Navigating the World of Digital Mapping

To the cursory observer, online map services like Google Maps or Bing Maps may seem like simple tools, simply placing a searchable compilation of points of interest on a scrolling set of map images. In reality, it’s a very complex business with immense potential going forward, with demand coming from transport electrification, autonomous cars, consumerization of ground logistics (UPS -> Uber/Lyft), and broader use cases for unmanned aerial vehicles, among other areas.

Mapping entails digitizing the physical world, so every map service at its root needs access to mapping data. This consists of the actual imagery – satellite images, aerial photos, and street level photos, for instance – mapped to a digital overlay of roads containing all manner of metadata (e.g. street name, type, traffic direction, speed limit, toll road). Collecting these data is an immensely labor-intensive on-ground task that is never complete (as roads and buildings keep changing), so there are really only a few global players in this space that almost all map-based services ultimately get their map data from – namely HERE (originally Navteq; recently sold by Nokia to Daimler/BMW/VW), Google, and TomTom.

There are a few hybrid players – e.g. Microsoft sources map data from HERE and others, but also had a hundred employees building out their own map data via street vans, aerial imagery, and such (a division recently sold to Uber), and Apple, which recently entered the mapping space with Apple Maps, gets its data from TomTom but is also building out a fleet of its own mapping vans.

On top of map data, you need routing algorithms, address and point-of-interest data, search, and lots more.

Below I will start with an anecdote about my introduction to the world of mapping and then discuss some opportunities in the space today.

TA Maps and Google

After college, I shipped out to India to work at Mahindra, which is India’s largest automaker (and also the world’s largest farm equipment manufacturer, among other things). After moving into my apartment in Mumbai, I realized a few things—one, the Google Maps app, which back home in the U.S. I used quite extensively on my phones at the time, an iPhone and an HTC HD2 (running Windows Mobile 6.5), had incomplete data in some parts of the city, so pretty often I’d be switching between Google and other map apps. Then I upgraded to an HTC HD7, running Microsoft’s rebooted-from-scratch Windows Phone 7 OS (whose story I’ve written about), and there was no Google Maps app in the store at all.

Windows Mobile had earlier conquered the pre-iPhone high-end PDA/smartphone market, crushing Palm OS with a remarkably feature-packed and open OS. So if Google wanted its mapping service in high-end mobile users’ hands, it had to be on Windows Mobile (just as it had to be on iOS later). Yet as many large tech companies often do (e.g. MS ceasing development on Internet Explorer after IE6, having beaten Netscape, only to be woken up later by the upstart Firefox project), Microsoft was busy running a victory lap when the iPhone launched and took a while to respond, by jettisoning Windows Mobile completely in favor of the ground-up Windows Phone 7. Meanwhile Google’s acquisition, Android, launched as a very Windows Mobile 6-like response to the iPhone. By the time Windows Phone launched, Google felt it could forego its biggest rival’s platform entirely and thereby perhaps gain a competitive advantage for Android.

So, with an incredibly smooth Windows Phone 7 device that I wanted to use daily, and no Google Maps in front of me, I sought to fix the problem by writing my own mapping app – TA Maps – that would initially serve as a Google Maps client and then expand to include multiple map sources, thereby solving the constant switching problem I had with Google Maps on iOS and Windows Mobile 6.x. To do this, I sourced map tiles from Google (and later Bing, OpenStreetMap, and others), plugged into their point-of-interest search and directions APIs, and then handled a bunch of curiously complicated tasks like reverse-engineering Google’s compression algorithm for map polylines (e.g. route lines on a map for directions).

With multiple data sources, I solved my own navigation problem and others’ too (e.g. building in OpenCycleMap for bicyclists). In the process, I put the app up on the app store and gained thousands of free and paying customers across the world, learning a ton about mapping in the process (e.g. when customers in China all reported the map as being off by a certain distance, I found that the Chinese government had at some point built a location offset from the (US military-run) GPS system, as a rudimentary security measure ensuring that all non-China-specific maps would be off unless they specifically compensated for the offset).

