app categories that can run in background mode like for example, navigation apps.

While it will be up to developers to think differently when it comes to delivering apps for Apple Watch, I believe Apple has given them a much easier tool set to succeed.

Apple Watch and its Role in Ambient Computing

HomePod was the sexy hot product that everybody paid attention to and ambient computing is the buzzword of choice at the moment. Both extremely relevant in how one should think about home computing and even office computing, to be honest. It is easy for me to see the role that Apple Watch can play in helping me navigate my ambient computing network in a personal and highly relevant way. It is early days, but Apple has laid the foundation!

Computing Evolves from Outside In to Inside Out

on June 13, 2017
Reading Time: 3 minutes

Sometimes, the most radical changes come from simply adjusting your perspective.

In the case of computing and the devices we spend so much of our time on, that perspective has almost always been from the outside, where we look into the digital world that smartphones, PCs, and other devices essentially create for our viewing pleasure.

But, we’re on the cusp of one of the most profound changes in how people interact with computers in some time. Why, you ask? Because now, those devices are incorporating data from the real-world around us, and enabling us to see an enhanced version of the outside world from the inside out. In a sense, we’re going from digital data inside to digitally-enhanced reality on the outside.

The most obvious example of this phenomenon is augmented reality (AR), which can overlay internally created digital images onto our devices’ camera inputs from the real world and create a mixed reality combination. In truth, the computer vision technology at the heart of AR has applications in many other fields as well—notably for autonomous driving—and all of them involve integrating real-world data into the digital domain, processing that data, and then generating real-world outcomes that we can physically see, or otherwise experience. However, this phenomena of inside out computing goes way beyond that.

All the sensor data that devices are collecting from the simultaneously profound and meaningless concept of the Internet of Things (IoT) is giving us a whole new perspective on the world, our devices, and even the people around us. From accelerometers and gyroscopes in our smartphones, to microphones in our smart speakers, to vibration sensors on machines, there’s a staggering amount of data that’s being collected, analyzed, and then used to generate information and, in many cases, actions on our behalf.

The process basically involves measuring various aspects of the physical world, converting those measurements into data, computing results from that data, incorporating that data into algorithms or other programs designed to react to them, and then generating the appropriate result or action.

This is where several other key new concepts come together in this new inside-out view of computing. Specifically, machine learning (ML) and artificial intelligence (AI) are at the heart of many of these new data processing algorithms. Though there are many types of ML and AI, in many cases they are focused on finding patterns and other types of logical connections in the data.

In the real world, this means that these algorithms can do things like examine real-world images, our calendar, our documents, the music we listen to, etc., and convert that “input” into more meaningful and contextual information about the world around us. It helps determine, for example, where we should go, what we should eat, who we should meet—the permutations are staggering.

Most importantly, the real-world data that our devices can now collect or get access to can then be used to “train” these algorithms to learn about what we do, where we are, what we like, etc. At its heart, this is what the concept of ambient computing—which is essentially another way to talk about this inside-out computing model—is all about.

As different and distinct as the many technologies I’ve discussed may first appear, they all share this outward projection of computing into the real world. This is a profoundly different, profoundly more personal, and profoundly more valuable type of computing than we’ve ever had before. It’s what makes the future of computing and AI and IoT and AR and all of these components of “contextual computing” so exciting—and so scary.

Never before have we really seen or experienced this extension of the digital world into our analog lives as intensely as we are now starting to see. Sure, there have been a few aspects of it here or there in the past, but we’re clearly entering into a very different type of computing future that’s bound to give all of us a very different perspective.

Apple Pay Cash Will Help in China and India, not Just the US

on June 13, 2017
Reading Time: 4 minutes

Last week at WWDC, Apple introduced Apple Cash, a new peer to peer (P2P) payment system in iMessage powered by Apple Pay. Quickly compared to PayPal’s Venmo and Square Cash, the service will launch with iOS 11 and be available at the time of launch only in the US.

