Emerging Technology and Media, May 14–20 Edition
In this, the second edition of this newsletter, you’ll find…
- The Big Picture: the recent history of virtual reality, my experiences exploring virtual reality, and where virtual reality is going.
- Words on the Blockchain: the theory of institutions entering cryptocurrency/blockchain industry, as some major institutions make waves by doing just that.
- Alternate Reality: Beat Saber is a hit (for VR); AR and VR gain browser support; Amazon launches a developer tool; esports teams experiment with VR spaces.
- Media Channel: two companies raise big money to tackle digital media; YouTube has a hit series and changes up its subscription products; Snap launches scripted, interactive shows.
- The Feed: Twitter cracks down on trolls; Facebook and Instagram introduce new social features; Snap introduces unskippable ads.
- Fun and Games: Discord hits a milestone; the New York Times writes about the scale of gaming and esports.
- Other Stuff: Microsoft announces an impressive, technologically sophisticated whiteboard; Amazon’s Go stores are expanding; Fidelity experiments with virtual reality and assistants.
- Recommended Media: a video by Andreessen Horowitz partner Connie Chan on Chinese tech and the concept of offline-to-online commerce.
The Big Picture: Virtual Reality in 2018 and where it is going
In 2016, the tech world lost its mind for virtual reality. But this was not an overnight phenomenon. In the previous five years, the stars had aligned in such a way that virtual reality was ready to burst onto the scene. When it did, virtual reality almost looked like an inevitable success and not a speculative new technology.
Ready Player One was published in August 2011, becoming a New York Times bestseller and inspiring people to imagine a world where virtual reality was the dominant form of entertainment. A year later, 19-year old Palmer Luckey founded Oculus and launched a ground-breaking crowd-funding campaign for a virtual reality headset. In March 2014, Facebook purchased Oculus for $2.3 billion, legitimizing the nascent technology and giving Oculus the resources to compete with just about anyone. Steven Spielberg signed on to direct a film adaptation of Ready Player One in March 2015, which indicated that virtual reality was going to be making a huge cultural impact in a couple of short years. In late March and April of 2016, the first consumer version of the Oculus and the HTC Vive hit the market. Sony released the PlayStation VR in October 2016, enabling potentially millions of PlayStation owners to jump on the technology. Virtual reality had arrived. Market researchers anointed virtual reality as The Next Big Thing, projecting $5 billion in total sales in 2016 and almost 40 million devices sold.
Today in the Bay Area, virtual reality is a conversational dead-end. In 2016, the VR industry generated $1.8 billion in sales and shipped 6 million devices, a far cry from the projections at the beginning of the year. 2017 was also a disappointment for the industry. Steven Spielberg’s Ready Player One has come and gone without much impact, despite grossing almost $600 million in box offices worldwide. People reminisce about how wrong we all were about virtual reality and how it isn’t going anywhere. Broaching virtual reality as a potential platform for entrepreneurship is met with scoffs and skepticism. The market researchers cooled off on VR but are still long-term believers. Current projections place VR sales at $4.5 billion in 2018 with significant growth in 2019 and onward.
From the vantage point of May 2018, it is easy to see where things went wrong. Early adopters were keen to try out the new technology and rushed to buy the early hardware. This led to success for even compromised products such as the Google Cardboard and the Gear. This also led to selling out for the initially limited supplies of the Oculus, Vive, and PSVR. But the experiences people were looking for weren’t available yet. The content on the platforms was crude, made people ill, and wasn’t immersive or deep. Developers and designers hadn’t learned how to work with the technology and adapt it to mass consumption yet. The hardware itself was bulky and expensive. Devices like the Oculus and Vive required something that was becoming scarce in living rooms — a powerful personal computer. Setting up a virtual reality experience required free space and often involved too much friction to be done at a whim. While the early adopters were willing to try out this latest generation of virtual reality, it wasn’t accessible or good enough to move beyond this point.
It can be easy to get swept up by the periodic waves of hype that roll through the technology industry when all you are doing is reading the headlines and bombastic coverage of TechCrunch. To get to the reality of an emerging consumer trend, you should get close to the experience and become a consumer. My experiences with virtual reality date back to February 2015, when I bought my first Google Cardboard. The experience was crude, brief, and low resolution but it was a beginning. It was good enough that the early adopter in me easily justified a PlayStation VR in late 2016. After hearing about how much better the Vive was, I splurged on a state-of-the-art desktop and set-up a permanent VR area in my living room. My interest in VR led me to augmented reality and beta testing Pokémon Go as well as experimenting with Snapchat Spectacles.
