Samsung – Edge dancer pt. II

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I think Bixby will struggle against Google Assistant.

  • Samsung has launched its offensive on the digital assistant market but I think it will still be dancing around the edge of the main act on the Galaxy s8: Google Assistant.
  • Samsung has announced that its new digital assistant, Bixby will be present on the Samsung Galaxy 8 with its own dedicated key on the side of the device.
  • Bixby promises to offer:
    • First, completeness: This promises to give users complete control of enabled apps rather than the few tasks offered by other assistants.
    • Second contextual awareness: Samsung is promising that Bixby will be aware of the context within which it has been triggered, making it more relevant and useful.
    • I suspect that it will do this using the hooks in Android that Google wrote to enable Google Assistant to do the same thing.
    • Third natural language recognition: Bixby should be able to understand complex, multi-part questions as well as prompt the user to clarify the pieces that it does not understand.
  • These features are very similar to those promised by Viv, the artificial intelligence company that Samsung purchased in October 2016 which is clearly the source of this product.
  • If Bixby can truly fulfil the promises that it is making, then it will almost certainly will be better than Google Assistant.
  • However, I think that this is a very big ask given that RFM research has found that AI excellence to date has been a factor of time and data volume.
  • Viv was founded in 2012 and has no data from commercial products while Google has been crunching data for 20 years and has orders of magnitude more data than its nearest rival.
  • Consequently, I think that compared to this highly ambitious billing, Bixby is going to fall very far short of the promises that it has made.
  • Furthermore, Samsung’s delivery of Bixby is going to be hobbled by the 2014 agreement that it made with Google where it agreed not to compete in the ecosystem (see here).
  • This is why I suspect that Bixby has been relegated to a button on the side of the device whereas it will be Google Assistant that is sitting on the all-important home button.
  • As a result I think on the smartphone, Bixby will lose out to Google Assistant but on other devices it has some chance.
  • Samsung has a good portfolio of other electronic devices, which combined with its SmartThings offering, could allow Bixby to offer intelligent and intuitive control of other Samsung devices.
  • This could help Samsung to encourage greater ownership of Samsung devices across its range but again this will depend on how good Bixby really is.
  • Over 20% of all Google mobile searches are already done using voice meaning that many users are already conditioned to pressing the home button and asking as well as being used to Google’s quality of service.
  • Consequently, I think that the odds are heavily stacked against Samsung having much success with Bixby but as long as it can continue to outsell Huawei by more than 2 phones to 1, the profitability of its handset business should remain intact.
  • I still pretty cautious on Samsung as I am not convinced that the full fall-out from the Note 7 disaster has been felt in terms of market share, which is what makes the Galaxy s8 launch so important.
  • I prefer Baidu, Tencent and Microsoft.

 

Amazon vs. Google – Homefront pt. II.

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Amazon is pre-emptively moving to keep Google out.

