Venture Bytes #40 - The Future of AR is Now

The Future of AR is Now

Every year there seems to be a single buzzword that makes its way around Silicon Valley. Last year, it was machine learning, with major players such as Google and Apple doubling down on their efforts to advance the machine-learning capabilities of their platform. The push to better machine learning certainly isn’t slowing down, but Silicon Valley has ushered in a new area of focus lately: augmented reality (AR). Big players such as Google and Apple have pushed hard on AR lately, and believe that AR will be an important technology of the future. A few years ago, Silicon Valley was focused on virtual reality, with companies such as Oculus promising to bring us all into a VR future. While the VR industry has expanded, and the technology advanced, the latest trends in the tech industry point to an augmented future, not a virtual one.

Apple, for example, released ARKit to developers, which turned iOS into the largest augmented reality platform overnight. Now, with a major operating system supporting augmented reality, third party software developers have more incentive than ever to integrate the technology into their own products and services. This has already yielded real-world results, with companies like Ikea and Target pushing innovative uses of AR into their apps. Ikea’s AR features allow users to point their phones at any surface and see what a piece of furniture would look like there. As more companies adopt AR and implement it across their hardware and software, it is increasingly apparent that AR will change business and consumer technology in ways that VR never could.

Virtual reality is limited by the nature of its interaction with users. When someone experiences VR, the headset and any other peripherals blocks out the world around them and simulates a new one for them to experience. Augmented reality is different in that it doesn’t take the user out of one reality into another, but rather changes or enhances this one. Whatever image is generated by AR software is transposed over the world around the user, allowing them to both see their surroundings and whatever the AR program may have generated. This has potentially far-reaching applications, especially in enterprises. Everything from warehouse logistics to surgery could be enhanced by some implementation of AR, and companies are hard at work to make that change come sooner.

While Apple, Google, and Microsoft are moving forward with their vision for AR, Silicon Valley startupss are also following suit. Magic Leap, a startup dedicated to AR-based image generation, is developing a a product which it says will generate images that seamlessly integrate with the real world, blurring

the line between what is real and what was made by the software. The company is rumored to be raising an additional $1 billion, which it will use to advance its product development. While Magic Leap has yet to reveal any exact details on what product they plan to bring to market, there are other rumors which suggest the company is preparing to ship a limited number of test units to a small group of users. Magic Leap is just one example of the new focus put on AR throughout the tech industry, and the recent flow of money seems to suggest that as well, as Magic Leap could be worth over $6 billion after the new round of financing, per Pitchbook.

VR and AR will always coexist, but AR has the potential to change wide swaths of everyday life, enhancing the world around us and how we interact with it. Everything from the latest video games, to shopping software, to social media, and many things in between could be complimented by the integration or adoption of augmented reality technology. As the software moves forward in the push to advance AR, so too has the hardware. Apple CEO Tim Cook has hinted that the company is researching a technology that could lead to AR eyeglasses, and many of the latest phones in both the iOS and Android ecosystems are shipping with the hardware necessary to advance augmented reality. While Silicon Valley will inevitably adopt another buzzword and highlight efforts in other fields, AR is more than a passing fad. Indeed, the technology and its vast applications are here to stay.

Who’s Hungrier–Consumers or Entrepreneurs?

When was the last time you called a restaurant for delivery? If it was over a year or two ago, you’re in good company. As the digital economy continues to take over many facets of life, we are bearing witness to an interesting confluence of trends. Seemingly all at once, people (millennials especially) are moving back into the cities, cooking less at home, and eating out or ordering delivery more than ever before. Their method of ordering delivery has ushered in an entirely new industry: the delivery app. The near ubiquity of smartphones has made it easier than ever for people to order food with a simple click of a button (or, more accurately, tap of a screen), which is why companies like Postmates, GrubHub, UberEATS, and Amazon, have grown so explosively in the past few years.

Amazon is of course the juggernaut on this list, allowing users to order anything under the sun to their front door, and even providing same-day delivery of groceries through its Prime Now service. GrubHub and its subsidiary brand Seamless emerged as the marquee intermediary between people wanting deliveries and the restaurants willing to provide them. Through the GrubHub platform, which is accessible on both the web and a mobile app, users can order from a wide variety of nearby restaurants, with delivery directly to their door. Services like GrubHub and Seamless represent intermediary applications that connect consumers with restaurants offering proprietary delivery. Companies such as Postmates and UberEATS, however, operate their own courier networks, connecting customers to restaurants that don’t typically deliver. This serves to illustrate the growing trend toward urban living and demand for smartphone-based deliveries.

While GrubHub and Seamless are limited to food from local restaurants, Postmates allows users to order anything from restaurant meals, groceries, alcohol, and even over the counter medicines. Postmates’ business model greatly benefits from densely populated urban centers where there is a higher likelihood of constant delivery requests and a shorter distance required to complete them. Other companies have followed suit in providing deliveries through their own logistical networks, such as UberEATS and Amazon Restaurants. While these companies have followed Postmates in including deliveries within their business, Postmates remains the only major platform that allows users to request such a wide breadth of products. The company’s platform has grown to many cities across the United States in the last few years, and has seen overall sales skyrocket as a result. According to Forbes, Postmates is conducting over two million deliveries every month, which the company says led them to a gross merchandise value (GMV) of over $1 billion for 2017 (annualized based on Q1 2017). GrubHub still leads in the space with more than 8 million average monthly orders, but every player in the smartphone delivery space stands to benefit from national trends and a massive total addressable market.

The total addressable restaurant market in the US is roughly $210 billion (per Morgan Stanley Research), and only 5 percent of that is made up by the online delivery industry. Postmates especially stands to benefit, as the restaurant delivery becomes increasingly more competitive. The company enjoys a heavy first mover advantage in the broader mobile courier delivery space. As more millennials embrace the digital economy and move to cities in the process, the online delivery business is poised for strong secular growth.