Then Google began to restrict access to its map data, deprecating old versions of its API and forcing users onto its new API, which required 1) authenticated tokens that identified the particular client requesting map data, and 2) agreeing to ever-narrower usage terms. When the API was updated to essentially ban native third-party navigation clients from using Google Maps, I received a not-so-friendly email from the Google Maps team – not quite a takedown notice yet, but clearly on the way. At that point, I decided to just take down the app (it still had standalone value sans Google, but I was too busy with my actual job to maintain it). Around the same time, another app emerged, as a pure-play Google Maps client that was even (egregiously) called “gMaps” and used a modified version of Google’s own Maps icon as its own. The difference? Those developers were in Russia and had no qualms agreeing to terms that they’d then explicitly violate (and then fight a technical cat-and-mouse war around Google’s API access blocking).

Google clearly saw map services as a tool to gain a competitive advantage in other areas of its business. For instance, when Motorola – then one of the top Android phone manufacturers – decided to use the services of the startup Skyhook Wireless to provide its users better location sensing than Google could provide, Google’s top executives responded with fury to the threat of losing consumer location data, forcing Motorola to switch course on Google’s supposedly “open” Android platform.

A couple years later, in January 2013, I and some others online discovered that Google had begun to specifically block Windows phones from accessing its own Google Maps website—presumably trying to get users to switch to Android. Google somewhat absurdly claimed that this was because Google Maps only worked well on browsers built on Webkit (i.e. Chrome, Safari) – strange, as the site worked fine on desktop Internet Explorer, Firefox, etc.

As I wrote here, if you changed the user agent (UA – a piece of identifying text by which the browser tells websites about itself and the device it’s running on) of Google’s own desktop Chrome browser to pretend that it was running on Windows Phone, it would no longer load Google Maps, and conversely, when a different UA was used on a Windows phone, the site loaded perfectly fine. Eventually the mainstream tech media picked up the story, and having been caught red-handed, Google was forced to re-allow access to its site. (incidentally, so much for “Don’t be evil”)

HERE, Uber, and Waze

Last year, Nokia put its market-leading maps service on the market, by then rebranded from Navteq / Nokia Maps to HERE. This was part of its exit from consumer-facing businesses (selling its best-known mobile phone unit to Microsoft, whose then-CEO Steve Ballmer apparently also wanted to buy HERE, but was turned down by a board so skeptical of any Nokia deal that Ballmer essentially sacrificed his job for it, agreeing to a timetable for stepping down as CEO in exchange for board approval on the Nokia phone deal).

A bidding war ensued for HERE, in which Uber battled a consortium of the German car manufacturers – Daimler, BMW, and Volkswagen. Why would either of these parties be interested in what might seem like off-core-competency offerings for either? The answer is simple – the future of transportation will depend on distributed data collection.

An Israeli startup, Waze, was an early entrant on the consumer side of this space, with the basic premise that if you collected position and speed data via a smartphone app running inside consumers’ cars, and had enough users, you could get a good idea of real-time traffic flows (better than existing sources of traffic data, such as government-installed highway car counters that at best can estimate traffic at particular locations) and use this to provide better traffic-adaptive routing. Waze executed exceedingly well and was acquired by Google for $1 billion.

Waze is dependent on a smartphone running inside a car, though. What if one thought of the car itself as a device—as an increasingly sensor-laden rolling connected device? Every car on the road could provide all of what Waze sees and much more (e.g. road grades, potholes, lane markers, more precise positioning, etc.)? Herein lies the problem for carmakers—platform companies like Google (Android Auto), Apple (CarPlay), Microsoft (Windows Embedded Auto), and BlackBerry (QNX) have designs on moving beyond where they currently play – in-dash infotainment systems – and into the car as a data platform.

Carmakers hate the thought of being reduced to commodity device builders like the no-profit world of Android smartphone/tablet manufacturers. Hence the German automakers’ interest in HERE, to preemptively build out the car as a digital platform and avoid getting marginalized by Google (which is the second largest mapping player and now, with Waze, also the leader in crowdsourced road data). HERE has its own infotainment platform, but more importantly, soon every Mercedes, BMW, and VW (meaning VW, Audi, Porsche, etc.) will provide Waze-like data to HERE, building up a strong, Google-free Waze alternative. HERE’s ambition is to power both tomorrow’s cars and location-based applications of all sorts.

