The deepest pockets of big tech keep learning that augmented reality is a real-world pain. Thinking a little smaller might pay off bigger.
Take the company once known as
Facebook.
META -6.44%
Less than nine months after going big on the metaverse, the company now known as Meta Platforms is reportedly shelving plans to release commercial AR glasses. That seems part of a broader refocusing of its hardware efforts: A report by The Information late last week has the company also canceling the release of its first planned smartwatch and shifting its Portal video-chat product to a business device. Meta’s Reality Labs segment, which houses its augmented and virtual reality operations, lost nearly $3 billion in the first quarter alone—on less than $700 million in revenue.
Last week also brought news that
Alex Kipman,
who led
Microsoft’s
augmented-reality project known as HoloLens, has left the company. Microsoft has been developing the headset for years, with the first version having been introduced in 2016. But a high price tag and few applications sharply limited the appeal even to many developers. The company decided to focus the device on the enterprise market in 2019, but it has still only shipped between 200,000 and 250,000 HoloLens units since launch, according to market research firm International Data Corp.
And then there is
Apple Inc.
Still the largest U.S. company by market capitalization, the normally secretive iPhone maker has been touting the potential of augmented reality for years. Even back in 2016, Chief Executive
Tim Cook
said during an earnings call that Apple is “high on AR for the long run.” But that effort so far has been confined to AR software tools for developers. Apple’s Worldwide Developers Conference for 2022 came and went last week with no mention of the AR glasses that the company has long been rumored to have in development.
For three companies with a combined war chest of $185 billion in net cash, what could be so difficult? Virtual reality fully immerses a user into a virtual world, while AR layers virtual items onto the physical world. The layering requires both the motion-capture capabilities of VR plus the computing power for machine vision, and artificial intelligence capabilities to process real world imagery in real time. All those capabilities must fit in a head-mounted display unit that is comfortable to wear and doesn’t look ridiculous.
It isn’t that easy.
Snapchat
parent, Snap, Inc. launched its first generation of AR glasses last year and, given they look like something you might throw on to humor your kids on a Disneyland ride, it is probably fortunate they are available to creators only. Snap also publicly sells an earlier generation of its wearable glasses or “Spectacles,” without AR—essentially a camera you wear on your face capable of taking three-dimensional photos—which runs more than $500, including accessories.
Pricing isn’t something Meta was ever blind to. On an earnings call last July, Mr. Zuckerberg was clear that Meta’s model for the metaverse wouldn’t focus on selling devices at what he called “a large premium.” Instead, he said Meta’s mission would be to serve as many people as possible, suggesting he planned to sell hardware for cheap to get consumers to spend once plugged in.
Spectacles have historically been a commercial disappointment for Snap, losing nearly $40 million in unsold inventory and purchase commitments back in 2017—and those were at nearly half the price of today’s publicly available version. Snap says having an active customer base for its hardware at this stage is most valuable for its own research, though it sees Spectacles as having long-term strategic opportunity.
Meta Platforms Inc., less than nine months after going big on the metaverse, is reportedly shelving plans to release commercial AR glasses.
Photo:
Hollie Adams/Bloomberg News
For now, Snap is mostly focused on marketing its AR software, which has been a fast success. More than 250 million people are engaging with Snap’s AR on average every day, according to the company—75% of its daily active user base as of the first quarter. Its software applications today include virtual shopping, allowing a consumer to see how a shoe or eye shadow would look on their body; and education, like using Snapchat’s camera to learn American sign language. Brands can also use Snap’s software to enable their consumers to shop on their websites using AR.
There are smaller ways to make AR pay off now, in other words. Take “Pokémon Go,” an AR-based smartphone game introduced by Google spinoff Niantic in 2016. That game has generated $6 billion in reported lifetime spending since its 2016 launch, according to data from Sensor Tower. In fact, “Pokemon Go” has generated the most revenue of any mobile game launched in 2016 or after with the sole exception of the smash hit “PUBG,” Sensor Tower said.
It is possible that tech giants are investing too much in an extended reality that too few will want to try on. In AR, it seems, a little goes a long way.
Write to Laura Forman at laura.forman@wsj.com and Dan Gallagher at dan.gallagher@wsj.com
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