  • Amazon is pulling out all of the stops to ensure that it is Alexa, rather than Google Assistant, that ends up becoming the nerve centre for controlling the smart home.
  • In its latest move, Amazon is offering credits for AWS that are likely to ensure that connecting one’s smart home device to Alexa remains free in almost every circumstance.
  • As the scope of Alexa improves and users can do more with Alexa, it is likely that creators of smart home devices will require more space on AWS that will require them to start paying Amazon.
  • Most device developers are small start-ups with very limited funds meaning that this will be a big incentive to do more with Alexa.
  • At the moment, the free tier gives developers 1m AWS Lamda requests and 750 hours of EC2 compute time per month.
  • Beyond that, developers end up incurring a monthly charge which is something that Amazon is wisely keen to avoid.
  • With this new program, Amazon is offering a one-time credit of $100 as well as $100 per month towards any charges that they incur as a result of usage of their devices.
  • This is likely to ensure that almost all developers of smart home devices will not have to pay anything to Amazon until they are generating so much usage that they are making plenty of money themselves.
  • I think that this is a very shrewd move as it encourages more developers to sign up to make their devices work with Alexa and also encourages them to make the skills deeper and more intuitive.
  • Currently, most skills are very basic and as a result they suffer from usability problems which in most cases makes it easier to turn the device on manually rather than using Alexa.
  • This looks like a pre-emptive move to keep Google at bay as I see Google making rapid moves to improve its Google Home developer program after being all but wiped out at CES 2017.
  • Even though Amazon has close to 10m devices installed in the houses of users compared to Google at 0.5m – 1m, the Google Home experience is so superior to Alexa that I still see a risk of Amazon losing this race (see here).
  • This is why I see Amazon doing everything that it can to show developers love and support which is something that to date, Google has badly neglected.
  • The result is that very few of the smart home device developers are making sure that their devices works with Google Home giving many users more reason go with Amazon’s Echo devices rather than Google.
  • Amazon is also very fortunate that the market’s view of Alexa is so positive as a side by side test of the Amazon Echo against Google Home shows how inferior Amazon is compared to Google.
  • This is why it is still Google’s battle to lose but Amazon is clearly doing everything that it can to ensure that it is Alexa rather than Google that dominates the potentially extremely lucrative market for intelligent home automation.
  • From an investment perspective, neither of these two companies are desperately appealing leaving me preferring Baidu, Microsoft and Tencent with Apple for long-term income based investors.

 

Android Security – Swiss cheese pt. V.

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Leaks look dated but still push Google towards proprietary Android.

  • Even if Google could quickly fix the vulnerabilities in Android that are being exploited by state sponsored hacking, it would be around 4 years before the majority of Google Android users were protected.
  • WikiLeaks has released 8,000 pages of documents that supposedly reveal all the tricks and hacks used by UK and US security services to turn ordinary consumer electronics products into surveillance devices.
  • iPhones, Android smartphones and Samsung TVs appear to be most specifically targeted but I have a feeling that this data is not comprehensive and may actually be considerably dated.
  • This is for two reasons:
    • First: there is no evidence in the leaked documents that any of the Android exploits apply to any version later than 4.4 (KitKat) meaning that 65.5% of Android devices may be unaffected by any of these revelations.
    • This leads me to think that these documents might in fact be very dated as I find it very hard to believe that vulnerabilities in Android suddenly went to zero with the release of version 5.0 (Lollipop) in 2014.
    • Whether these exploits were already known and have already been patched or whether these are new vulnerabilities is unclear at this time.
    • Second: Experts that have looked at the leaked iPhone vulnerabilities have stated that almost all of the leaked vulnerabilities are known and have in all likelihood already been patched.
    • Consequently, it seems likely that anyone running iOS10+ is already immune to these exploits.
    • Again, I find it difficult to believe that the occurrence of vulnerabilities has ceased and that these leaks could relate to pretty old data.
  • Mobile security firm Check Point is of the opinion that this leak may be snapshot of exploits used in early 2016, but I think the Android data indicates a much earlier point in time.
  • To make matters more difficult, assuming there are new exploits in this leak, no code has been released meaning that Google will have to search through millions of lines of code to find the exploits referred to before they can be patched.
  • Furthermore, even when Google has found these vulnerabilities and fixed them, it will then take around 4 years for these fixes to make into the hands of all Google Android device users.
  • This is for two reasons:
    • First: Most Android devices are not updatable.
    • Android is a commoditised, brutally competitive market meaning that in the mid-range, every cent of cost matters.
    • Making a device updateable means that extra resources have to be added to the device which are never reflected in the price.
    • Consequently, the vast majority of Android devices are not updateable to later versions of Android as there is no incentive for the device maker to add this capability.
    • Second: Google has no control over the update process for any of the devices that run its services.
    • It can update Google Mobile Services (GMS) from Google Play but lower level system updates (Android) are controlled by either the maker of the device or the mobile operator.
    • Google has no power compel these entities to update their devices and only has control of updates for its own, Pixel and Nexus devices.
  • It seems possible that this data leak represents some of the oldest and least relevant tools used by state sponsored hackers which is going to put even greater pressure on Apple, Google, Samsung to ensure that their software is watertight.
  • I think that this represents yet another reason for Google to take Android proprietary as having complete control over the code will enable it to quickly fix and distribute any vulnerabilities it identifies.
  • It will also enable Google take greater control of the user experience resulting in a more consistent, fun and easy to use experience for its ecosystem users.
  • I continue to hope to see signs of this at Google i/o in May this year.
  • I still think that Google is more than fairly valued and prefer Microsoft, Baidu and Tencent with Apple for long-term, income based investors.

