The Apple Privacy Wall/Strategy Analysis of How Apple will Come at Oculus Next Year.
At Infinite Retina we soon will be sharing research on the Spatial Computing industry, this post gives you a little taste. Contact Irena Cronin or me if you need business strategy help to enter the Spatial Computing world.
Apple is clearly going after Facebook. That became obvious to everyone today as Apple announced a ton of new things, including new AR features for its messenger, and new privacy-focused features, at its World Wide Developer’s Conference.
Irena and I are hearing that one of the devices, er, AR/VR head-mounted displays, Apple is considering launching next year could go directly after Oculus Quest and the rest of the VR space.
First, today we retweeted dozens of things from the Apple keynote over on our Twitter account, so if you have been away from the Internet today you can catch up on the Apple news, and reactions to it, there.
Since Oculus has such a head start, especially with its $400 Quest, how could Apple crush it?
We see several ways:
1. Go after VR as “unsafe.”
2. Go after Facebook as “privacy thief.”
3. Go after VR as “not good enough.”
4. Go after Oculus Quest as “not capable enough.”
5. Go after Oculus Quest as “not social enough.”
Let’s take these on one by one.
VR IS UNSAFE
I’ve seen this first hand. You can’t really use it in a subway. Why? You can’t see someone pickpocketing you. You can’t use it in a party at your house. Why? You will hit people standing around (this happened to my dad and it left him quite a bruise and was quite pissed since he didn’t realize someone was playing VR and that they couldn’t see him). You can’t use it in the street. Why? You won’t see a car or other danger coming toward you. Apple could push AR further and say that AR is the way to go, and that it will expose VR’s unsafety.
FACEBOOK IS A PRIVACY THIEF
In two years Spatial Computing, including Facebook’s Oculus VR headsets (we hear Facebook is working on Spatial Computing glasses too, along with many others like Microsoft, with its HoloLens, and Magic Leap) will have very advanced 3D imaging technologies and eye sensors, along with cameras and microphones. Facebook has done an awful job of protecting our privacy, even flaunting that privacy is dead (Facebook’s lawyer, today, said the same). Same with Google.
Apple is building a new privacy wall that will surround all of its services and devices. Yeah, it is a metaphorical wall, but it builds a huge strategic moat around its products and services that many are finding quite attractive. You saw that today based on applause during Apple’s keynote when these features were announced. We see Apple as making moves toward keeping user data from escaping over that privacy wall, which increases trust in its services (and usage, hence profitability).
Today Apple announced that it was forcing developers to use its own signon feature. You know all those apps that make it easy to sign on by clicking a Facebook or Google button? Now they will be forced to add an Apple button, too, and it promises to protect your privacy in several ways that Facebook and Google don’t, even creating randomly-created email addresses so that if that company starts spamming you you will be able to easily turn off that email address.
I get thousands of promotional emails a day. Why? Because I have signed up for so many services over the years and because my email address has always been public. So I know what a daunting problem email marketing and ad tech are for people. This new feature is hugely interesting to me and I’m really not a private person at all. Most of the consumers and enterprise workers/execs we do research with are far more private than I am, and some demographics, like women or people of color have far deeper concerns about their privacy than I do. Even Facebook recognizes this, and at its F8 conference, gave many talks on how it was turning the corner on privacy and other issues hitting its users.
VR ISN’T GOOD ENOUGH OR SHARP ENOUGH
The resolution of VR isn’t good enough (Oculus Quest has screens that are 1440 x 1600). It doesn’t have enough resolution and its GPU, while absolutely magical if you look at what it can do, is underpowered for more advanced Spatial Computing uses. I can’t use it to answer my emails, or do my social media work, or edit videos. It simply isn’t good enough and doesn’t have enough applications yet, even though it is very cool.
Until Apple jumps into the market the Quest is a MUST HAVE product, and will easily be the product of the year. We don’t expect Apple to announce products until the second half of 2020, and it’s very probable that you won’t be able to buy those products until the first half of 2021. So Facebook has a year or so to figure out how it will deal with Apple’s arrival to the Spatial Computing world. It has a lot of work to do.
