- (1:00) - Facebook Hires Regina Dugan: Former DARPA Engineer
- (5:30) - Tim Merel of Digi-Capital: AR & VR Expert
- (8:45) - Pokémon GO's Success
- (11:45) - 5 Big Challenges for AR
- (16:30) - Tim Merel's Four Waves of AR
- (18:45) - Why Apple Will Own AR
- (23:30) - Alibaba: The Amazon of China
- (27:00) - Episode Roundup: Podcast@Zacks.com
As a fanatical Facebook (FB - Free Report) investor, I have been ultra-curious lately about why they hired the former lead engineer of DARPA, Regina Dugan, to work in their own top secret labs. Actually, they poached her from Google’s (GOOGL - Free Report) top secret lab ATAP (Advance Technology and Projects) in 2016.
Yes, I know they didn’t spend $2 billion on Oculus Rift on a virtual reality (VR) hardware whim. But 98% of Facebook’s $27.6 billion in revenue last year came from digital advertising. And probably 98% of their projected $39 billion in sales this year will be from ads.
So I am curious because I want to know what they are up to in developing advanced technology that ties into consumer experiences which drive more business ad sales.
Because that has to be the direction they are going. So, I have reasoned very simply that it’s some combination of three markets:
(a) virtual reality shopping experiences that let consumers see, test, and “feel” products anywhere in the world
(b) enhanced “social gaming” experiences that draw non-traditional gamers from their vast user platforms (think of the success of Pokemon GO’s augmented reality)
(c) enhanced VR and AR (augmented reality) education platforms and tools for expanded, flexible and rapid learning
Beyond what Facebook might be doing, there are numerous practical applications of AR smart-glasses for business and industry. Picture a factory or warehouse worker whose perception is aided by a pair of glasses that can do everything from count products, measure parameters and detect problems to advise on tolerances, solutions, and even warn of danger.
Building 8 vs. Apple’s New Space Age Campus
While very few of us will ever get inside Facebook’s Building 8 to find out what Regina and Mark Zuckerberg are up to, I did find one excellent source of where all this technology is going.
Tim Merel is the Managing Director for a research and advisory firm called Digi-Capital, where they advise AR/VR, mobile & games leaders across America, China, Japan, South Korea and Europe.
And he has written some excellent articles on TechCrunch.com for the average investor like me to understand all the players in the AR/VR jungle.
In a January piece, he laid out a bold prediction for the growth of these markets after a 2016 full of exciting surprises and successes like GO...
“VR will be big, AR will be bigger and take longer.” What sounded revolutionary when we first said it two years ago has become accepted wisdom. But now the market has actually launched, and we’ve got 12 months of real-world performance and major tech players’ strategies emerging. And that’s changed our views on VR/AR growth. A lot.
Our new base case is that mobile AR could become the primary driver of a $108 billion VR/AR market by 2021 (underperform $94 billion, outperform $122 billion), with AR taking the lion’s share of $83 billion and VR $25 billion.
Merel also highlighted in that article the 5 major obstacles to any new AR product becoming mainstream…
In response to Pokémon GO, Apple’s Tim Cook said that Apple is “high on AR in the long run…continue to invest a lot in this…AR can be huge.” Google’s Sundar Pichai, Facebook’s Mark Zuckerberg and Microsoft’s Satya Nadella also hailed Pokémon GO as a major early win for AR.
But there are five big challenges AR needs to conquer for mass consumers:
1) hero device (i.e. an Apple-quality device, whether made by Apple or someone else)
2) all-day battery life
3) mobile connectivity
4) app ecosystem
5) telco cross-subsidization
To hear why Merel thinks Apple (AAPL - Free Report) will be the dominant player able to conquer all 5 of these challenges, be sure to listen to my podcast. He breaks down the AR revolution into 4 distinct waves of software and hardware and explains why Apple already owns them.
Disclosure: I own shares of Facebook, Alibaba, and Apple.
Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the TAZR Trader portfolio.