Greetings everyone, this is the online edition of my Week in Review newsletter, designed to encourage you to subscribe and receive it directly in your inbox each week.

Last week, I explored how Twitter is considering a decentralized approach to the future of the web, aiming to avoid the potential for unilateral platforming of prominent figures. This week, I’ve put together some observations on another facet of the evolving web: the ongoing competition between Facebook and Apple for dominance in the realm of augmented reality. The release of the necessary hardware will represent only the initial stage of a complex shift from a mobile computing landscape centered on smartphones to one focused on glasses.

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Recent developments in “reality” technology have demonstrated that tech companies will be unable to bypass the challenging initial phase of augmented reality; they will need to navigate it directly, and it will likely be a lengthy process.

Currently, it appears that everyday users haven’t demonstrated the same level of enthusiasm for AR as the next generation of platform providers, who stand to gain significantly from a substantial transition. While some analysts predict AR as the inevitable successor platform, the struggle to redefine mobile computing fundamentally involves attempting to supersede the smartphone before its time has passed.

A competition to reshape mobile computing in the victor’s vision

It’s logical that Apple and Facebook are the primary drivers behind this AR future, as both are ambitious companies acutely aware of opportunities they might have seized had they the chance to revisit past decisions.

Although both Apple and Facebook have numerous employees working diligently on developing their AR technology, we’ve heard and seen more regarding Facebook’s endeavors. The company has already launched several iterations of its VR hardware through Oculus and has openly discussed its vision for the convergence of virtual reality and augmented reality hardware over the years. 

Facebook’s hardware and software initiatives have been conducted openly, a benefit for a company that didn’t offer any hardware before introducing VR headsets. In contrast, Apple has provided a developer platform and occasional presentations at keynotes for developers utilizing their tools, but its most ambitious public AR project on iOS has been a measuring tape application. All other development has occurred privately.

This level of secrecy naturally makes any reporting on Apple’s plans particularly noteworthy. This week, a report from Bloomberg’s Mark Gurman highlighted some of Apple’s upcoming steps toward a long-anticipated AR glasses product, indicating that Apple intends to release a high-end, specialized VR device with some AR capabilities as soon as next year. This isn’t entirely unexpected, but it underscores the eagerness of current mobile leaders to facilitate the introduction of a technology with the potential to fundamentally alter existing tech infrastructures and the broader web.

Both Facebook and Apple face a number of obstacles in bringing AR products to market, and these are not insignificant:

1. The necessary hardware isn’t yet sufficiently developed.
2. The supporting platforms aren’t yet ready.
3. Developers aren’t adequately prepared.
4. Consumers haven’t yet expressed sufficient demand.

This presents a significant challenge, but is common for ambitious hardware projects. Facebook has already navigated this cycle with virtual reality through multiple hardware generations, although there were key differences and VR hasn’t yet achieved widespread mainstream adoption.

Nevertheless, there’s a clear advantage to focusing on VR before AR for both Facebook and Apple: they can invest in hardware that complements the technologies their AR products will require, they can attract developers to build for a platform that resembles what’s to come, and they can establish baseline expectations for consumers regarding a more immersive platform. This would be particularly true for Apple with a mass-market VR device comparable to Facebook’s $300 Quest 2, but a premium niche device, as Gurman’s report suggests, doesn’t quite align with that scenario.

The challenge of AR/VR content

I believe both Facebook and Apple are concerned about releasing functional AR hardware into a world where they are solely responsible for defining the primary applications.

The AR/VR landscape already includes a substantial number of developers who are optimistic about the technology’s long-term potential but are also frustrated by companies that appear to view content ecosystem development merely as a means to launch their next device. If Apple genuinely anticipates the sales figures suggested by Bloomberg—comparable to Valve’s early Index headset sales—I doubt there will be significant developer interest in building for an interim device; I would anticipate ports of Quest 2 content and a few standout projects from Apple-funded partners.

I don’t believe this will provide a substantial advantage.

Genuine AR hardware will likely necessitate different input methods, different interaction standards, and a fundamentally different approach to use cases compared to a device designed for home or smartphone use. Apple has consistently encouraged mobile developers to embrace phone-based AR on iPhones through ARKit, a push they have appeared to scale back at recent developer-focused events. From my observations of early projects, most developers in the field have been disappointed by the capabilities of existing platforms and the resulting output.

This is not favorable for Apple or Facebook and suggests that both companies will need to guide users and developers through use cases they specifically design. I believe there’s a strong argument that initial AR glasses applications will be dominated by first-party technology and may avoid fully independent native apps in favor of tightly controlled data integrations, similar to Apple’s approach to developer integrations within Siri.

However, offering developers a platform built with Apple or Facebook’s own dominance in mind will be difficult to sell, highlighting the fact that mobile and mobile AR will need to coexist for a considerable period. There will be opportunities for developers to create experiences that leverage 3D and spatial computing, but there are also reasons to expect they will be hesitant to move from a mutually beneficial mobile platform to one where Facebook or Apple will have a privileged position. What’s in it for them?