For all of the reasons I mentioned before, the technology and content was not ready. But I became convinced that the technology would be unmatched in its ability to immerse users. For as crude as the experiences were, I momentarily believed I was in those virtual worlds. Virtual reality’s complete control over my sight and my hearing was that potent. Even in the cartoonish world of Rec Room, I became completely immersed. For virtual reality to realize its potential, developers need to build worlds and mechanics that leverage this capability. But this is a chicken and egg problem, because there aren’t enough virtual reality users to justify the investment by developers. For more people to jump into virtual reality, they need more accessible hardware.
The past few weeks have given me renewed hope that virtual reality will fulfill its promise in the next three years. As I covered last week, the Oculus Go is a capable and well-designed device. Having tried it out this week, it represents a true step forward towards making virtual reality accessible. It has the ease of use of the old, phone-based Gear. The ability to just put a headset on without any cables or dependence on a computer cannot be undersold. It also has good-enough resolution and a robust software and content ecosystem. At $200 many people will be willing to try it out. The last step is getting this kind of device, at this price point, with a robust ecosystem, to support six degrees of freedom. Six degrees of freedom is essential to elevating the virtual reality experience. There are indications that Oculus’s Project Santa Cruz will offer the complete package, though it isn’t likely it will be able to hit the right price point. Given another two years, it is likely that the technology and production will enable a fully capable untethered headset for $200. In console gaming, it has been common for Sony and Microsoft to use consoles as loss-leaders and profit off of services and games. If virtual reality platforms adopt this strategy, which I believe they will, it is possible we’ll get there faster.
A new game phenomenon has hit the VR community as well, receiving overwhelmingly positive praise and spawning an active modding community almost overnight. Beat Saber is a rhythmic music game very similar in theory to Dance Dance Revolution, Guitar Hero and Rock Band. In the game you wield two differently-colored rods that look like lightsabers and use them to cut through floating blocks that fly at you in time to a musical track. It sounds complicated but it is one of the easiest-to-learn VR experiences I’ve seen. It also has a surprising amount of depth and a high skill cap. Beat Saber’s ease of learning is its most critical accomplishment though. A complete novice is likely to get through their first track in the game, and feel great doing it. Beat Saber is a ton of fun and is far superior to its virtual reality competition. It is polished, tightly designed, and inexpensive to try. These qualities have been scarce in virtual reality and this is why Beat Saber is a phenomenon in the VR community. A developer locking in on how to accomplish this means more developers are going to figure it out.
Beat Saber is the new bar for virtual reality experiences and virtual reality platforms will need a healthy supply of such experiences to succeed. Multiplayer experiences like Arizona Sunshine’s zombie horde and Rec Room’s casual sports demonstrated that virtual reality is a lot of fun with other people. Polished experiences like Beat Saber demonstrate how a well-designed and well-executed virtual reality experience can be easy to learn yet infinitely replayable and difficult to master. Developers will find ways to reliably produce the qualities of these successful experiences while building out diverse genres and categories of content.
There is a path for virtual reality to accelerate as an emerging technology that is somewhat independent of the hardware and content. That is if enterprises find ways to adopt it. Enterprise-scale adoption goes a long way towards normalizing a technology for consumer usage while enabling manufacturers and developers to gain the benefits of higher scale. Enterprise adoption also helps support a nascent industry while early friction is addressed. I believe there is potential for virtual reality to gain steam in the workplace.
Companies are becoming more aware of the issues that the open office creates — frequent interruption, no privacy, ambient noise and odors, etc. Virtual reality and its unrivaled immersive potential could address these issues. Remote work is also a trend that companies are utilizing, in order to gain access to global talent pools. Workers looking to avoid urban environments or create wage/cost arbitrage influence the trend as well. Virtual reality could make remote work more viable, as it could facilitate relationship development and close collaboration that come from physically interacting with coworkers.
I remain bullish on virtual reality as a technology and as an experience. I’m skeptical about the likelihood that it will become ubiquitous or even gain mainstream-level adoption, but it will have at least a secure niche of certain experiences and use cases. The recent hardware releases are encouraging, as are some of the latest software experiences. Virtual reality’s future is dependent on progress across two fronts: hardware and content. Without affordable, untethered hardware the friction of the experience is simply too high. Without high-quality content and software, there is no reason to put on the headset. Recent progress in these areas is very encouraging and I believe we’ll see commercial success for the industry in two years.
