The Coming Spatial Computing Battle
We are on the cusp of some interesting times in the technology industry as a battle is looming between Apple and Meta over spatial computing/mixed reality. In case it isn’t totally obvious, the battle will first begin as a war over words as Apple will look to standardize Spatial Computing and Meta will look to standardize Mixed Reality. Because of that, I am not sure where the industry will land, but if I had to bet on whose marketing will win, I’ll bet on Apple’s. Hence, I chose Spatial Computing for the title.
A few weeks ago, I shared a brief overview of some recent market research we did on the current virtual reality space. Our study surveyed consumers who don’t own VR headsets but have tried them and current VR owners, with the vast majority of that group owning a Meta Oculus Quest. I stand by the analysis that these headsets, wearable computers, or whatever we call them, are still many years off from widespread mass adoption. But I think it’s important to contrast what is very likely Meta’s strategy here with Apple’s.
A somewhat subtle theme Mark Zuckerberg kept emphasizing at Meta Connect was making this technology affordable and approachable for everyone. I felt this language intertwined throughout the event, and the launch of Quest 3 was intentional in showcasing Meta’s strategy here as a whole and in particular, their positioning against Apple. Scale has, first and foremost, been in Meta’s historical favor (more people use Facebook and Instagram than any other single software product in the world), and I get the sense Zuckerberg and Meta want the same thing to be true with their hardware strategy.
The language repeated as Zuckerberg launched the quest kept coming back to innovation in this space, meaning improving the overall product experience and continuing to focus on bringing the price down so it can get into the hands of the masses. To use a smartphone market analogy Meta wants their platform enabling the Quest to basically be Android. But the question is, will they allow other hardware OEMs to run this platform, or are they attempting to blend the strategy of Google and Apple and build their own hardware but also relentlessly focus on price affordability and thus sheer unit scale.
Our research would suggest Meta’s best strategy here is to open up its software platform and ecosystem to other brands, but there is no indication this is their play yet. From our survey, Samsung and Google ranked much higher than Meta when we asked consumers which brands they were most likely to consider in a future purchase of VR/Mixed Reality headsets. This suggests that if Meta were to allow Samsung and Google, assuming they are willing and interested, then there is a much better chance of them reaching their scale ambitions of having as many people as possible on their platform. This is extremely relevant if they want a chance to compete with Apple because if Meta’s mixed reality platform it will come down to installed base and developers.
In my mind, Meta’s strategy is clear. They will relentlessly focus on scale, but it is unclear whether they will attempt to attempt that scale alone or with an army. The latter has historically been needed to compete with Apple.
Apple’s playbook seems generally straightforward. Focus on making the best hardware, on top of the best software, focus on simplicity ease of use, attract the market’s best developers, and focus more on the premium side of the market. Apple will never be the least expensive hardware product, but they believe their hardware is worth a premium, and the market seems to agree.
While Apple Vision Pro is likely to remain out of mainstream price points for several years, at least their efforts in setting the experience bar will not go unnoticed by the market. Despite debates about how many possible devices Apple will sell in year one, it will be enough that a vast majority of consumers will get to try one either at retail or at a friend or family member’s house. It may come as no surprise that in our VR survey, 71% of respondents indicated their first experience with a VR device was at a friend’s or family member’s house. This means the single best place for VR to sell itself will be experiencing it at someone’s house whom you know. I’ll put more stake in this scenario, being critical to driving these experiences to the mainstream over any traditional retail experience. And it is within this setting most people will experience Apple Vision Pro.
The challenge for competing headsets will be Apple Vision Pro setting the bar extremely high. Yes, the price will be out of reach for now, but people will remember those first experiences, and that will help Apple over time as Apple Vision Pro evolves and eventually reaches more mainstream price points.
A few other nuggets from our data that play in Apple’s favor. The brand most consumers overwhelmingly said they would consider if they were in the market for a VR device was Apple at 55%. This was significantly larger than any brand we tested.
Second, 20% of current non-VR owners indicated they would be willing to spend $1,000 or more on a VR headset. This was quite a bit of a surprise and, overall, led us to a new insight relative to this category. In prior VR surveys we have conducted, as well as many we have read from third parties, the vast majority of respondents signaled a low-price threshold (under $400) as the price they are willing to pay. Our survey saw a measurable increase in willingness to spend above $500. This could suggest more people seeing the wider value of these experiences and perhaps ways to embrace new forms of entertainment and productivity. We believe a key factor in convincing consumers to pay more for spatial computing devices is that they see it as a potential replacement for their TV or laptop/desktop someday.
To test this, we asked current VR owners if they could see themselves replacing their TV and or laptop/desktop with a more advanced headset at some point and 57% said they could see replacing their laptop/desktop, and 60% said they could see themselves replacing their TV.
While we completely acknowledge a goggle form factor head-worn device is an interim step for spatial computing to a more glasses-type form factor, for at least the next 4-5 years, these larger head-worn devices will be what comes to market. The technology to miniaturize is still many, many years away. But, we think as consumers see these more as general-purpose entertainment and productivity devices, we could see a chunk of the market adopt these devices and perhaps reach 20% population penetration in the 2025-2026 timeframe.