Meanwhile car dispatch apps like Uber, Lyft, Didi Kuaidi, Ola, and such are essentially in the logistics business. The better they can route cars, the faster customers and drivers meet, the more transactions the companies process, and the more they profit, consequently. The business of route optimization, previously limited to delivery companies like UPS (whose in-house routing famously avoids left turns at almost all costs, reducing wait time in turning lanes and avoiding accidents), is now squarely within the sights of Uber and its ilk. Uber’s driver app on Android (but not iOS) currently bounces drivers out to Waze by default for optimized routing. But that’s a ton of useful data that Uber’s feeding to Google instead of itself, and at the same time, Google’s looking to directly encroach on Uber’s terrain (with its own car sharing service), so for Uber, becoming Google-free as quickly as it can is a priority.

One route was for Uber to buy HERE and have a full-fledged mapping business on its hands. With its huge market cap, Uber could probably afford to outbid the German automakers too (which itself is something worth reflecting on). Yet Uber eventually lost that bid and opted for another strategy, which was to make a deal with Microsoft. Under CEO Satya Nadella, Microsoft is focusing heavily on cloud-enabled services and treating everything below that in the stack as a commodity (its own offerings there will eventually just be demand drivers). Part of that is a new strategy for its map services (such as Bing Maps) in which, rather than driving imaging vans around the world, Microsoft will have strategic deals with map vendors like HERE to source imagery while focusing on higher-end services (such as 3D mapping and integrating mapping into other services). So Uber and Microsoft struck a deal by which Microsoft is transferring its surface imaging unit (and the technology entailed) to Uber, and Uber will integrate deeply into Microsoft services like Office and Cortana. With this, Uber can eventually turn its global network of drivers and riders into a huge source of map data that’ll be of value for its own routing but potentially also to others.

Looking Forward

At Mahindra, I eventually headed strategy and tech planning for the electric car venture, Mahindra Reva (a startup in Bangalore that we had acquired). One of my focus areas was building out a vision for the connected car, and as part of that, I looked at areas in which we could build EV-specific experiences. One idea that came to mind was in mapping— electric powertrains are drastically more efficient than internal combustion engines (ICEs), so when looking to improve efficiency and maximize range, one starts to look at things like aerodynamic drag and road grade much earlier than with ICEs (where these things only really matter for racing cars).

Could we create map routing that would optimize energy consumption by, say, sticking to flat or downhill roads? I met with map vendors and realized the idea would be a bit challenging to implement because most navigation apps calculate the crow’s flight distance (i.e. if the land were all flat from a top view), not a 3D-mapped altitude-sensitive true distance. Further, in some regions, grade data were not available at all. We would’ve had to develop grade-sensitive navigation routines in-house, which was beyond our core competence, but the opportunity here remains significant.

There are lots of potential applications in robotic navigation as well – how would an Amazon delivery drone best navigate an urban environment (FAA rules permitting), for instance?

Clearly, much remains to be done in mapping, and it’s quite an exciting field today.

By: Ashish Bakshi


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Google (Alphabet) has its own eponymous app for both iOS and Android devices called “Google”. Sometimes it is more colloquially referred to (especially inside the company) as Google Now. The premise is a smart app that trolls your emails, location data, maps history, calendar, and other information that Google knows about you to offer you recommendations and information that Google thinks you would want to know.

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Each snippet of information shows up in a little card. There are cards for weather, traffic, public transportation information, news, sports scores, airline reservations, your calendar schedule, stock prices, restaurant reservations, and more. Google wants to predict what you might be thinking and when and offer you specific answers to your internal questions based on a host of information already saved somewhere inside your personal Google account. It also wants to keep you updated on your life events that might be happening via your emails and calendars. Users can click cards for more information, swipe away cards when they are deemed unnecessary or not useful, and scroll to find more cards.

Furthermore, the app features Google voice search command that one sees so often on TV commercials. Open the app, tell your phone your search query, and most of the time it’ll give you a nice little list of results with some snazzy narration.

If one is an avid Google user and funnels his or her email, calendar, internet browsing, video watching, and social life through Google properties, then the app can actually be quite useful. I especially find it useful regarding upcoming flights—the app goes through your email confirmations received from airlines and displays all the relevant information for you in a little, easy-to-digest card format. Another cool use case is for traffic. Presuming Google knows where you work and where you live, it can give you real-time traffic information (taken from standard Google Maps app) and suggest when you should start heading home (via a push notification). Another nice touch is that it includes calls-to-action with some cards, whether it’s to buy tickets to an event, book a hotel, reserve a table at a restaurant, or buy a product. So far, no ads have shown up in the card feed—probably because the usage is so low there are no advertisers willing to spend money to reach minimal eyeballs. Another plausible explanation is that Google doesn’t want to clutter this product with ads as it has with so many of its other products.