Mobile OS leaders captured value from app marketplaces, but the true prize was the expansion of the digital advertising market. With the opportunity to revisit mobile, expect these pioneering tech companies to propose proprietary digital ad infrastructure for their devices. Advertising will likely be augmented reality’s greatest opportunity, allowing the digital ads market to create an infinite global canvas for geo-targeted customized ad content. A predictable, if uninspiring, future.

For Facebook, platform ownership in the 2020s means the ability to set its own limitations on use cases, avoiding App Store regulations and designing hardware with social integrations built into the silicon. For Apple, reinventing the mobile OS in the 2020s likely represents an opportunity to more effectively dominate mobile advertising.

This is a potential opportunity worth trillions of dollars in revenue.

Looking ahead

The AR/VR industry has been consistently seeking saviors. Facebook has been a key supporter after numerous startups have failed to achieve rapid success. Apple’s long-awaited AR glasses are currently the focus of many enthusiasts’ hopes.

I don’t believe Apple or Facebook underestimate the magnitude of this opportunity to succeed, which is why they each have more personnel dedicated to this than any other forward-looking project. AR will likely be transformative and fundamentally change the web, representing a true Web 3.0 and the most significant shift in the internet’s history.

That doesn’t suggest a process that will be particularly smooth.

I anticipate that these initial devices will arrive later than expected, offer less functionality than anticipated, and differ from the mobile paradigms of the smartphone era in ways we haven’t yet foreseen. I also expect that these companies will face challenges in forcing a more seamless transition. This will be a complex process for tech platforms and won’t happen quickly.

Loon Project Discontinued
One of tech’s more unusual ventures has ended, as Google announced this week that Loon, its internet balloon project, is being shut down. It was an ambitious effort to provide high-speed internet to remote areas, but the team concluded that it wasn’t sustainable to offer a high-cost service at a low price. More

Facebook Oversight Board to Review Trump Ban
I discussed a couple of weeks ago—which feels like a long time ago—how Facebook’s temporary ban of Trump would create a challenge for the company. I wasn’t sure how they’d delay a decision regarding a banned Trump before he used Facebook and Instagram as his primary platform, but they made a strategic move, purposefully involving the issue in PR-friendly bureaucracy by submitting the case to their independent Oversight Board for their most significant case to date. More

Jack Ma Reappears
Alibaba’s CEO has returned to public view. Alibaba shares increased this week when the company’s billionaire CEO, Jack Ma, reappeared in public after more than three months of absence, sparking numerous speculations. The reason for his absence remains unclear, but I doubt we will find out. More

Trump Pardons Anthony Levandowski
Although no longer President, Trump surprisingly granted a full pardon to Anthony Levandowski, the former Google engineer convicted of stealing trade secrets related to their self-driving car program. This was a surprising conclusion to one of the more dramatic big tech lawsuits in recent years. More

Xbox Live Price Increase [Update: Possibly Reversed]
I’m not sure how significant this is compared to other news, but I’m personally frustrated that Microsoft is raising the price of their streaming subscription, Xbox Live Gold. It’s well known that the gaming industry is embracing a subscription model, and it will be interesting to see how gamer spending shifts between platform owners and studios.  More

Musk Pledges $100M to Carbon Capture Technology
Elon Musk, currently the world’s wealthiest individual, tweeted this week that he will donate $100 million to a competition to develop the best carbon capture technology. TechCrunch learned that this is connected to the Xprize organization. More details

I’m adding a section going forward to highlight some of our Extra Crunch coverage from the week, which provides more in-depth analysis of the finances and strategies of investors.

Hot IPOs Maintain Gains as Investors Continue to Bet on Tech
“After setting an IPO price range of $35 to $39 per share, Poshmark sold shares in its IPO at $42 apiece. Then it opened at $97.50. Such was the enthusiasm of the stock market regarding the used goods marketplace’s debut.
But today it’s worth a more modest $76.30 — for this piece we’re using all Yahoo Finance data, and all current prices are those from yesterday’s close ahead of the start of today’s trading — which raised the question: How many recent tech IPOs are also down from their opening price?” More

How VCs Invested in Asia and Europe in 2020
“Concluding our analysis of how venture capital invested in 2020, today we’re examining Europe’s impressive year and Asia’s somewhat less remarkable results. (We’re currently speaking with sources who may have data on African VC activity in 2020; if that information becomes available, we’ll add a final entry in our series concerning the continent.)” More

Hello, Extra Crunch Community!
“We’re going to be experimenting with new features here, with the Extra Crunch staff taking a more prominent role and incorporating your feedback more than ever. We work for you, the subscriber, and want to ensure you’re getting value for your money.” More

Until next week,
Lucas Matney