What Facebook’s announcements at F8 2017 mean for VR & AR startups

Facebook’s F8 conference today featured AR and VR heavily. I put together some quick analysis on what this means for the industry.

Ecosystem impact

• AR Studio was the the biggest surprise. AR Studio enables many more people to create filters and hides the complexity of working with computer vision and 3D technologies. The content being created, however, will likely be tied to Facebook’s platform.

AR Studio is trying to abstract away the complex computer vision and 3D rendering needed to create AR content (Source)

• Tying produced content means that Facebook will silo some of the best AR content, getting a head start on creating a consumer AR ecosystem. Developers tend to focus on the highest impact platform, creating a dev ecosystem that will be harder for other companies to replicate. This is like Apple launching iOS well before Android causing most devs to adopt their platform first. It took Android several years to catch-up and even now many developers still release on iOS-first/only. This starts a flywheel where developers continue to add content to the platform, which then makes the platform more valuable, which then attracts more devs and so on. Note: Facebook also did this with their social platform early on as well. Most developers were building for Facebook over MySpace & OpenSocial because they were iterating faster, better designed, and higher monetizing.
• Snap, for now, doesn’t seem like they have any technological advantage over Facebook’s AR offerings. Even with the announcement of Snap’s World Lens today, because of AR Studio, Facebook is further along the AR roadmap that Snap was pioneering. They are only missing their version of Spectacles. Given Facebook’s focus on growing Facebook Live and the obvious glasses based imagery in their F8 keynote today, it’s likely they will launch some form of camera-enabled sunglasses soon.

Snapchat’s World Lenses

• Facebook’s weakness will be at the OS layer but they are cross-platform and have network effects. Most of the low-level AR tech (SLAM, face tracking) that Facebook demoed today will likely be made available at the OS layer by Apple and Google. The benefit they have is that, by tying content to their messenger and social graph, they may still have all of the most compelling applications. Many of the best features they demo’d are services not apps that benefit from strong network effects, such as chatting with friends and real world hot spots. Facebook’s core strength is here.

How this affects VR/AR startups

• Low-level AR tech companies have a limited window. There may be a narrow window for companies that are building facial tracking, filter libraries, and SLAM tech to sell to competing platforms. I’d imagine, however, that this technology becomes widely and freely available as open source and is a component rather than a business.
• Facebook will be the gold standard for social VR engagement and the benchmark social VR apps will be compared against. Facebook Spaces is what you get when you already have a social graph, brand awareness, and best in class social engagement features. Therefore, the retention and engagement on Facebook’s platform will likely be amongst the best VR apps. This means that we’ll now have benchmarks for what “good” retention and engagement look like in VR. Any new standalone pure social VR applications are already at a disadvantage because they lack the network, but now they have actual numbers they will be compared against as well.
• Social VR/AR apps need to target a niche or provide a unique interaction model versus just being a VR chatroom / social network. It’s obvious that Facebook can continue to add to Spaces and even open it up as a platform for 3rd party devs. As a result, any startup trying to compete on purely being a new communication layer is at a disadvantage. One way to circumvent this would be to create new types of interactions that are fun/solve a problem, position your brand around that one use case, and then build a social layer around that. Even then, Facebook may power the social layer for those apps. Examples of companies doing this are BigScreen and Rec Room.
• Standalone mobile AR apps may not be differentiated enough to be able to get downloads. Given that most people already have Messenger on their phone, any AR apps focused on real life marketing or placing virtual notes/content for other people to find should have an answer for why their app should exist separately vs. just being a part of Facebook’s Camera Platform.
• AR apps on Messenger may create viable businesses. Similar to early Facebook and iOS applications, the right AR app could potentially capitalize on the new distribution channel and buzz around Messenger Camera Filters. Just like other new platforms, however, the key will be repeat daily & weekly usage and not just simple throw away gimmicks.
• Cross-platform tools/SaaS on top of this and competing platforms may be a viable businesses. The camera filters are a publishing and eventual advertising platform, this means that all of the companies and infrastructure that existed for video and other forms of content now need to be AR-enabled as well. Cross-platform tools and technology that are additive to the Camera Platform and/or help non-technical people publish and measure ROI out of these platforms, similar to social analytics products, could help bring brand dollars and performance marketers to AR.
• Reality capture and other technologies that bring VR/AR closer to the real world are opportunities. As fidelity increases and more use cases for VR/AR are discovered, we will want the virtual world to resemble the real world more and more. As a result, there will be a need to increase graphic fidelity, bring real world objects into the virtual world, and create more seamless ways of interacting with virtual objects.

Amitt is a Managing Partner at Presence Capital, an early-stage venture firm focused on investing in VR/AR companies. If you liked this article, please consider recommending or sharing it.