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The service has been out for quite some time (I have been using it since 2013 and only because I was working at Google) but an informal HBS straw poll of 10 students showed that not one person had even heard about this app offering from Google. I can confirm that sentiment elsewhere in the tech-hub and tech-forward Bay Area, California nonetheless. Few outside of Google actually know Google even has an app, let alone what it does or how it can be useful. Despite massive TV advertising, among the generation of 20-30 somethings this Google app has been far from a hit.

One of the more amazing but downright eerie features of the Google app is the location history. If you have the app and have your location services on (which I presume many users do by default but there is definitely an option to turn it off), Google will track your every movement via your phone and GPS. Look at where I went on December 29, 2014. I can confirm I did play golf that day out in Eastern San Diego and then returned home.

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How about Sunday September 28, 2014? I clearly made a full day of Harvard. I wonder what I was doing on Linden Street?

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I flew home on Thanksgiving Day in 2014 to surprise my whole family who thought I wasn’t coming home for the holiday. Good thing they have no idea this even exists on Google.

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It even tracked me during FIELD II all the way in Brazil on January 4, 2015. Don’t tell mom I went to Bar Tize in Belo Horizonte!

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One doesn’t have to think very hard about all the possibilities of how this information could be useful, harmful, interesting, and disastrous all at the same time. I am sure this would take relationships to a new level if only people actually knew about this. For Google and for me, it’s scary—Google basically knows everywhere I go and when I go there with a good degree of accuracy. Should I be upset or should I be thankful in case this information actually comes in handy one day? I think that’s up for an individual to decide. But regardless, Google has done a poor job marketing this feature—I wonder why…

 In summary, if you are a Google maniac and run your life through Google products, Google Now could be very useful for you. I actually really, really like the idea of smart recommendations and trying to predict what you are thinking and/or the information you need. I think it’s the future of the connected world—having technology think for you. And I believe Google is the one company in the world best positioned to do this due to the extensive data they have on all of us. However, without adoption or a solid marketing effort (a problem that is pervasive throughout Google for most of its products and services), this app is nothing but a fun little app for Google employees, ex-employees, and those who love their TV commercials or happen to stumble upon it one day. Perhaps Google doesn’t care to advertise it because they are still working on making the cards relevant and smart and don’t want mass adoption of a less-than-optimal solution.

Finally, the location history is an interesting one. I love showing my friends the technology and most are very intrigued when I do, wondering if they can figure out their own location history. Most are disappointed that they can’t because they don’t have the Google App installed. But then they have no real desire to install it, so they don’t.

Overall, it is definitely a fun little exercise to think about what Google can do with Google Now and what the future might hold.

By: Danny Belch


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The Meta-Search Paradox and Value of Online Aggregators

Priceline is an online hotel booking service with inventory that is also directly available from Marriott, Intercontinental, Hilton, and many others. Priceline receives a commission for every room reserved, a commission that is less than the profit that the hotel reaps from the booking. However, in online search ad auctions,  Priceline’s ads are somehow able to appear higher than the ads of any of the individual hotels. Considering that Priceline makes less money per booking, how is it able to pay more per visitor than the hotels?

AdWords is Google’s search ad marketplace and is the most prevalent ad auction online. It uses a formula to determine ad position based on the following inputs: advertiser cost-per-click (CPC), a “quality score,” and the click through rate (CTR) of the ad for a particular search term. The quality score is based on ad relevance (to the search term), landing page experience, and expected click through rate (CTR).

Assume that the auction formula inputs for a Priceline ad and a Hilton ad on a search query for “hotel room in Boston” were the same – same CTR, same ad quality, etc. It seems impossible for Priceline to be able to outbid Hilton in this case, but paradoxically, they they are able to outbid individual hotels on a huge variety of keyword queries.

Suppose a simplified scenario where there are only 10 hotel providers in Boston: Hilton, Marriott, Starwood, and 7 others. Each of the 10 have 10 rooms available for a particular night that a user is interested in. Imagine a user who clicked the Google Ads of each individual hotel before making a decision. Each of the hotels would have to pay for the user to click their ad, even though 9 out of 10 got no benefit. Thus, each one has only a 10% chance of attracting this person’s business, given that he is committed to buying a hotel room in Boston. If a hotel has to pay Google for 10 ad clicks to make one room sale, those ad payments start to add up and eat into the profit margin of the room sale. In contrast, an aggregator like Priceline who has deals with each of the 10 direct players, will have 100 rooms in its inventory. It has a much higher chance of actually gaining a conversion since the consumer is likely to find exactly what they are looking for on Priceline. The aggregator has a higher conversion rate and therefore it can pay more than a direct advertiser to attract a user to its site, despite a lower profit margin for a sale.

