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Despite years of limited customer interest, tech giants are renewing a push into augmented reality in the hope that the technology is now useful enough for people to spend big money on it.
A big vote of confidence came this week when the U.S. Army said it would buy up to 120,000 Microsoft AR headsets for “situational awareness, target engagement, and informed decision-making,” the Army said in a statement. The deal is potentially worth $22 billion over 10 years for Microsoft, if the Army chooses to extend the agreement after a five-year period.
It’s a big win for Microsoft, which debuted its HoloLens AR headsets in 2016 as a way for people to interact with digital graphics overlaid onto the physical world. Over the past few years, Microsoft has increasingly shifted its marketing of the HoloLens to businesses and the military after consumer demand for AR technology proved disappointing. Among the few exceptions was the success of Pokémon Go, a game developed by Niantic that was a smash hit in the summer of 2016 and involved using smartphones to find digital monsters scattered around cities.
It was just a few years ago that tech giants including Apple, Google, Facebook, and Microsoft pitched AR technology as the future of how people would interact with computers. At the time, they released tools for developers to create AR apps for smartphones and eventually AR headsets once they were released. Several high-profile startups like Magic Leap, ODG, and Meta were developing their own AR headsets, hoping that their devices would become as mainstream as smartphones.
But AR, like its sibling technology virtual reality, never became the hit that executives and investors had hoped for. Startups like ODG and Meta collapsed after failing to create successful businesses, while the much-hyped Magic Leap shifted its focus from consumers to companies and replaced its CEO, Rony Abovitz, with former Microsoft executive Peggy Johnson, in September 2020.
For Gartner senior principal analyst Tuong Nguyen, mainstream adoption of AR is “a very long road,” which makes it difficult for startups to survive. Venture capitalists, the lifeblood for most startups, don’t want to continuously fund for years if these businesses fail to catch on quickly.
Tech giants, on the other hand, have deep enough pockets that they can continue to pour cash into nascent technologies while their primary lines of business subsidize those losses. Google, for instance, bought AR startup North in 2020 for an undisclosed amount, while Apple is expected to reveal its own AR headset “in the next several months,” according to a Bloomberg News report.
Even Snap, the parent company of social media app Snapchat, reportedly plans in the next version of its own Internet-connected glasses to add more advanced AR technologies.
The challenge for AR headset makers is that the headsets, although increasingly cheaper to make, are still relatively expensive and clunkier than more mainstream computing devices, like smartphones and laptops.
As IDC research director Ramon Llamas explained, current AR headsets more closely resemble the cumbersome visor worn by Star Trek: The Next Generation character Geordi La Forge, rather than something more fashionable.
“You don’t want to have those things on in public,” Llamas said.
But the fact that companies are discussing new AR headsets and related Internet-connected glasses these days shows that their leaders believe upcoming models will be bigger sellers, Llamas explained.
In the meantime, business and military use of AR is increasing, as exemplified by Microsoft’s recent Army deal, Llamas said. Although consumer AR technologies attract the most attention, several companies selling AR headsets and related software to corporate customers have quietly increased sales. These companies include Mad Gaze, China-based Shadow Creator, printing giant Epson, and tech behemoth Microsoft, Llamas said.
One reason AR is catching on more quickly with business customers than consumers is that for workers, bulky headsets may not be that embarrassing to wear. Consider hard hats, which are “ugly,” said Nguyen. While Nguyen wouldn’t wear a hard hat “to the club or to do grocery shopping,” if he were working in a construction zone, he would “100% wear it.”
“I wouldn’t complain,” Nguyen said.
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