Smart Home – Back to front.

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Apple is losing badly despite offering the best user experience.

  • Apple has redesigned its HomeKit website (see here) in order to generate interest around its smart home offering but despite having the best experience, it remains a very distant third in developed markets.
  • HomeKit enables smart home devices to be controlled with Siri as well as the Apple’s own Home app that appeared with iOS10.
  • I think that Apple has three main problems with its offering for smart home:
    • First: Hardware. device makers need to install a piece of Apple hardware to enable them to work with HomeKit.
    • This adds a level of complexity and cost for device makers who in many instances are small companies with only a few employees and very limited resources.
    • Consequently, most have ignored HomeKit completely and simply written their own app for iOS devices that talks to the device directly over WiFi or Bluetooth.
    • Second: Data. Just like Digital Life services, HomeKit brings together multiple devices and enables them to work together.
    • The device makers get access to the data that their devices generate, but it is only Apple that gets to see the whole picture.
    • RFM research has found on multiple occasions that understanding the bigger picture is far more useful and offers a much greater monetisation opportunity than looking at data sets individually.
    • I think that this is why device makers who understand this concept generally decline to make their devices work with HomeKit or HealthKit.
    • Third: Device. Apple has no device within which Siri can reside within the home.
    • Usage of both Alexa and Google Home show that over 60% of all usage is generated when the user’s hands are busy with another task.
    • This makes the use case of Siri on a device that needs to be removed from the pocket not as easy or as intuitive as Alexa or Google Home.
    • Furthermore, both Alexa and Google Home can hear the user from a distance which also improves the use case within the home.
    • Hence I think it quite likely that Apple will launch a home speaker device of its own or enable third parties to embed Siri in their products.
  • The irony of the current situation is that Apple has by far the best smart home user experience.
  • This is because Apple has understood the importance of integrating these devices together into single commands and use cases like going to bed, leaving the house or arriving home.
  • This makes it easy to turn off all the lights, lock up, turn down the heating and so on with a single button press which is something that neither of the other two have come close to offering.
  • Furthermore, I suspect that HomeKit will end up being far more secure than the other two but at this point in time, no one seems to care.
  • Amazon has both first mover advantage and has done the best job of showing developers love and support.
  • The net result is that there now over 10,000 skills available for Alexa which continues to grow rapidly despite the awful user experience offered by most of these skills.
  • Consequently, I still think that this is Google’s race to lose as its product is by far the best, and its decimation by Amazon at CES seems to have shocked it into getting its developer activities up to scratch.
  • Of the three, I would continue to prefer Apple but overall I still like Baidu, Microsoft and Tencent.