My Takeaways from AWE (Augmented World Expo)

on June 12, 2017
Reading Time: 4 minutes

Two weeks ago, I spent two days at Augmented World Expo(AWE) held at the Santa Clara Convention Center just across from Levi’s Stadium. As I sat through many sessions and walked the show floor, I observed a lot of hype along with some really cool demos.
The AV and AR crowd at this show is very bullish on AR and VR as they should be.

AMD and Intel Race Towards High Core Count CPU Future

on June 12, 2017
Reading Time: 4 minutes

As we prepare for a surprisingly robust summer season of new hardware technologies to be released to the consumer, both Intel and AMD have moved in a direction that both seems inevitable and wildly premature. The announcement and pending introduction of high core count processors, those with many cores that share each company’s most modern architecture and design, brings with it an interesting combination of opportunity and discussion. First and foremost, is there a legitimate need for this type of computing horsepower, in this form factor, and secondly, is this something that consumers will want to purchase?

To be clear, massive core count CPUs have existed for some time but in the server and enterprise markets. Intel’s Xeon line of products have breached the 20-core count in previous generations and if you want to dive into Xeon Phi, a chip that uses older, smaller cores, you will find options with over 70 cores. Important for applications that require a significant amount of multi-threading or virtualization, these were expensive. Very expensive – crossing into the $9000 mark.

What Intel and AMD have begun is a move to bring these high core count products to consumers at more reasonable price points. AMD announced Threadripper as part of its Ryzen brand at its financial analyst day, with core counts as high as 16 and thread counts of 32 thanks to SMT. Then at Computex in Taipei, Intel one-upped AMD with its intent to bring an 18-core/36-thread Skylake-X CPU to the new Core i9 lineup. Both are drastic increases over the current consumer landscape that previously capped out at 10-cores for Intel and 8-cores for AMD.

Let’s first address the need for such a product in the world of computing today. There are many workloads that benefit easily from multi-threading and consumers and prosumers that focus in areas of video production, 3D rendering/modeling, and virtualization will find single socket designs with 16 or 18 cores improve performance and scalability without forcing a move to a rackmount server infrastructure. Video encoding and transcoding has long become the flagship workload to demonstrate the power of many-core processors. AMD used that, along with 3D rendering workloads in applications like Blender, to demonstrate the advantages of its 8-core Ryzen 7 processors in the build up to their release.

Other workloads like general productivity applications, audio development, and even PC gaming, are impacted less by the massive core quantity increases. And in fact, any application that is heavily dependent on single threaded performance may see a decrease in overall performance on these processors as Intel and AMD adjust clock speeds down to fit these new parts into some semblance of a reasonable TDP.

The truth is that hardware and software are constantly in a circular pattern of development – one cannot be fully utilized without the other. For many years, consumer processors were stuck mostly in a quad-core rut, after an accelerated move to it from the single core architecture days. The lack of higher core count processors let software developers get lazy with code and design, letting the operating system handle the majority of threading operations. Once many-core designs are the norm, we should see software evolve to take advantage of it, much as we do in the graphics market with higher performance GPUs pushing designers forward. This will lead to better utilization of the hardware being released this year and pave the road for better optimization for all application types and workloads.

From a production standpoint Intel has the upper hand, should it chose to utilize it. With a library of Xeon parts built for enterprise markets already slated for release this year and in 2018, the company could easily bring those parts to consumers as part of the X299 platform rollout. Pre-built, pre-designed and pre-validated, the Xeon family were already being cannibalized for high-end consumer processors in previous generations, but Intel capped its migration in order to preserve the higher prices and margins of the Xeon portfolio. Even at $1700 for the 10-core 6950X processor, Intel was discounting dramatically compared to the Xeon counterpart.

Similarly, AMD is utilizing its EPYC server product line for the Threadripper processors targeting the high-end consumer market. But, AMD doesn’t have large market share of workstation or server customers to be concerned about cannibalization. To them, a sale is a sale, and any Ryzen or Threadripper or EPYC sold is an improvement to the company’s bottom line. It would surprise no one if AMD again took an aggressive stance on pricing its many-core consumer processors, allowing the workstation and consumer markets to blend at the top. Gaining market share has taken precedent over margins for AMD; it started as the initiative for the Polaris GPU architecture and I think it continues with Threadripper.

