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Augmented reality and the next century of the web

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Howdy friends, this is the web version of my Week in Review newsletter, it’s here to entice you to sign up and get it in your inbox every week.

Last week, I showcased how Twitter was looking at the future of the web with a decentralized approach so that they wouldn’t be stuck unilaterally de-platforming the next world leader. This week, I scribbled some thoughts on another aspect of the future web, the ongoing battle between Facebook and Apple to own augmented reality. Releasing the hardware will only be the start of a very messy transition from smartphone-first to glasses-first mobile computing.

Again, if you so desire you can get this in your inbox from the newsletter page, and follow my tweets @lucasmtny


The Big Thing

If the last few years of new “reality” tech has telegraphed anything, it’s that tech companies won’t be able to skip past augmented reality’s awkward phase, they’re going to have to barrel through it and it’s probably going to take a long-ass time.

The clearest reality is that in 2021 everyday users still don’t seem quite as interested in AR as the next generation of platform owners stand to benefit from a massive transition. There’s some element of skating to where the puck is going among the soothsayers that believe AR is the inevitable platform heir etc. etc., but the battle to reinvent mobile is at its core a battle to kill the smartphone before its time has come.

A war to remake mobile in the winner’s image

It’s fitting that the primary backers of this AR future are Apple and Facebook, ambitious companies that are deeply in touch with the opportunities they could’ve capitalized on if they could do it all over again.

While Apple and Facebook both have thousands of employees toiling quietly in the background building out their AR tech moats, we’ve seen and heard much more on Facebook’s efforts. The company has already served up several iterations of their VR hardware through Oculus and has discussed publicly over the years how they view virtual reality and augmented reality hardware converging. 

Facebook’s hardware and software experiments have been experimentations in plain sight, an advantage afforded to a company that didn’t sell any hardware before they started selling VR headsets. Meanwhile Apple has offered up a developer platform and a few well-timed keynote slots for developers harnessing their tools, but the most ambitious first-party AR project they’ve launched publicly on iOS has been a measuring tape app. Everything else has taken place behind closed doors.

That secrecy tends to make any reporting on Apple’s plans particularly juicy. This week, a story from Bloomberg’s Mark Gurman highlights some of Apple’s next steps towards a long-rumored AR glasses product, reporting that Apple plans to release a high-end niche VR device with some AR capabilities as early as next year. It’s not the most surprising but showcases how desperate today’s mobile kingpins are to ease the introduction of a technology that has the potential to turn existing tech stacks and the broader web on their heads.

Both Facebook and Apple have a handful of problems getting AR products out into the world, and they’re not exactly low-key issues:

  1. hardware isn’t ready
  2. platforms aren’t ready
  3. developers aren’t ready
  4. users don’t want it yet

This is a daunting wall, but isn’t uncommon among hardware moonshots. Facebook has already worked its way through this cycle once with virtual reality over several generations of hardware, though there were some key difference and few would call VR a mainstream success quite yet.

Nevertheless, there’s a distinct advantage to tackling VR before AR for both Facebook and Apple, they can invest in hardware that’s adjacent to the technologies their AR products will need to capitalize on, they can entice developers to build for a platform that’s more similar to what’s coming and they can set base line expectations for consumers for a more immersive platform. At least this would all be the case for Apple with a mass market VR device closer to Facebook’s $300 Quest 2, but a pricey niche device as Gurman’s report details doesn’t seem to fit that bill quite so cleanly.

The AR/VR content problem 

The scenario I’d imagine both Facebook and Apple are losing sleep over is that they release serviceable AR hardware into a world where they are wholly responsible for coming up with all the primary use cases.

The AR/VR world already has a hefty backlog of burnt developers who might be long-term bullish on the tech but are also tired of getting whipped around by companies that seem to view the development of content ecosystems simply as a means to ship their next device. If Apple is truly expecting the sales numbers of this device that Bloomberg suggests — similar to Valve’s early Index headset sales — then color me doubtful that there will be much developer interest at all in building for a stopgap device, I’d expect ports of Quest 2 content and a few shining stars from Apple-funded partners.

I don’t think this will me much of a shortcut for them.