MWC Day 1 – The time machine

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The taxonomy of MWC is changing

  • Nokia has through nostalgia has created some excitement in the mobile phone industry but elsewhere the signs of maturity are everywhere.
  • The notable fall out coming from Microsoft, Blackberry, Huawei amoung others who have substantially reduced the sizes of their stands has been replaced with:
    • First: Automakers who outside of BMW still seem to be a little unsure of what they are doing at this show.
    • They have realised that mobile holds the key to preventing them from becoming Android handsets on wheels but are very uncertain how they intend to address this problem.
    • I think that Tesla has a very good idea of what it is doing in this space and consequently does not feel that it needs to be here.
    • Second: An endless list of handset brands who are all selling almost exactly the same device where the proposition is very unclear.
    • Two exceptions are Wiko and LeEco who are at least trying to offer points of differentiation on the device even if they are having a very hard time doing so.
    • Condor from Algeria and Accent from Morocco are doing stock Android but are attempting to achieve some differentiation by focusing on their respective regions.
  • Furthermore, the app industry, largely present in Hall 8,8.1 and the hallways, has moved into a new phase of development.
  • Gone are the heady days of 2015 when it was all a out adding users at any cost.
  • Now the focus is clearly on engagement, analytics and monetization.
  • Developed markets are pretty much saturated from a user perspective meaning that how to delight those users and making sure that they stay engaged is of paramount importance.
  • Consequently, the suit count in Hall 8.1 has gone up substantially as has the size of the average stand.
  • This implies that many of the smaller, ineffective players have been weeded out leaving the bigger players who have much larger marketing budgets.
  • Consequently MWC has revealed an industry that looks very mature (just like it did in 2005) but this time I can’t see anything on the horizon to upset the status quo.
  • I continue to prefer the ecosystems over the handset and PC makers in general as they, at least, have a way to differentiate

MWC Day 0 – Prominent feature.

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A feature phone steals the show.

Huawei – Rear view mirror.

  • Huawei launched its latest flagship the P10 and P10 plus but did not seem to be very excited about its products in a press conference that felt like it was simply going through the motions.
  • This was exemplified by the fact that Huawei had Pantone on stage talking for 15 minutes about two of the multiple colour variants in which the P10 is being launched.
  • Elsewhere, Huawei made incremental improvements to the camera and photography experience as well as marginal tweaks to the user experience.
  • At its heart, just like every other Android phones in developed markets, the P10 is a Google device and where Huawei is able to drive further usage, it will be Google that really benefits.
  • This is because, Huawei’s products remain largely undifferentiated to the user meaning that Huawei cannot charge a premium.
  • Huawei has made good progress with its brand this year rising to No. 72 (Interbrand) but even Samsung at No. 7 only really makes money from its volume, not premium prices.
  • Consequently, Huawei must find something with which to excite users otherwise it will continue to grind out 2-4% operating margins in the best instance.
  • Huawei has made good share gains but barely enough to be seen only as a dot in Samsung’s review mirror.

Nokia – No downside to old glory.

  • Nokia relaunched itself into the handset market with a throwback to its old glory days but the key ingredient, profit, looks unlikely to make a reappearance.
  • Global HMD, a company backed by Foxconn, launched three Android devices and new version of the classic 3310.
  • The 3310 has three features of note:
    • First: the battery lasts a month
    • Second: it has the Snake game
    • Third: it has the old Nokia ringtone.
  • Beyond that it is a design classic and while not sexy, it is likely to appeal in Africa and India where nearly 100m feature phones still sell each quarter.
  • Global HMD also launched the Nokia 3,5 and 7, which are three unremarkable Android devices that are really going to struggle to compete against the Chinese brands.
  • The real clue to the situation at Nokia and HMD Global is in the prices being charged for these new devices.
  • The 3310 is starting at $51 which in Nokia’s heyday would have been priced at almost half that and Nokia still would have made great margins on it.
  • The Android devices are priced at $150, $200 and $315 which in my opinion do not stack up that well against what the Chinese are offering.
  • This is clearly because Nokia no longer has the power of 40% global market share or its brand.
  • Consequently, if it wants to make headway in Android, it will have to do something interesting with the devices or cut its prices.
  • Good news for Nokia (the company) is that its exposure to this is simply the brand licence fee that it receives upon which gross margins will be almost 100%.
  • Consequently, there is no downside for Nokia if this does not work out as planned.

Samsung – Comes in the box.