Watching videos inside a VR HMD, like the $400 Oculus Quest, is a great use case, but the screens aren’t sharp enough to feel like you are in a movie theater. It’s more like you are sitting very close to a nice TV screen and you can see individual pixels. Netflix or YouTube on the Quest has the same problem: really amazing to have a personal viewing device where a huge virtual screen is in front of you, but leaves you wanting because the resolution isn’t there yet.
We can’t say what Apple is planning here because so many sources are giving us conflicting information but Apple has some screens in development that follow what you hear here: https://youtu.be/el2IWYfEaCQ (Mark Spitzer worked at Google on Google Cardboard and here he lays out how optics should work to make hyper-sharp displays. His talk really is eye opening, pardon the pun, we are shocked more people aren’t watching this and discussing his conclusions).
VR IS NOT CAPABLE ENOUGH
Even after you solve these two problems, which will prove daunting for Facebook, since Apple can separate Augmented Reality into two pieces, the phone and the glasses themselves: in the phone goes compute, wireless, and battery, and that will let it keep glasses much lighter than companies that have to put it all into glasses. It also separates the cost in a way that hurts Facebook when it comes to price.
We are hearing Facebook is going to try to do that by putting the compute into the cloud, which shows that it will punt on many privacy issues, where Apple is going toward keeping data on your own devices, and in an encrypted form, so that Apple’s privacy wall will be daunting as a technical challenge, and a cultural one (and it really requires 5G to be available widely, something we don’t expect for years). Facebook tried selling a phone a few years ago and failed, so it will be forced to figure out some other way to bring the cost, and weight of glasses down, and keep price affordable for its two billion users to consider, too.
Apple will have a huge advantage here because of the millions of apps that already run on its phones and tablets. Facebook has none of those running on Quest (and won’t, especially since Facebook has locked down Quest pretty significantly and is putting up many barriers to independent developers to participate in its ecosystem. Many developers, who have spent hundreds of thousands of dollars building VR experiences, have gotten refused access to the Quest store, which means they are locked out and Quest users will never see them). We can see Apple having many many apps on day one, from Uber/Lyft to photo editing to spreadsheets, and many of the other apps we use on phones. Facebook will struggle to gain acceptance with developers until it proves it can sell tens of millions. Most industry insiders we talk with expect Quest to sell a few million in next 15 months, where Apple could sell that many in the first weekend. That’s the expectation, at least.
Apple gave a hint at how it would go at it, too, by developing exclusive content only available inside its privacy wall. Movies, TV shows, that kind of thing. I expect it will go a lot further by showing off integration to its health services, music services, credit card, news service, and more. Facebook’s efforts in each of these is second rate, if they exist at all.
VR IS NOT SOCIAL ENOUGH
Like we discussed before, you can’t use Oculus on public transportation. Last week my sons used it on a plane and it was inconvenient, at best, and we couldn’t see staff members trying to get our attention. At worst this will lead to huge safety issues. AR could bring dramatically important innovations so that, even if your visual field is mostly covered by virtual things, the virtual layers could be “turned down” when it senses a human is looking at you.
You also can’t use VR while trying to talk with someone else, you need to take the device off, and Facebook hasn’t done a good job yet of showing off multi-party environments you can play or work in. Yes, some exist, most notably Rec Room, but since so few people have VR those use cases aren’t all that useful for playing with people you know, so they aren’t getting the hype they probably should get.
If you take these advantages Apple has, we believe Apple will be able to charge far more for the Apple ecosystem than Facebook can charge, while having consumers thinking that the Apple glasses aren’t that expensive, especially in today’s world where Apple released a $7,000 monitor that isn’t even 8k yet.
In our research we are finding people will pay $1,000, or more, just to get devices from Apple, whom our average consumers tell us it trusts, than from Facebook, which it does not (even though they all are using it on Instagram, Messenger, and here, but the usage pattern here isn’t one of the deep trust we put into our phones, which have many people’s health data, credit cards, bank account info, and much more — very few people trust Facebook enough to turn over their credit cards to it).
Can Facebook convince users to try a $500 headset instead of buying an Apple one that might be $1,500 or more? We see that challenge as very daunting indeed because of the brand trust that Apple users have.