True AR hardware is likely going to have different standards of input, different standards of interaction and a much different approach to use cases compared to a device built for the home or smartphone. Apple has already taken every available chance to entice mobile developers to embrace phone-based AR on iPhones through ARKit, a push they have seemed to back off from at recent developer-centric events. As someone who has kept a close eye on early projects, I’d say that most players in the space have been very underwhelmed by what existing platforms enable and what has been produced widely.

That’s really not great for Apple or Facebook and suggests that both of these companies are going to have to guide users and developers through use cases they design. I think there’s a convincing argument that early AR glasses applications will be dominated by first-party tech and may eschew full third-party native apps in favor of tightly controlled data integrations more similar to how Apple has approached developer integrations inside Siri.

But giving developers a platform built with Apple or Facebook’s own dominance in mind is going to be tough to sell, underscoring the fact that mobile and mobile AR are going to be platforms that will have to live alongside each other for quite a bit. There will be rich opportunities for developers to create experiences that play with 3D and space, but there are also plenty of reasons to expect they’ll be more resistant to move off of a mutually enriching mobile platform onto one where Facebook or Apple will have the pioneer’s pick of platform advantages. What’s in it for them?

Mobile’s OS-level winners captured plenty of value from top-of-funnel apps marketplaces, but the down-stream opportunities found mobile’s true prize, a vastly expanded market for digital ads. With the opportunity of a mobile do-over, expect to find pioneering tech giants pitching proprietary digital ad infrastructure for their devices. Advertising will likely be augmented reality’s greatest opportunity allowing the digital ads market to create an infinite global canvas for geo-targeted customized ad content. A boring future, yes, but a predictable one.

For Facebook, being a platform owner in the 2020s means getting to set their own limitations on use cases, not being confined by App Store regulations and designing hardware with social integrations closer to the silicon. For Apple, reinventing the mobile OS in the 2020s likely means an opportunity to more meaningfully dominate mobile advertising.

It’s a do-over to the tune of trillions in potential revenues.

What comes next

The AR/VR industry has been stuck in a cycle of seeking out saviors. Facebook has been the dearest friend to proponents after startup after startup has failed to find a speedy win. Apple’s long-awaited AR glasses are probably where most die-hards are currently placing their faith.

I don’t think there are any misgivings from Apple or Facebook in terms of what a wild opportunity this to win, it’s why they each have more people working on this than any other future-minded project. AR will probably be massive and change the web in a fundamental way, a true Web 3.0 that’s the biggest shift of the internet to date.

That’s doesn’t sound like something that will happen particularly smoothly.

I’m sure that these early devices will arrive later than we expect, do less than we expect and that things will be more and less different from the smartphone era’s mobile paradigms in ways we don’t anticipate. I’m also sure that it’s going to be tough for these companies to strong-arm themselves into a more seamless transition. This is going to be a very messy for tech platforms and is a transition that won’t happen overnight, not by a long shot.


Other things

The Loon is dead
One of tech’s stranger moonshots is dead, as Google announced this week that Loon, it’s internet balloon project is being shut down. It was an ambitious attempt to bring high-speed internet to remote corners of the world, but the team says it wasn’t sustainable to provide a high-cost service at a low price. More

Facebook Oversight Board tasked with Trump removal
I talked a couple weeks ago — what feels like a lifetime ago — about how Facebook’s temporary ban of Trump was going to be a nightmare for the company. I wasn’t sure how they’d stall for more time of a banned Trump before he made Facebook and Instagram his central platform, but they made a brilliant move, purposefully tying the case up in PR-favorable bureaucracy, tossing the case to their independent Oversight Board for their biggest case to date. More

Jack is Back
Alibaba’s head honcho is back in action. Alibaba shares jumped this week when the Chinese e-commerce giant’s billionaire CEO Jack Ma reappeared in public after more than three months after his last public appearance, something that stoked plenty of conspiracies. Where he was during all this time isn’t clear, but I sort of doubt we’ll be finding out. More