  • Samsung launched a series of devices that I think need to have the accessories included in the box to drive user interest high enough to make a purchase.
  • Following a pitch on the needs of 5G and the launch of some infrastructure, came 2 tablets of which innovation around the new S Pen was the most interesting.
    • First: the Samsung Galaxy Tab S3 which was an unremarkable Android Tablet other than it has four speakers and that the S Pen comes in the box.
    • Second: the Galaxy Book which is a Windows 10 Pro tablet that is very thin but in my opinion is far from cutting edge.
    • At the cutting edge, I find the Eve V which is 7th generation i7 and is remarkable in that the device is fan-less.
    • The Eve V is a little thicker at 8.9mm but it delivers a more powerful processor, double the RAM, double the storage, more USB ports and a kickstand.
    • To jazz the Galaxy Book up Samsung is including both the S Pen and the type cover in the box with the device.
  • The S Pen stole the show in my opinion as it works with both Android and Windows Tablets, is integrated with Photoshop and Staedtler is doing a version of the S Pen that looks just like its classic yellow and black pencil.
  • Finally, a new version of the Gear VR was launched in conjunction with a hand controller that, of course, also comes in the box.
  • Of software, services, artificial intelligence and ecosystem there was no real mention other than a nod to Samsung’s cross device strategy powered by Samsung Flow.
  • The net result is that with the launch of the Galaxy s8 now on March 29th, these launches are unlikely to have any real financial impact this year even with the accessories already in the box.

Take Home Message

  • The launch of the new Nokia 3310 was the highlight of my day which is an indicator of how difficult it has become to innovate in smartphones.
  • Industry profits are gobbled up by Apple, Google, Baidu, Tencent and Alibaba leaving those without an ecosystem struggling for relevance.
  • Add this to a market that is unlikely to grow much in unit terms and may decline in monetary terms leads to a pretty grim outlook all round.
  • This is why I continue to prefer the ecosystems of whom Tencent, Baidu and Microsoft are my top choices.

Samsung – Residual fall-out.

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It is still the long-term damage that I fear. 

  • While Samsung appears to have contained the disaster that was the Note 7, I remain concerned that the reputational damage could have an impact in market share in developed markets and especially at the high-end.
  • Samsung has taken a massive $5.4bn hit to profits, apologized profusely for the recall and admitted shortcomings in its quality and assurance process but I don’t think that the full effects of this issue have fully hit home.
  • This is because there is also the potential for market share and pricing pressure to materialise from the weakening of its brand and its reputation as a vendor of high quality consumer electronics.
  • The first sign of this is in with a survey from Harris Poll which shows that Samsung reputation has fallen from No 7 in USA to No. 42, just one position above the US Postal Service.
  • Apple and Google have remained pretty steady at no. 5 and 8 respectively but Samsung is now thought to be less reputable than Hewlett-Packard, GE and Sony, which are competitors that do date, Samsung has had no trouble in defeating.
  • What concerns me is that when the Galaxy s8 and s8 edge are available, users in developed markets are likely to think a little bit harder before purchasing and may go so far as to consider something from LG, Google, Sony or Huawei.
  • Hence, I think that Samsung will have to price the Galaxy s8 and s8 edge quite carefully as well as go on a major charm offensive to calm user fears that these products will suddenly burst into flames.
  • I am certain that these products will be the safest that Samsung has ever made but that is not how the mindset of the average smartphone buyer operates.
  • Both of these charm offensives will cost money in terms of pricing and marketing spend.
  • The high-end devices that Samsung makes generate the majority of its handset profits and I am somewhat concerned that profits could suffer as the aftershocks of this disaster make themselves felt.
  • This is why I have been cautious on Samsung since the problem with the Note 7 surfaced, and why I would be thinking of taking some profits following the recent excellent performance in the share price.

Google vs. Amazon – Homefront.

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This could be a repeat of VHS vs. Betamax. 