In addition to this structural benefit that aggregators benefit from, users often appreciate aggregators because they simplify the buying process. The CTR of an aggregator and is often higher than those of direct players which, coupled with the higher purchase conversion rate, means that aggregators can bid even less and still maintain the top ad positions in search. Aggregators are valuable to users as they minimize the need to shop around across a highly fragmented industry. It is much easier for the user to compare amenities, prices and location in one place. The breadth of listings gives consumers the further confidence that they are making an informed decision.

Furthermore, aggregators can seem like an independent third party and thus foster trust. A user that visits a hotel’s website directly, isn’t likely to have full trust in the reviews that are displayed since they might be biased. A third party that aggregates review information is likely to be more trustable. This isn’t to say that a third party is necessarily trustworthy, but rather that consumers are more likely to trust their reviews and/or recommendations.

You might ask why the hotels would continue to support this structure and fund a channel that undercuts their margins. The answer primarily lies in the fragmented nature of the marketplace. The aggregators would only be threatened if a large majority of hotels in an area colluded to pull their contracts. It is not in an individual hotel’s best interest to turn off this marketing channel and they are unlikely to be able to come to a deal with their direct competitors. The result of this fragmented structure is that the aggregators continue to thrive online.

This model works in a surprising number of fields. Flights, hotels, rental cars, apartments, home services, online courses, and many others.

In addition to providing deep breadth of listings for their users, aggregators can further differentiate themselves by helping users in the decision-making process. This is becoming especially important as online consumers seek the simplicity associated with being served an answer on what to do by a trustworthy expert. Unfortunately, some companies exploit this user desire, by, for example, promoting products that bring in the highest affiliate commission rather than the ones that are truly the best.

There is an opportunity for new companies in many fields to step up and take their role as quality raters and custom recommendation seriously. For example, the company bestreviews.com is focused on getting real expert input on specific products and recommending products in all categories on the basis of the combination of expert opinions and public reviews. Similarly, users will value eversence.com, the well-researched science-based supplement recommender.

As the online economy continues to grow and evolve, the role of online aggregators will also have to adapt if they want to stay competitive. I believe that the aggregators will further differentiate by creating more value by providing complimentary services such as deep research and trustworthy recommendations.

By: Liza Yermakova


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A growing trend among online retailers is the expansion into brick and mortar stores. Google, Amazon, Rent the Runway, Warby Parker, Bonobos, Birchbox, and Honest Beauty have all complemented their online businesses with offline retail concepts in the form of showrooms, pop-up stores or traditional retail formats. This expansion offline is allowing retailers capture greater growth and more effectively convert today’s highly informed consumers. This trend, coupled with the increasingly blurred line between the online and offline retail channels, is leading to the emergence of the omni-channel retail concept of the future.

amazon

Amazon Store in Manhattan

 

 

 

 

 

Unlocking Meaningful Growth

Online retail has experienced significant growth over the past decade but, while still attractive, e-commerce growth rates have declined from ~30% per year in the early 2000s to ~10% today. Approximately half of today’s growth is generated by those online retailers that also have a physical retail presence, a distribution channel that still generates between 94% to 97% of total retail sales. Retailers that have both an online and physical retail presence report an average annual growth rate of 23%, relative to the 9% experienced by online only retailers. With the online retail space experiencing declining growth rates, brick and mortar stores offer online retailers with an additional channel through which they can broaden their customer reach and extract meaningful growth.

Enhanced Customer Conversion

The customer conversion process is becoming longer as consumers are increasingly inundated with information and becoming smarter as a result. While the online retail channel is undeniably valuable, the addition of a physical presence allows retailers to directly interact with the customer and to tell the story of their brand through a differentiated shopping experience. Touching and feeling a tangible product and creating a physical and human experience with the brand is a powerful way to convert increasingly smarter consumers.

Those consumers acquired through the offline channel have the potential to be of higher long-term value to the retailer by means of relatively larger purchase sizes and greater loyalty to the brand.