These platforms will need to prove their value in the face of dramatic platform requirements. Both processor vendors are going to ship the top performing parts with a 165-watt TDP, nearly double that of the Ryzen and Kaby Lake desktop designs in the mainstream market. This requires added complexity for cooling and power delivery on the motherboard. Intel has muddied the waters on its offering by varying the number of PCI Express lanes available and offering a particular set of processors with just four cores, half the memory channels and 16 lanes of PCIe, forcing platforms into convoluted solutions. AMD announced last week that all Threadripper processors would have the same 64 lanes of PCIe and quad-channel memory support, simplifying the infrastructure.

With that knowledge and assumption in place, is higher core count processing something that the consumer has been asking for? Is it just a solution without a problem? The truth is that desktop computers (and notebooks by association) have been stuck at 4-cores in the mainstream markets for several years, and some would argue artificially so. Intel, without provocation from competent competing hardware from AMD, has seen little reason to lower margins at the expense of added performance and capability in its Core line. Even the HEDT market, commonly referred to as the E-series (Broadwell-E, Ivy Bridge-E and now Skylake-X) was stagnant at 8-cores for longer than was likely necessary. The 10-core option Intel released last year seemed like an empty response, criticized as much for its price ($1700) then praised for its multi-threaded performance.

AMD saw the opportunity and released Ryzen 7 to the market this year, at mainstream prices, with double the core count of Intel Core parts in the sub-$400 category. The result has been a waterfall of an effect that leads to where we are today.

Yes, consumers have been asking for higher core processors at lower prices than they are currently available. Now it seems they will have them, from both Intel and AMD. But pricing and performance will have the final say on which product line garners the most attention.

Podcast: Apple WWDC 2017

on June 10, 2017
Reading Time: 1 minute

This week’s Tech.pinions podcast features Ben Bajarin, Carolina Milanesi and Bob O’Donnell discussing the many announcements from Apple’s Worldwide Developer Conference including new iPad and Mac hardware, ARKit, Siri, HomePod, iOS 11 and more.

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If you happen to use a podcast aggregator or want to add it to iTunes manually the feed to our podcast is:

Apple Shows its AR Cards, Offers Developers Sizeable Opportunity

on June 9, 2017
Reading Time: 4 minutes

As expected, at WWDC this week Apple unveiled its plans to support augmented reality on iOS devices, providing developers with software tools to create AR apps through its new ARKit. As an analyst who’s been covering the AR space for several years, I was quite happy to see Apple not only enter the space but do so in an aggressive way by adding support for the technology in the upcoming iOS 11 and across a wide swath of existing devices.

Apple Brings Scale to AR
Apple isn’t the first major player to throw its hat into the mobile AR ring, but the scale of its developer community and the size of the supported hardware installed base means it has the potential to significantly accelerate the entire category. Apple didn’t announce iOS developer numbers at this year’s WWDC keynote, but at last year’s event CEO Tim Cook put the number of registered developers at roughly 13 million, and that number has undoubtedly increased since then.

Apple’s AR Kit uses what the company calls visual-inertial odometry (VIO) to track the world around it. The VIO technology brings together camera sensor data with CoreMotion data collected by other device sensors to understand how a device moves, allowing the software to place digital objects into the scene. Importantly, ARKit also uses the camera to estimate the amount of light in a scene and then applies the correct amount of light to the virtual object. This helps address one of the key complaints about AR so far, which is that even realistic-looking digital objects look fake when they don’t have the same lighting as the real objects in the room. I had an opportunity to see ARKit in action shortly after the keynote and the visuals were suitably impressive. And it’s early days. I’m convinced developers will do amazing things with the technology.