  • Google is adding functionality to allow Google Assistant to compete more directly with Amazon’s Alexa, but what it really needs is to offer love and support to developers of smart home products.
  • Google’s failure to do this was visible on every stand at CES where a smart home product was to be found as they all will work with Amazon Alexa
  • Only a very tiny fraction will work with Google Assistant.
  • Google’s shopping functionality has involved singing a up a series of retailers such as Costco, PetSmart and Target to link their online ordering systems with Google Home such that a similar (to Amazon) shopping experience can be offered through the device.
  • Measuring up to Amazon in this category is going to be tough because Amazon has one system through which millions of products are available globally, whereas Google will have to sign up lots of retailers in every locality where it aims to have this service available.
  • However, when it comes to almost all of the other features, Google Assistant is capable of offering a vastly superior user performance than Amazon Alexa.
  • This is because the AI that powers Google Assistant is top of the class while Alexa’s is second rate at best.
  • Furthermore, the Google Home speaker is $50 cheaper than the Amazon Echo and in my opinion, a nicer looking product.
  • However, where Google falls over is home automation and here Amazon is currently ruling the roost.
  • RFM research has found that device developers receive plenty of love and support from Amazon which combined with the fact that there are now 8m devices in the hands of users drives them to make their products work with Alexa right from launch.
  • This is despite the fact that using many of these products with Amazon Alexa is a frustrating and fragmented experience.
  • A good example of this is Plex, which recently enabled an Alexa skill so that the user could control the Plex player using Alexa.
  • However, because Alexa lacks the brains to make service intuitive, the user experience is so bad that one tries to control Plex with Alexa once and quickly returns to the remote control.
  • In contrast to Amazon, many developers find that Google is difficult to work with and some did not even know who to at Google to call to enable Google Home with their product.
  • This is the opportunity for Google Home even though it only has around 0.5m devices in the market today.
  • I think Google needs to ramp up its love and support for developers immediately and thinking that they will just turn up at Google i/o is not nearly good enough.
  • There is a whole segment (home) of the digital ecosystem up for grabs right now and I still maintain that this is Google’s to lose.
  • However, at the moment it is Amazon that is blazing the trail and if Alexa makes it into the majority of households before Google pulls its finger out then the game will, in all probability, already be lost.
  • This will not be the first time that an inferior product will have won the day and I think there are valuable lessons that Google can learn from studying this history.
  • From an investment perspective, I continue to not really like either Alphabet or Amazon preferring Baidu, Tencent and Microsoft.

Magic Leap – Creations great but not small

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Technology is there but size is miles off.

  • While I do believe that Magic Leap is capable of producing an augmented reality experience (AR) that far outstrips anything its peers are offering, I think it is years away from fitting that technology into anything that a consumer will tolerate.
  • The latest leak (see here) from Magic Leap shows a unit that is clearly a development board in a clear plastic box powered with an external battery pack and a fairly large head unit.
  • This has been reported to be the latest prototype called PEQ (product equivalent) that the company will be presenting to its board and investors this week.
  • This group are all looking for results from the $1.39bn raised so far.
  • Magic Leap CEO, Rony Abovitz, has been quick to identify the device as a R&D test rig used for data collection that helps with the creation of surfaces and textures in AR.
  • This follows a number of data points that RFM research has collected over the last month that include:
    • There appear to be problems with the core fibre optic technology that has led to the company having to redesign elements of its offering (see here) to make it smaller.
    • Suppliers have described conversations with Magic Leap engineers that strongly imply that some parts of the system are not even past the concept stage.
    • Silicon Valley chatter also highlights the possibility of infighting between the Silicon Valley operations and the mothership in Florida as well as some high-level departures and very short senior tenures.
  • I think that the key to understanding what is happening at Magic Leap comes from Rony Abovitz himself who describes his prototypes (see here) as being in “agile build cycles”.
  • To me this means that the hardware and software design and specification of the PEQ product, that Magic Leap intends to launch, are far from being locked down.
  • Consequently, there is no point whatsoever is spending a fortune in trying to miniaturise the hardware as all that investment would be wasted if something has to be changed.
  • I also suspect that Magic Leap has been forced by the pressure to start generating revenues into producing a compromised product.
  • RFM research indicates that the older, far bulkier prototype uses all of the Magic Leap technology and produces a great user experience but remains far too bulky to wear.
  • Consequently, it appears that to make it wearable, Magic Leap has been forced to make compromises in the user experience.
  • These would include features like field of view, resolution and refresh rate.
  • This would explain why the feedback generated by the few who have experienced the technology appears to have gone from “wow!” to “ho-hum”.
  • Hence, I think that Magic Leap is very far away from producing the kind of product with which it could take the AR market by storm.
  • I don’t think that this is a problem as almost all of its competitors are looking to sell their units to enterprises where the user experience is much less important (see here).
  • Magic Leap is aiming for the consumer and given how poor the general AR experience is today, I can’t see anyone producing a successful consumer device for 2-3 years at least.
  • This gives Magic Leap time in terms of the market it is aiming at but the real question is what time frame did it promise its investors and will they be willing to pour a lot more money into this company?
  • One thing I am pretty sure of is that Magic Leap is going to need it.