Bonobos has reported that customers buy ~75% more if they buy in the fashion retailer’s brick and mortar stores. In this setting, the customers’ experience of the Bonobos brand is enhanced by their ability to touch and try on the Bonobos products as well as the one-on-one human experience, which the company believes leads to greater customer loyalty.

Warby Parker Co-Founder and Co-CEO, Dave Gilboa, notes that “selling offline is a key way to interact with customers” and “the offline sales component is part of a long-term customer acquisition strategy which can fuel more sales online.”

bonobos

One-on-one shopping experience at a Bonobos Guide Shop

The Omni-Channel Concept of the Future

As the divide between online and offline retail concepts is becoming increasingly blurred, we are seeing the emergence of the omni-channel retail strategy of the future.

To build a valuable brand, meaningful customer base and to stay relevant, retailers must combine the best of the online and offline retail concepts into a reimagined, new and innovative retail experience for customers.

Bonobos and Warby Parker were early movers with their launch of small-scale concept stores that serve as showrooms (inventory is for display and trying on only). This retail concept allows consumers to physically experience a brand, while also being introduced to the company’s online store. Retailers also benefit from higher customer conversion rates, generally larger order sizes and the lower costs associated with significantly lower in-store inventory volumes.

Rebecca Minkoff and eBay have joined forces and are also paving the way to the omni-channel experience of the future with the launch of an interactive store in New York City’s SoHo. The store combines the best aspects of the online and offline shopping experience. Shoppers can browse through the entire Rebecca Minkoff catalogue on the “Connected Glass” interactive shopping wall. At the touch of a button on the wall, the customer can have their selected products sent to a dressing room. The dressing room mirrors are also interactive and allow the customer to request additional items as well as a stylist at the touch of a button. The interactive system also allows the customer to link any products that they have tried on to their personal profile, which they can access online or during future visits to the interactive store.

As demonstrated by Bonobos, Warby Parker and Rebecca Minkoff, the possibilities are endless and the race is on to develop the ultimate omni-channel retail experience of the future.

minkoff

Rebecca Minkoff’s Interactive Shopping Wall

 

Sources:

https://hbr.org/2014/08/e-commerce-is-not-eating-retail/

http://www.wwwmetrics.com/shopping.htm

http://www.emarketer.com/Article/Customers-Spend-More-Ecommerce-Site-They-Buy-After-Visiting-Bonobos-Offline-Shops/1011874

https://gigaom.com/2012/11/05/the-future-of-e-commerce-is-both-online-and-offline

http://www.retailcustomerexperience.com/videos/rebecca-minkoff-debuts-first-interactive-store/

http://www.megatechnews.com/amazon-store-coming-to-nyc/

http://www.retail-week.com/retail-week-live-2013-a-glimpse-of-the-future/5046698.article

By: Jessica Reed


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ONE

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(Intel ad from the mid 90’s and an image of the recently announced Samsung Gear VR)

For those following trends in Silicon Valley, one might experience a sense of déjà vu recalling the mid-1990’s when Virtual Reality first captured the zeitgeist for its promise as an immersive portal into the nascent world of cyberspace. Twenty years later, the amorphous medium has transformed from a “not too distant future” captured in the low-resolution computer graphics and millenarianism of 90’s Sci-Fi films into a commercial reality. The the 2.4 billion dollar acquisition of the Kickstarter funded Oculus VR by Facebook and the recently announced $542 Million dollar Series B financing round for the VR/Augmented Reality start-up, Magic Leap (led by Google with Qualcomm, Legendary Entertainment, KKR, Vulcan Capital, Kleiner Perkins, Andreessen Horowitz and Obvious Ventures) suggests that large tech companies are committed to developing virtual reality platforms. The big question is how will companies like Oculus / Facebook and competitors like Google mobilize development of their virtual reality platforms?

The Oculus Platform

In his explanation of the acquisition of Oculus VR to investors and the public, Mark Zuckerberg characterized the virtual reality startup as pioneering a “new communication platform” that was part of “a long term bet on the future of computing”. In the same way that mobile phones have created a new form of ubiquitous computing, virtual reality may similarly add qualitatively higher levels of immersion in computing, enabling a new ecosystem of applications to develop. Whereas mobile applications make novel use technologies like embedded cameras, GPS and accelerometers, virtual reality apps can use technologies like positional head tracking and three-dimensional high-resolution, wide field view screens to create new online products and businesses.