Words on the Blockchain (Cryptocurrency and Blockchain)
Cryptocurrencies and the blockchain had an amazing run last year. A recurring story was that this was despite a lack of institutional support and money for the technology. In the past couple of weeks, some large companies have thrown weight behind this thesis. It is simple for companies to launch pilots and dip their toes into the blockchain. However, sustained efforts and investment are not guaranteed and these companies will need to yield some results.
Coinbase announced a number of new products and initiatives aimed squarely at facilitating institutional involvement in crypto-land and the blockchain. Coinbase Custody is a secure solution for storing cryptocurrencies with some well-known launch partners. Coinbase Prime is a platform for institutional trading of cryptocurrencies. Coinbase Markets is an initiative to provide a centralized pool of liquidity for all Coinbase products with future features resembling those used by high-frequency traders. The Coinbase Institutional Coverage Group is a support team meant to cater to institutional clients. Coinbase is piecing together the set of services and ecosystem necessary for institutional involvement at scale.
Facebook got on board the blockchain hype train by creating an internal group dedicated to the blockchain and staffing it with prominent executives from Messenger and Instagram. Part of me wonders if these executives just didn’t want to leave Facebook but also wanted to get in on the current flavor of the month. Facebook’s announcement led to speculation that Facebook would launch its own crypto-security. I was amused by this bizarre Wired article on Kik, which was a relatively early mover into tokens, and how they want to form an alliance against Facebook. It is unclear how valuable Kik’s technology is as the scheme otherwise seems one-sided. But they get some props from me for using a Star Wars metaphor as click bait.
Circle, a start-up with backing from Goldman Sachs and Baidu among other investors, raised a $110 million series E, valuing the company at close to $3 billion. The funding was noteworthy for its size as well as the involvement of Bitmain, a cryptocurrency mining company that has grown rapidly and is becoming a rival to established companies such as Nvidia. Circle also announced an initiative to launch a stable coin based on the US dollar.
At this point multiple blockchain-enabled smartphones have been announced but now HTC is getting into the game. HTC’s Android-based Exodus will have an embedded crypto wallet and secure hardware to support using cryptocurrencies and decentralized apps. How this hardware translates to actual user benefits, beyond cold storage, remains to be seen.
Alternate Reality (Augmented Reality, Virtual Reality, Mixed Reality)
The various kinds of alternate realities are seeking killer apps and increasing accessibility for consumers. Accessibility is being improved from multiple angles: new, better hardware; development tools; and support for alternate reality tech. Killer apps have yet to emerge but the community is eager to try quality content.
As mentioned in The Big Picture, Beat Saber is one of the fastest-selling virtual reality titles seen in the market. It sold over 50,000 copies in its first week after its launch for Oculus, Vive, and Windows on May 1st. The game has benefited from popular Youtubers and Twitch broadcasters playing the game before audiences numbering in the tens of thousands. Here is some footage.
While virtual reality is most closely associated with platforms such as Oculus and Vive, multiple tech companies are working to bring virtual reality and augmented reality experiences to the Web and browsers. This week Amazon released Sumerian which is a tool for creating VR and AR web applications. In April Mozilla announced Firefox Reality, a new version of Firefox meant for virtual and augmented reality headsets. At Google I/O, Google previewed a WebXR API and Chrome browser support for AR experiences.
Sansar, the social virtual reality platform developed by Linden Lab (of Second Life fame), has partnered with two Overwatch League teams to develop virtual “watchspaces” for the teams’ games. Fans will be able to gather together in virtual reality to watch the teams, interact with each other and players, and buy merchandise. Social VR apps such as Rec Room and VR Chat have proven popular with VR adopters, so there is precedent for this kind of behavior. However, the critical factor is whether or not there are enough OWL fans who own VR equipment and are willing to boot up during the weekly games.
Media Channel (Digital Media, Social Media)
Digital media is growing up, transitioning from an upstart industry of individual creators and small teams to one that more closely resembles traditional media. People like Jeffrey Katzenberg seek to build and finance media companies that can do things at the scale of traditional Hollywood powerhouses. At the same time, tech companies are trying to find ways to differentiate their services and are using exclusive content to attract customers and keep them around.
Jeffrey Katzenberg, a titan of the media industry formerly of Dreamworks Animation, raised $800 million for his company, NewTV. NewTV’s rather vague plan is to produce high-quality short-form videos. The amount of money alone is worthy of notice.