 

Virtual Reality – Virtual standstill.

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VR seems only to be popular at trade shows.

  • After a very disappointing 2016, Virtual Reality looks set to have another disappointing year in 2017 while its proponents work out how to fix the issues that keep it from being a success.
  • The latest blow is the removal of 200 out of 500 of Oculus Rift demonstration stations as a result of poor performance within stores.
  • The idea has been that to get a user to buy VR, he has to try it but in some stores entire days have gone by without a single demo being given.
  • Best Buy will continue to range the Oculus Rift but the real estate given up will be re-used for products that produce better sales per square foot.
  • It appears that the only place where people queue for a demo is at trade shows with the regular user not really seeing the point of the technology.
  • This is a further indication that the limitations of VR continue to hamper its appeal.
  • These remain:
    • Price: Many of the devices cost several hundreds of dollars and also require a PC to run, further increasing the cost.
    • Clunky: VR and AR units are still large, clunky and uncomfortable to wear.
    • In many cases they also make the user feel foolish when wearing one.
    • Comfort and security: VR in cuts the user off from almost all sensory inputs from his immediate environment severely limiting the situations in which the user would feel comfortable using one.
    • Many units also cause feelings of nausea due to an imperfect replication of the real world compared to what the brain is expecting.
    • Cable: Many units require an HDMI cable which prevents the user from moving and also increases the risk of a fall should the user trip over the cable.
    • Content: Both games and content remain in short supply limiting the reasons for users to immediately adopt the platform.
    • The adult entertainment industry is a good yardstick for the adoption of new media types and even this has been slower than expected to jump in.
  • The net result is that I think 2017 will be a disappointing year for VR.
  • The one bright spot remains augmented reality (AR) to enterprise customers.
  • For the enterprise, it is productivity that really matters with the user experience being less important.
  • This is because in consumer, the users pay money for an experience but in the enterprise users are paid to use the technology.
  • Hence, enterprise users’ willingness to put up with a substandard user experience is much greater.
  • The AR user experience is still miles from where it needs to be but critically it does offer productivity improvements that have led to many companies trialling it particularly for employees in the field.
  • Hence, I think that AR in the enterprise should see both unit shipment growth as well as good growth in revenues from software and services in 2017.
  • Consequently, the companies to watch this year are those in this field like ODG, Microsoft HoloLens, Meta, Atheer Labs and of course Magic Leap.
  • Magic Leap is an exception is it has made incredibly bold promises around a consumer offering in AR, but it is questionable as to how close it really is in terms of having a working, commercial product (see here).
  • From an investment perspective, AR in the enterprise is the only place I would entertain putting money into this year unless it is something aimed at fixing the limitations I have listed above.