Trump pardons Anthony Levandowski
Trump is no longer President, but in one of his final acts, he surprisingly opted to grant a full pardon to one Anthony Levandowski, the former Google engineer convicted of stealing trade secrets regarding their self-driving car program. It was a surprising end to one of the more dramatic big tech lawsuits in recent years. More

Xbox raises Live prices
I’m not sure how this stacks in importance relative to what else is listed here, but I’m personally pissed that Microsoft is hiking the price of their streaming subscription Xbox Live Gold. It’s no secret that the gaming industry is embracing a subscription economy, it will be interesting to see what the divide looks like in terms of gamer dollars going towards platform owners versus studios. More

Musk offers up $100M donation to carbon capture tech
Elon Musk, who is currently the world’s richest person, tweeted out this week that he will be donating $100 million towards a contest to build the best technology for carbon capture. TechCrunch learned that this is connected to the Xprize organization. More details


Extra Things

I’m adding a section going forward to highlight some of our Extra Crunch coverage from the week, which dives a bit deeper into the money and minds of the moneymakers.

Hot IPOs hang onto gains as investors keep betting on tech
“After setting a $35 to $39 per-share IPO price range, Poshmark sold shares in its IPO at $42 apiece. Then it opened at $97.50. Such was the exuberance of the stock market regarding the used goods marketplace’s debut.
But today it’s worth a more modest $76.30 — for this piece we’re using all Yahoo Finance data, and all current prices are those from yesterday’s close ahead of the start of today’s trading — which sparked a question: How many recent tech IPOs are also down from their opening price?” More

How VCs invested in Asia and Europe in 2020
“Wrapping our look at how the venture capital asset class invested in 2020, today we’re taking a peek at Europe’s impressive year, and Asia’s slightly less invigorating set of results. (We’re speaking soon with folks who may have data on African VC activity in 2020; if those bear out, we’ll do a final entry in our series concerning the continent.)” More

Hello, Extra Crunch Community!
“We’re going to be trying out some new things around here with the Extra Crunch staff front and center, as well as turning your feedback into action more than ever. We quite literally work for you, the subscriber, and want to make sure you’re getting your money’s worth, as it were.” More


Until next week,
Lucas Matney

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Gillmor Gang: Win Win

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Just finished a Twitter Spaces session. It is an engaging platform, somewhat clunky in feature set but easily a tie overall with Clubhouse. I don’t see this as a horse race, however, more as cooperating teams fleshing out a platform where both will be major players. Like notifications in iOS and Android, the feature set is a push and pull motion where Android delivers deep functionality and Apple alternately pulls ahead and consolidates gains. Though the details can vary, the combined energy of effectively 100 percent of the consumer base mandates best practices and opportunities for innovation.

Something similar is going on in Washington as the Democrats test out their majority of none on the pandemic stimulus bill. The headline in the Times says bipartisanship is dead, but the subheading is the real story. The battle for control of the Senate is closing in on the arcane gerrymandering of the filibuster, or what passes for it after Republican whittling of the original talk ’til you drop croaking of Jimmy Stewart as in Mr. Smith Goes to Washington.

The telltale giveaway is Senator Lindsay Graham, who complains bitterly that the Democrats are steamrolling the COVID Rescue Bill without Republican votes “because they can.” The actual bipartisanship is between the progressives and moderates in the Democratic Party, as the Senator from West Virginia moderates one aspect of the bill to gain the prize of something the President can sign. Not only does it establish Biden’s power to govern but it also provides a roadmap for justifying the necessity of altering the filibuster equation.

Notice how Biden changed the subject from bipartisan negotiations to the power play it turned into. He used the polls to squeeze the Republican moderates where they fear most, the primary battles for control of the House in the midterms. The wave of vaccines are making it almost impossible to put up a political firewall; the anti-mask mandates seem like clueless floundering as people begin to have hope of an exit from the gridlock of partisan obstructionism. It will be hard to run on a platform of denial and death as we reach the end of May.

