There are two periods in a new platform’s lifecycle when it’s possible to build big new businesses. One is early, when the idea first emerges, and it’s by building the platform itself. Examples are Apple for mobile, and Oculus for virtual reality. The other is late, after there are over a hundred million people on the platform, because that’s when there are enough potential users for apps to take off. There are lots of obvious examples of mobile apps, starting with Instagram, Uber and WhatsApp. Anything in middle — meaning after the platform is built but before a hundred million people are using it — will likely die a painful death.
For the past few years, augmented reality (AR) has been stuck in this “valley of death”. But that’s about to change because, in the next twelve months, hundreds of millions of people will get their first AR-capable device, instantly creating a huge user base for app developers.
The new AR-enabled device is the iPhone, and its new operating system, iOS 11, which Apple will announce on September 12th. Buried inside iOS 11 is ARKit, a new framework that enables developers to build AR applications. Not to be outdone, the Android team just announced ARCore, which does pretty much the same thing on Android phones. But ARKit is more interesting, because Apple controls both hardware and software and so can integrate them more closely, to support higher quality apps (the Android ecosystem will catch up, it will just take some time).
This is exciting because mobile AR could be transformative. Hands-free AR devices (e.g., glasses) have been around for a while. But none have taken off, so people live two separate lives — one physical and the other virtual. Mobile AR provides a “magic window” in which you can blend the two, and see the virtual world merge with reality. Going forward, any app developer can use the camera, accelerometer and gyroscope to map digital images onto real world objects with much greater precision than was possible before.
The big question is: what will people want to do with it? Today, the obvious answer is gaming and self-expression. Pokemon Go, the first AR-based game, has zoomed to over $500 million in revenue, and Snapchat Filters are a huge driver of Snap’s popularity. But what else? What can we expect beyond that, now that any developer can easily build an AR-based app?
We don’t yet have a good answer, but history offers some clues. First, it will be something unexpected. Just as no one would have guessed in 2010 that Uber would be the most valuable new app built on mobile, it’s unrealistic to expect us to see AR’s highest-value application today. Second, AR will be added as a feature to every existing app. Why not show you the furniture as it looks in your living room, or the shirt as it would look on you? Third, there will be some new, native-to-AR experience that captivates consumers and breaks out. For example, the window people spend most time looking through is a windshield; imagine an app that sits on the dash and overlays digital information on real world objects (e.g., road names or store reviews or even the social profile of the car owner in front of you, identified by their license plate).
Perhaps the best historical analog is user generated content, and more specifically the ability to comment on websites. When commenting became possible, every website added the ability for users to leave comments. It became a commodity feature — something no one even thought about. But it also enabled some incredible businesses, in travel like TripAdvisor or local services like Yelp, that used comments to help consumers make better decisions. There will almost certainly be the equivalent in AR.
At Sequoia, we are excited to explore new AR apps and dream about a future that integrates the virtual and physical worlds. Whether on mobile today, or other hands-free devices tomorrow, it’s the future we cannot wait to see.