Luminary Media is the first company with the ambition to become the “Netflix of podcasts” and raised $40 million to execute on that ambition. While the business model of Netflix seems like a good fit for podcasts, they had a much stronger starting position with a large customer base.
In the lead up to the Royal Wedding, I was fascinated by this story on a TV writer who used Instagram to tell a fictitious narrative about a rivalry between the 3-year old Prince George and Meghan Markle. So much of Instagram is fictitious these days, but this narrative experiment is novel, clever, and clearly based in Internet culture.
The YouTube sequel series to the original Karate Kid movies, Cobra Kai, is the service’s first premium hit and was renewed for a second season. As someone who binged the series, I can attest to its quality and authenticity to the original series. YouTube also announced some changes to its premium services, launching YouTube Music and YouTube Premium while eliminating Google Play Music and YouTube Red.
Snap is launching a scripted murder-mystery show made by Vertical Networks, a company majority-owned by Elizabeth Murdoch and in which Snap holds a minority stake. With Facebook copying Snap’s features and threatening its user base, Snap is seeking to differentiate with exclusive content (among other strategies).
The Feed (Social Media)
Social media products exhibit periods of expressive expansion in order to attract users and grow engagement. To monetize users and curb the unintended consequences of free expression, social media products also exhibit periods of regulation and streamlining. Instagram is in a period where it is rapidly introducing new ways for users to use the platform and engage, in order to gain an advantage over the competition. Meanwhile, Twitter is regulating its user base and attempting to clean up the platform.
Twitter announced that it is testing new methods of addressing Twitter trolls. These methods involve behavioral signals and filtering flagged tweets. During testing, Twitter saw single-digit drops in related abuse reports.
Facebook announced new story features including a permanent gallery, cloud storage, and voice-only posts. Instagram is adding the ability for users to share posts to Instagram stories, including posts from followed accounts. It is good to see Facebook and Instagram pushing the story format forward beyond the features Snap pioneered. However, I’m not looking forward to how sharing posts to stories will change the use of stories by my friends.
Snap is experimenting with the ability to export Spectacle videos into formats that would work well with non-Snapchat video players such as YouTube. The strategy here is unclear since Spectacles could be used to differentiate and create exclusive content for Snapchat. This test instead makes Spectacles more attractive at the expense of Snapchat, since users would no longer need to post content exclusively to Snapchat. Snap is also offering a new, 6-second ad format that is unskippable. This format is available in Shows, which means that only a limited set of partners will be able to use them.
Fun and Games (Gaming and eSports)
One of the overarching stories for gaming over the past decade is its growing cultural relevance and pervasiveness. Gaming phenomena such as the newly emerged Fortnite is a prime example. Esports, YouTube, and livestreams have created massive new platforms for professional gamers, game developers, and game communities to come together around their shared interests and passions. This week’s stories illustrate these themes in full.
Discord recently celebrated its birthday, as companies do these days, and released some humble-braggish figures. Most importantly, the company now has 130 million registered users and 19 million daily users. Discord’s growth is spectacular and it now represents an intriguing new platform for developers, communities, and content creators.
The New York Times recently published an article, All We Want to Do Is Watch Each Other Play Video Games, that caught my attention not because it held any novel information but because it acknowledges the cultural weight games have today. The article noted the sheer amount of time people spend watching games like Fortnite on Twitch, how pro sports fans are doing Fortnite-inspired dances, and how popular Fortnite content is on YouTube. The article goes on to discuss esports arenas and esports media companies.
Other Stuff
Microsoft announced a new version of the Surface Hub, naturally dubbed the Surface Hub 2. The Hub is a digital whiteboard quite similar to Google’s $5,000 Jamboard. The introductory YouTube video does an excellent job selling the device, though no price was announced. I predict that the same companies that install Cisco telepresence products will love the Hub.
Amazon is recruiting for Amazon Go store positions in San Francisco and Chicago, indicating that the Go store format is expanding into these markets. The reception to the Go store in Seattle was pretty positive.
Fidelity Labs, the research arm of Fidelity, debuted a digital financial advisor that can be interacted with in virtual reality. The advisor was developed using Amazon’s Sumerian tools. The demo was developed to explore how Fidelity could use VR its services, if VR took off with consumers.
Recommended Media
This week I am recommending Online-to-Offline 2.0, a presentation by a16z partner Connie Chan, that introduces an update on the concept of online-to-offline commerce. Technology adoption and innovation in China is fascinating and Connie highlights new ways in which online technology is interacting with people and the physical world, and vice versa.
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If you found this post interesting, check out my previous post here.
