When you talk about smart glasses, many investors quickly return to the 2014 Google Glass disappointment. For those of you who don’t remember, Google Glass were “smart” glasses with a small plexiglass display that presented information in the user’s field of view, controlled with voice commands, including a built-in camera for taking photos and videos, and receiving turn-by-turn directions on-lens.  However, limited applications, a $1.5k price tag, and being a first-of-a-kind product riddled it with social stigmas, earning the early adopters the name “Glassholes”. The product was discontinued in 2015 with an estimated sub-100k units sold. The product failed because of its “creep” factor and lack of utility.

Despite that cautionary case study, Meta and Google appear to be all in on a next generation of smart glasses that combines fashion, functionality, and generative AI into a compelling form factor. I believe the reason for their optimism is a combination of recognizing consumers gravitate to easy-to-use tech along with greater confidence in what generative AI can add to the equation.

The catalyst here is Generative AI, which has allowed us to retrieve information faster and easier through multi-modal centralized search. GenAI is paving the way toward complex wearable Ambient Computing. In other words, the current goal is making glasses that look and feel like “normal glasses”, but with generative AI access via voice-activation, cameras, and sensors. This means your glasses will understand the physical world around you, ready to provide you any information about it, like “what kind of plant am I looking at?” or “did you see where I left my keys?”.

As evidence of this shift, The Information reported Meta is ending development of its Vision Pro competitor, codenamed La Jolla.

Here’s where I see Google and Meta standing on the smart glasses topic:

Google: Project Astra (announced May 2024) – Project Astra is currently in development and is Google’s vision for the future of AI assistants. Project Astra will be integrated into any Google device with a camera, most notably phones and smart glasses. This will allow computer vision and generative AI to inform the user of their surrounding world. The applications include everything from doing math on a whiteboard, remembering someone’s name, to directions. It’s unclear how much Google is spending annually on Project Astra development, that said, I estimate it to be in the $2-4B per year range.

Meta: Smart Glasses (released 2021) – While the initial version was without AI, the new Ray-Ban and Meta AI combination create a product that is similar to what Project Astra is pursuing. You can use voice commands to interact with Meta AI to perform various tasks like sending messages, making calls, controlling media (including live streaming), and even getting information from the web. I estimate more than half of Reality Labs’ ~$20B in annual losses is related to smart glasses. In other words, Meta is putting their money where their beliefs are in terms of the future of wearable computing.

In short, we’ve gone from completely immersive digital worlds (VR), to adding digital elements to our real world (AR), to blending the digital and physical seamlessly (Spatial Computing), and finally, to making technology so intuitive and integrated that it works in the background to enhance our everyday lives (Ambient Computing).

Apple’s current vision for Spatial Computing comes the form of Vision Pro, which has been available for the past 8 months. This year, Tim Cook has been consistent on every earnings call and at Apple product event that Vision Pro is the future. While I agree that Vision Pro has meaningful opportunity to be a $25-50B annual business, I believe future versions of their Spatial Computing hardware will map to Google and Meta’s smart glasses lineup.

One manifestation of an expanded Spatial Computing product lineup could include future versions of Air Pods with cameras.

As for timing, I expect the next product announcements in the Vision Pro lineup will be a lower priced mixed reality headset, similar to the current product. Over the next 5 years, I expect the company will begin to announce these next generation wearables. My confidence is based on a belief that there is more utility to smart glasses versus a mixed reality headset, and it would be a costly miss for Apple not to enter the market.

Starting with VR, many pin the start of virtual reality to 2010’s founding of Oculus in 2012 that generated widespread interest in the VR headset. However, VR predates Oculus by a wide margin, given big tech names have been trying to win over consumers with immersive experience headsets since the early 90’s:

These include:

• Virtuality (1991): Virtuality was one of the first companies to produce VR gaming systems for arcades.
• Sega VR (1993, unreleased): Sega announced the Sega VR headset for its Genesis console in the early 1990s, but it was never released due to concerns about motion sickness and the technology not being ready for mass market.
• Virtual Boy (1995): Nintendo released the Virtual Boy, a 3D gaming console that used a stereoscopic display. However, it was not a true VR headset as we understand today.
• VFX1 Headgear (1995): VFX1 was one of the first true consumer VR headsets for PC gaming. It featured head tracking and stereoscopic 3D, but it was expensive, had low-resolution displays, and required a powerful computer to run.
• CyberMaxx (1995): Like the VFX1, it offered head tracking and stereoscopic 3D, but with similar limitations in terms of display quality and usability.
• Sony Glasstron (1997): Sony released the Glasstron, a head-mounted display that provided a virtual screen experience. While not a full VR headset, it had some applications in virtual reality and was an early attempt at head-mounted display technology.

15 years later Oculus was founded in 2012, setting off a chain of events that advanced the tech to where we are today:

• March 2014: Facebook (which later became Meta) acquired Oculus VR for approximately $2 billion. This acquisition marked Facebook’s serious entry into the virtual reality space.
• September 2018: Oculus announced the Oculus Quest, a standalone VR headset that didn’t require a PC to operate. While the product itself was named “Quest,” the broader brand remained “Oculus” until later.
• October 2021: As part of Facebook’s rebranding to Meta, the company announced that the Oculus brand would be phased out, and future VR headsets would be under the “Meta” brand. The Oculus Quest was rebranded as the “Meta Quest.”
• October 2021: Facebook Inc. officially changed its name to Meta Platforms. This rebranding was part of a broader strategy to focus on the “metaverse,” a concept of interconnected virtual worlds that Meta aims to develop.
• June 5, 2023: Apple announced the Vision Pro, its first mixed-reality headset. The Vision Pro is designed for both virtual reality (VR) and augmented reality (AR) experiences, which Apple calls “Spatial Computing”.

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