Governing by success undercuts the argument that government doesn’t work. Breaking the back of the filibuster requires the framing of the issue as finding a way to let government keep working in a bipartisan way. That brings us back to changing the definition of bipartisan as evidenced in the technology arena. In the Apple/Android example, two viable entities bring different strengths to insuring the ability to survive long enough to govern. Google’s lock on the network effect in advertising and “free” services may be challenged by Apple’s focus on privacy and a hardware revenue base, but the net effect is to cancel each other’s vulnerabilities due to the market force of their positions. The bipartisan finesse is that each platform has the other as a dominant customer.

In the same vein, Twitter v. Clubhouse is really not the point. Certainly we can cherrypick the battle as startup v. incumbent: Clubhouse filled with unicorn celebrities and rockstar investors and a builtin tension with the media, Twitter protectively fast following with its natural social graph advantages and struggling with scalability and the fear they’ve sown of abandoning projects before they can thrive. The question begged: what is the nature of the bipartisan compromise that will ensure both end up winners?

The answer is how to make each player the best customer of the other. Twitter’s problem is focus, and harnessing the power of users to hack the system to both theirs and the company’s advantage. The @mention spawned the retweet, providing the analytics that drive Twitter’s indelible social graph. Instagram may be Facebook’s best attempt so far at challenging the fundamental strategic value that the former president used to dominate, but Clubhouse promises to go one big step better with its hybrid of mainstream media and a Warholesque factory engine that creates new stars and the media they generate. This in turn migrates through the entertainment disruption led by the streaming realignment. What exactly is this NFT thing really about?

So Clubhouse has to open up its ability to multitask with Twitter and other curated social graphs. Facebook as a source for Clubhouse notifications and suggested conversations is different than Twitter’s But patching into the sharing icon on iOS will offer substantial access to blunt Twitter’s native integration in Spaces. On the flip side, Twitter’s Revue newsletter tools present an opportunity to mine the burgeoning newsletter surge, using its drag and drop tools to bring not just default social network citations but the implicit social graph of curated editorial rockstars. Not only is the influencer audience rich in signal for advertisers, but these same brands will prove most attractive to Clubhouse listeners looking for value. Win win.

from the Gillmor Gang Newsletter

__________________

The Gillmor Gang — Frank Radice, Michael Markman, Keith Teare, Denis Pombriant, Brent Leary and Steve Gillmor. Recorded live Friday, March 5, 2021.

Produced and directed by Tina Chase Gillmor @tinagillmor

@fradice, @mickeleh, @denispombriant, @kteare, @brentleary, @stevegillmor, @gillmorgang

Subscribe to the new Gillmor Gang Newsletter and join the backchannel here on Telegram.

The Gillmor Gang on Facebook … and here’s our sister show G3 on Facebook.

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The iMac Pro is being discontinued

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Chalk this up to inevitability. The iMac Pro is soon to be no more. First noted by 9to5Mac, TechCrunch has since confirmed with Apple that the company will stop selling the all-in-one once the current stock is depleted.

One configuration of the desktop is still available through Apple’s site, listed as “While Supplies Last” and priced at $5,000. Some other versions can also still be found from third-party retailers, as well, if you’re so inclined.

The space gray version of the popular system was initially introduced in 2017, ahead of the company’s long-awaited revamp of the Mac Pro. Matthew called it a “love letter to developers” at the time, though that particular letter seems to have run its course.

Since then, Apple has revamped the standard iMac, focusing the 27-inch model at those same users. The company notes that the model is currently the most popular iMac among professional users. The system has essentially made the Pro mostly redundant, prefiguring its sunsetting. Of course, there’s also the new Mac Pro at the high end of Apple’s offerings.

And let us not forget that the Apple silicon-powered iMacs should be on the way, as well. Thus far the company has revamped the MacBook, MacBook Air and Mac Mini with its proprietary chips. New versions of the 21.5-inch and 27-inch desktop are rumored for arrival later this year, sporting a long-awaited redesign to boot.

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Investors still love software more than life

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Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. Want it in your inbox every Saturday morning? Sign up here.

Ready? Let’s talk money, startups and spicy IPO rumors.

Despite some recent market volatility, the valuations that software companies have generally been able to command in recent quarters have been impressive. On Friday, we took a look into why that was the case, and where the valuations could be a bit more bubbly than others. Per a report written by few Battery Ventures investors, it stands to reason that the middle of the SaaS market could be where valuation inflation is at its peak.

