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Augmented Reality: Consumers, gorillas and unicorns

Despite fierce competition, mobile phones are still a healthy technology to be involved in. But what’s next? Smartwatch sales are yet to set the world on fire, but are mixed-reality computers worn on the face where the future is heading? Possibly. Some analysts are predicting Augmented Reality (AR) could be a $150 billion market in the next five years, and has its fair share of evangelists.

25-08-15-augmented-reality-consumers-gorillas-and-unicornsOri Inbar is one such man. As CEO of AugmentedReality.org, a non-profit dedicated to promoting the technology, he is beyond eager. The former SAP man worked at the German giant for seven years before discovering that AR was his calling. “The initial motivation was to get my kids away from the screen and have them interact with real things in the real world,” he says. “It is obvious we need to add a digital layer to the real world to make it relevant for the millennials.”

His organisation’s goal is to get a billion people using AR by 2020. “Smartglasses may seem different from smartphones but are a natural progression,” he says. “It’s a personal device that provides information on the go and since it does it in a more personal and intuitive way people will need it even more than they need smartphones today.”

While a billion people might seem ambitious to some, Inbar takes it in his stride. “The one billion goal is a very round and simple to remember number. It’s an aggressive number, yet a realistic one.” That figure is based on a prediction made by former Nokia executive and author Tomi Ahonen during a talk he made in 2013.

From zero to one billion – in 50 years

“Just like smartphones surpassed the PC, smartglasses are arguably the next computing platform that will replace smartphones as we know it,” explains Inbar. “When you look at the history of new technology adoption curves – it keeps accelerating; if it took smartphones 10 years to get from zero to one billion, it will take less for the new technology that supplants it.”

“In 2015 for the first time we have over 12 new smartglass models sold in the market. That, combined with the identified needs for this technology, the maturity of tools, and the accumulated knowledge – we are on the accelerating growth curve towards a $150 billion market by 2020.”

Despite the 10 year plan, Augmented Reality has been around for a while. “The first phase started with the invention of AR in 1968, followed by decades of lingering in a handful of labs around the world.”

“The second phase started with ARtoolkit [released a mere 30 years later, in 1999] which for the first time enabled people to easily create AR and experience AR applications with webcams. That was the first major step in bringing it to the masses.” From there things sped up. “The introduction of the iPhone in 2007 and Android right after had all the ingredients for an AR device which millions already had in their pockets.”

Today we’re in what Inbar calls the fourth phase, where we have the introduction of the first commercial smartglasses with the likes of Vuzix, Epson Moverio, and of course Google Glass. “During these four phases the best use cases for AR were identified, developed and refined, the tools and services for developing apps matured, and designers started developing proven approaches for UX.”

Consumers, gorillas and unicorns

While mobile devices can be used to create AR experiences, Inbar’s organisation is focused on smartglasses. “The killer scenario is whenever a person is performing a task (work, play or study) with his hands and needs information in her field of view. There is no better way to deliver this information than with smartglasses.” To this end, AugmentedReality.org has published a report, “Smart-glasses Market: Towards One Billion Shipments,” which analyses the current market and predicts how it will change between now and 2023.

In the report, Inbar predicts that by the end of this year we’ll see some one million AR/smartglasses shipped. 2016 will see 10 million devices shipped, 2018 will see 50-100 million and within a couple of years of that the figure will have reached one billion devices. Somewhere between 2020 and 2023, smartglasses will reach an inflection point where they actually outsell smartphones.

For now that one billion figure is being almost entirely driven by the enterprise. Google Glass was retired from the public, and the second edition is reportedly being sent out to enterprises after much backlash in the mainstream. “I think it’ll follow a similar path to what we have seen with smartphones: when initially introduced in 2004/5 by BlackBerry – it was oversized and ugly and yet became very popular in the enterprise as an unmatched email machine for road warriors,” Inbar explains.

“A few years later when the collection of technologies required for a smartphone matured - the slick iPhone came out and captured the consumer market by storm.” When asked if Apple might be the leader, he says it could happen but likely would be later, in 2017. “In a few years, when the hardware and software matures, looks better, and settles on a consumer price range, I expect it to become widely adopted by consumers.”

Of the three major wearable technology industries – smartwatches, AR and Virtual Reality – the watch industry is probably the most mature and furthest along that consumer adoption trend. Even at the lowest of estimates, Apple is already the “800lb Gorilla” and several watch companies – from Mondaine to Swatch and Tag Heuer – are starting to move into wearable technology in order to keep up.

Will we see similar competition between technology firms and traditional eyewear companies? “It’s already happening. Luxottica, which controls 80% of the eyeglass market, is all over smartglasses. Opticana, another traditional eyewear company in Israel, is the lead investor in a new smartglasses company, Theia.”

For those traditional eyewear companies, and even technology companies yet to make a move, investment or acquisition might be the only option. “Companies have a window of opportunity until the end of 2015 to have [an AR] strategy. The leaders who emerge by end of next year could be independent startups or big players who get there through an acquisition spree.” Despite relatively few devices being actually sold so far (and probably even less being made by the software companies) the market is already well-populated [Inbar’s report names 30 companies] and is predicted to consolidate.

“It may be too late to decide to build from scratch but there are plenty of acquisition targets to get a head start.” Intel, Google, Apple, Microsoft and Facebook/Oculus have already started the M&A stampede, with almost a dozen AR acquisitions between them in the last year. “It’s hard to predict the make up at the end of the shakeup. I expect those four platform players to have a fierce battle and one will emerge as the 800lb Gorilla.”

While the hardware market may already be beyond the reach of anyone not already involved, what goes on inside the devices or in the backend is still up for grabs. “There is always room for innovation. The market for software is wide open. Experienced engineers and designers are becoming more common so I expect many new software startups to emerge and capture market share in various industries.”

The rise of mobile and cloud technology saw new waves of billion-dollar “unicorns” appear; from Salesforce and Dropbox to Jawbone and Uber. But will we be seeing AR companies reaching 10-digit valuations in the future? “Absolutely. Magic Leap is already there. Blippar and Daqri are on the way,” says Inbar, but they’re not the only ones he predicts could go onto big things. “Additional software infrastructure companies like Catchoom, 3D mapping and tracking like InfinityAR, and eCommerce apps like Cimagine are yet to break through from the initial stage.”

 

Download the IDG Connect watch report now to see why the watch industry is showing no fear of Silicon Valley and how the companies trying to muscle in on their turf think they should change.

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Dan Swinhoe

Dan is a journalist at CSO Online. Previously he was Senior Staff Writer at IDG Connect.

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