In 2016, the next “it” trend in technology was virtual reality. VR, as it was termed by the tech hipsters, was going to revolutionize the way we experience life, interact with product brands and revolutionize education. Looking back with the benefit of hindsight in 2017, and observing the crazy world that has befallen society since those now seemingly wildly optimistic days, one opinion is starting to emerge: virtual reality is dead. But there is a new “it” technology trend replacing VR, a Macquarie report noted. The research analysts who fanned the flames of excitement over VR now say AR, or augmented reality tech, is really the next big thing. Really.
Macquarie analysts brave enough to admit they were wrong on VR, point out that augmented reality tech is different
Investors have been tepid to embrace augmented reality tech, Macquarie Capital analysts Benjamin Schachter and Ed Alter note in an August 31 research note. And who could blame them after the experience they might have had with VR over promises in the past.
TechCrunch’s Lucas Matney notes that battle to be king in the war over the top VR platform is no longer the issue as the cheese has moved in this maze.
“Over the past several months it’s become clear that the war is no longer HTC and Oculus trying to discover who is Betamax and who is VHS, now they’re just trying to ensure that high-end VR doesn’t turn out to be LaserDisc,” she observed as the landscape shifted. “Though few of the big players are keen to readily admit it, many investors and analysts have been less than thrilled with the pace of headset sales over the past year.”
VR investors have that feeling of being burned by the emotional commitment they made to the next big thing, believing in Santa Claus and finding out it was all a fantasy. And this is now stinging the augmented reality tech investing climate.
“We are painfully aware of how wrong we were on VR,” Macquarie's Schachter and Alter admit, but this time it is different. “We think investors must understand the potential for AR across verticals. In fact VR’s failures are lowering the expectations for AR among investors, media, and users,” creating potential opportunity.
But is there a meaningful difference between AR and VR?
AR is about enhancing life as it is without the need for obtuse equipment that was required by VR
As The Economist points out, VR creates an entirely different reality, a new world. AR, on the other hand, looks at the existing world and enhances it with graphic overlays. The publication uses the example of “The Terminator” movie where the lead robot character, played by Arnold Schwarzenegger, “sees a constant stream of useful information laid over his view of the world, a bit like the heads-up displays used by fighter pilots.”
Anyone who watches golf on television is experiencing augmented reality when the flight path of the ball, difficult for the naked eye to see, is enhanced with an afterglow. Unlike virtual reality, augmented reality provides an informational enhancement to the world as it is while virtual reality changes the world.
Another material difference is that with VR, users were required to manage clunky and obtuse headsets and meaningfully change their normal patterns of behavior to access the experience. With AR, users don’t change anything, the experience is retrofitted into cell phones, computers, and TVs.
Working on the assumption that AR is materially different from VR, Macquarie considers a second take on the investing thesis, outlining a number of investments that enhance the world as it is.
Apple Computer is among those taking the lead, with 3D drawing applications transforming traditional two-dimensional view into a more meaningful experience. Video overlays to static photos and drawings used in applications from the likes of ARKit from Trixi Studios are showing promise, as are videos inserted into real world experiences developed by 5th Wall, as another example of emerging technology the analysts are watching.