THREE

Rather than building a business around selling hardware, Oculus VR and Facebook have focused on developing their “Oculus Platform” – a store for new virtual reality applications. Oculus VR / Facebook has partnered with Samsung to build virtual reality devices on top of existing mobile devices – which are rapidly increasing in screen resolution and processing power – and have expressly said that they will be pricing their virtual reality headsets at or below cost in order to grow the VR ecosystem. In other words, Oculus will subsidize virtual reality hardware in order to build a large developer and user base needed for a software ecosystem and app marketplace to develop.

To assist in the development of the virtual reality ecosystem Oculus is investing in developers subsidizing headsets as well as providing the tools to create new VR Apps. These include developer support forums, developer “best practice” manuals with clear guidance on the technical standards, and finally free software for updating apps as virtual reality hardware changes. Additionally, in its September “Connect” conference, Oculus announced an expanded strategic partnership with the game development platform Unity, providing free Oculus add ons for Unity Developers to further build a developer ecosystem. Although Oculus is assisting and subsidizing the development of third party apps, the company is also creating sponsored Oculus Apps that will raise the quality level of early consumer virtual reality experiences.

FOUR

In addition to building its developer base, Oculus VR / Facebook has decided to wait and let the virtual reality ecosystem to develop before releasing mass commercial products. The company has already released three different Developer Kit headsets (DK1, 2 & 3) with a consumer version yet to be officially announced. Oculus’ stated intention is to first develop a marketplace of high-quality virtual reality experiences before releasing mass consumer products, as they are concerned that the platform can be undermined by a lack of compelling content.

As the virtual reality app marketplace is growing, Oculus is also providing its own ratings of apps on its platform. Additionally, while the company is allowing the development of third party accessories, they are also building sponsored Oculus accessories. These moves allow Oculus to control the quality of the platform, creating a high quality experience for consumers that they describe as “good for everyone.” This discretion to control the platform can be a powerful tool for Oculus, allowing the company to define the parameters of its app marketplace leading to higher quality and potentially inreased market power.

In contrast to Facebook / Oculus, Google’s strategy for developing a virtual reality platform is less clear, and perhaps at an earlier stage of development. Although the company did launch Google Cardboard, a cheap cardboard adapter and mobile app turning all mobile phones into virtual reality devices, they have yet to be as public about their intentions in virtual reality. However, the company’s investment in exotic stealth technologies like Magic Leap’s digital lightfield displays, may signal broader ambitions in the virtual reality market. Currently, Google appears to be offering compatibility with Facebook, Oculus and Samsung products alongside its suite of products, suggesting that there is currently collaboration in virtual reality.

As virtual reality ecosystems develop, there are questions about whether this initial collaboration across will be replaced by competition once the market becomes lucrative enough. For example, although the Oculus Platform is compatible with multiple mobile phone based operating systems, it is not yet clear whether the Apple store will allow the Oculus Platform app to run on iOS phones. Additionally, it is unclear exactly how Facebook / Oculus will monetize their virtual reality platforms once they attract a large enough user base to make it economically viable for developers to continue committing large resources towards developing virtual reality applications. Finally, it is unclear whether formal standards will emerge for developing virtual reality applications or whether there will be competition between different standards.

We may be seeing the rise of new computing and entertainment platforms that will create remarkable new collaborative possibilities as well as competitive challenges for the largest media and technology companies – stay tuned!

Links:

On Mark Zuckerberg’s statements regarding the acquisition of Oculus VR:

https://www.facebook.com/zuck/posts/10101319050523971

http://www.technologyreview.com/news/525881/what-zuckerberg-sees-in-oculus-rift/

http://arstechnica.com/gaming/2014/08/why-oculus-sees-virtual-reality-as-the-final-compute-platform/

Articles on the Oculus Platform and Developer Support

http://techcrunch.com/2014/09/20/oculus-platform/

http://www.roadtovr.com/oculus-rift-best-practices-guide-virtual-reality-recommended-age/

http://unity3d.com/company/public-relations/news/unity-technologies-and-oculus-expand-strategic-partnership

Links about Magic Leap:

http://www.technologyreview.com/news/532001/how-magic-leaps-augmented-reality-works/#

http://recode.net/2014/10/20/look-who-else-is-joining-google-to-back-magic-leap-the-secret-augmented-reality-startup

Recommended Virtual Reality 90’s Movies: eXistenZ and Strange Days


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