Apple will roll out support for ARKit when it launches iOS 11 later this year. ARKIt requires iOS hardware running either Apple’s A9 or A10 processors. On the iPhone side, this includes the 6S, 6S Plus, SE, 7, and 7 Plus. On the iPad, this includes the recently launches iPad (2017) and all versions of the iPad Pro, including the first-generation 9.7- and 12.9-inch products and the new 10.5- and 12.9-inch products announced at WWDC. By not restricting support to just brand new products, Apple has guaranteed developers a substantial opportunity numbering in the hundreds of millions right out of the gate.

Existing Mobile AR Developer Kits
Prior to Monday’s announcement, among the most-used software developer platforms for creating augmented reality experiences for mobile devices was PTC’s Vuforia. PTC estimates that there are 350,000 Vuforia developers actively creating content on its platform. Earlier this month, the company estimated that developers so far have created about 40,000 applications, used by both consumer and commercial end users.

Another primary software developer platform for mobile AR is Wikitude. In April, the company estimated that about 100,000 developers were using its platform to create AR apps. It estimated the total apps to be about 20,000 with close to 750 million installs.

Both Vuforia and Wikitude support developers creating apps for Apple’s iOS and Google’s Android. Vuforia also supports Microsoft’s Universal Windows Platform. It’s worth noting that they both also support head-mounted displays that support these operating systems, too. These products aren’t shipping in significant volumes, yet, but they’re clearly the end-game for apps designed for industry verticals and hands-free use.

Finally, as I’ve discussed before, Google has offered support for Mobile AR through its Android-based Tango platform. At present, there are just two announced Android phones that support Tango and one shipping into the market.

Apple’s entrance into AR will significantly increase the number of developers looking at the space. The benefit of ARKit over other platforms is that because Apple controls the OS and hardware, it can provide a more customized and optimized experience than other developer kits. That said, I’d be willing to bet that companies such as PTC and Wikitude don’t see Apple’s entrance as a bad thing, but one that will effectively “raise all boats.” One of the other benefits of bringing Apple’s huge developer base is that we’ll soon start to see even more unique ideas forming around the use of augmented reality. I would go so far as to say that the true killer app for mobile AR doesn’t yet exist.

AR as Apple Hardware Refresh Driver
As noted, Apple is supporting ARKit on iOS 11 devices that support the A9 and A10 chips. While this includes a sizeable chunk of the iPhones in the world, it’s a much smaller subset of the iPads out there. At WWDC Apple announced a long list of iPad-specific updates to iOS that may well jumpstart interest in Apple’s tablet (and which merit a separate future column). Mobile AR, however, may end up being the new technology that drives a sizeable percentage of consumers to finally upgrade from their aging iPads.

Equally interesting is the question of whether Apple’s next-generation iPhones—expected later this year—will ship with additional AR capabilities beyond what’s available on today’s products. At present, ARKit is utilizing just the primary device camera and not the second camera currently available on the iPhone 7 Plus. It is reasonable to assume that future iterations of the phone will also have multiple cameras. Use of multiple cameras can lead to better AR experiences (Google Tango phones utilize three). Might Apple bifurcate the iOS AR experience later this year, potentially offering a better and best experience for buyers of its newest flagship phone?

The next few months will be crucial to Apple’s AR ambitions gaining traction with developers as the company heads into its fall iPhone announcements. I fully expect to hear Tim Cook announce during that event the number of AR-enabled apps already available in the iOS App Store. And the success of developers in creating AR apps for the iPhone and iPad will naturally lead to what logically comes next: a head worn AR product from Apple.

An Internet Ad Recession?

on June 8, 2017
Reading Time: 3 minutes

It seems odd, in light of the momentum behind Google and Facebook, to even talk about a slowdown/recession in Internet advertising. That is a term I hear quite often from folks deep in the industry. The advertising industry is, without question, shifting more dollars from offline ads to online. However, some trends around ad-blocking, and now Apple adding both auto-play and tracking blocking to Safari, signal trends that will impact some of the more basic Internet advertising techniques and could open the door for others beyond Facebook and Google.

Apple’s Very Different Approaches to VR and AR

on June 8, 2017
Reading Time: 6 minutes

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.