Something to keep in mind if your startup’s growth rate is ticking lower. But today, instead of being an enormous bummer and making you worry, I have come with some historically notable data to show you how good modern software startups and their larger brethren have it today.

In case you are not 100% infatuated with tables, let me save you some time. In the upper right we can see that SaaS companies today that are growing at less than 10% yearly are trading for an average of 6.9x their next 12 months’ revenue.

Back in 2011, SaaS companies that were growing at 40% or more were trading at 6.0x their next 12 month’s revenue. Climate change, but for software valuations.

One more note from my chat with Battery. Its investor Brandon Gleklen riffed with The Exchange on the definition of ARR and its nuances in the modern market. As more SaaS companies swap traditional software-as-a-service pricing for its consumption-based equivalent, he declined to quibble on definitions of ARR, instead arguing that all that matters in software revenues is whether they are being retained and growing over the long term. This brings us to our next topic.

Consumption v. SaaS pricing

I’ve taken a number of earnings calls in the last few weeks with public software companies. One theme that’s come up time and again has been consumption pricing versus more traditional SaaS pricing. There is some data showing that consumption-priced software companies are trading at higher multiples than traditionally priced software companies, thanks to better-than-average retention numbers.

But there is more to the story than just that. Chatting with Fastly CEO Joshua Bixby after his company’s earnings report, we picked up an interesting and important market distinction between where consumption may be more attractive and where it may not be. Per Bixby, Fastly is seeing larger customers prefer consumption-based pricing because they can afford variability and prefer to have their bills tied more closely to revenue. Smaller customers, however, Bixby said, prefer SaaS billing because it has rock-solid predictability.

I brought the argument to Open View Partners Kyle Poyar, a venture denizen who has been writing on this topic for TechCrunch in recent weeks. He noted that in some cases the opposite can be true, that variably priced offerings can appeal to smaller companies because their developers can often test the product without making a large commitment.

So, perhaps we’re seeing the software market favoring SaaS pricing among smaller customers when they are certain of their need, and choosing consumption pricing when they want to experiment first. And larger companies, when their spend is tied to equivalent revenue changes, bias toward consumption pricing as well.

Evolution in SaaS pricing will be slow, and never complete. But folks really are thinking about it. Appian CEO Matt Calkins has a general pricing thesis that price should “hover” under value delivered. Asked about the consumption-versus-SaaS topic, he was a bit coy, but did note that he was not “entirely happy” with how pricing is executed today. He wants pricing that is a “better proxy for customer value,” though he declined to share much more.

If you aren’t thinking about this conversation and you run a startup, what’s up with that? More to come on this topic, including notes from an interview with the CEO of BigCommerce, who is betting on SaaS over the more consumption-driven Shopify.

Next Insurance, and its changing market

Next Insurance bought another company this week. This time it was AP Intego, which will bring integration into various payroll providers for the digital-first SMB insurance provider. Next Insurance should be familiar because TechCrunch has written about its growth a few times. The company doubled its premium run rate to $200 million in 2020, for example.

The AP Intego deal brings $185.1 million of active premium to Next Insurance, which means that the neo-insurance provider has grown sharply thus far in 2021, even without counting its organic expansion. But while the Next Insurance deal and the impending Hippo SPAC are neat notes from a hot private sector, insurtech has shed some of its public-market heat.

Stocks of public neo-insurance companies like Root, Lemonade and MetroMile have lost quite a lot of value in recent weeks. So, the exit landscape for companies like Next and Hippo — yet-private insurtech startups with lots of capital backing their rapid premium growth — is changing for the worse.

Hippo decided it will debut via a SPAC. But I doubt that Next Insurance will pursue a rapid ramp to the public markets until things smooth out. Not that it needs to go public quickly; it raised a quarter billion back in September of last year.

Various and Sundry

What else? Sisense, a $100 million ARR club member, hired a new CFO. So we expect them to go public inside the next four or five quarters.

And the following chart, which is via Deena Shakir of Lux Capital, via Nasdaq, via SPAC Alpha:

Alex

 

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