WHAT SHOULD ZUCK DO?
Now, this doesn’t mean all is lost for Facebook. We see that an advertising-supported approach will be much cheaper and will be attractive to companies who will want to market to consumers. The combination of both will give Facebook opportunities to build experiences that will be attractive to many consumers. We are hearing it is developing a “metaverse” that could see significant buyin from consumers and industry too.
The cost difference may be hard for consumers to discern, though, because Apple has the advantage of putting much of the compute down in the phone, most consumers might not think of the $1,000 to $1,500 they will pay for a new 5G iPhone (which we think will be required to drive the Apple glasses, when they get announced in late 2020) as additive to glasses that will run $500 to $1,500. We can imagine, too, Apple bringing different glasses for different use cases. The glasses you would want to wear while running, for instance, could be quite different than the ones you use while playing games, or watching movies, or working. The ecosystem Apple is building could, our research shows, run thousands of dollars, once you throw in new AirPods, Watches, a new 5G iPhone, and new Glasses. Facebook and Google could come along with approaches that would be far cheaper, due to being subsidized by advertising dollars.
So, back to the privacy wall. It’s clear that Apple is building a privacy wall around its services. Inside the wall? Less data will be collected than outside the wall. Inside the wall? That data will be encrypted and won’t be shared with third parties outside the wall.
This will see Apple’s services thrive in a world that cares deeply about privacy. We can imagine lots of consumers, for instance, will go with Apple Music, instead of Spotify, because they understand Apple’s stance on privacy and trust it not to share data with others. Spotify is sharing with lots of people, as I’m reminded when I look at Discord, which is how our company runs internally, and see Irena is listening to Spotify on its user interface. In other words, Spotify has shared data with third parties. We can see Apple is going to take a harsh stance against that kind of “over the privacy wall” kind of sharing. Companies that want to do it will live outside of Apple’s privacy wall and will have to convince people that giving up their privacy will bring enough benefits. Based on our research we find many consumers simply not willing to take that risk.
So, what would we do if we were Mark Zuckerberg? Give them a reason to jump over the privacy wall. Develop content studios that will bring exclusive after exclusive. Give developers capabilities to add value to Spatial Computing that Apple will simply be unwilling to give, due to its privacy wall strategy. Make Facebook’s systems easier, and more fun to use, than Apple’s are, and more capable. We can see many ways to do that that Apple will be culturally reticent to do.
Also, make it very clear that there’s a huge cost difference between Apple’s privacy wall-enclosed services and devices and Facebook’s advertising and transaction-supported business models. Apple’s core DNA is that it won’t do anything, or allow anything, inside the Apple Privacy Wall that they can’t make at least 30% margins on. Which means if you are inside the Apple Privacy Wall you will be forced to use Apple Pay, with its 30% cost. Facebook, by developing its own currency, and by being far less greedy, could take something like what credit cards do, say 2 to 5% of each transaction. Consumers, and content developers, who will want to sell tons of virtual items in, say, a metaverse, will eventually figure out that Apple’s approach is expensive indeed and many will jump over the privacy wall looking for other approaches.
Mark Zuckerberg should be heartened by Apple’s behavior with iPhone, actually. When it first came out it seemed like Apple would have a monopoly. But then Google came with Android, which was more open, less expensive, and it won most of the market share.
Zuckerberg might be able to stay ahead of Microsoft or Google as the world moves toward using glasses to compute by building on the amazing experiences that just shipped on Oculus Quest to get there just as Android did against the iPhone.
We’ll see, and that’s what makes this industry so fun to watch and participate in.
What should your business do? Well, today, if you don’t have an Oculus Quest and either a Magic Leap or a HoloLens, or spent significant time in all three, your business is already behind and that will be very noticeable next year as many new products, not just from Apple, come to market. Really, though, each business is individual and needs its own strategy, even if that strategy is to wait to see the market develop further before jumping in. We would love to help, drop us a line. I’m at robert @ infiniteretina.com
By 2022 the entire world will change and we see $50 billion worth of investment from both big and small tech companies coming to bear. Ignore this market at your peril. Apple isn’t. Its privacy wall is proof enough of that.