Apple, Facebook and Google aim to create and control the next crucial technological platform

March 28, 2014 5:38 pm

Technology: All eyes on the future

By Tim Bradshaw


Apple, Facebook and Google aim to create and control the next crucial technological platform

Goggle-eyed: a visitor to the Game Developers Conference in San Francisco tries the Oculus Rift virtual reality goggles

Palmer Luckey is holding court among the geeks. The boy king of virtual reality is answering questions from game developers about whether the pioneering headset he built in his parents’ garage, Oculus Rift, might work with something known as “galvanic vestibular stimulation”.

GVS, he gleefully explains, is “basically taking high-voltage electrodes and passing current through your head for entertainment”.

What Oculus’s VR technology does for the eyes, galvanic vestibular stimulation does for balance. Strapped to the ears, a GVS system tricks the body into feeling as if it is moving in ways it is not. In theory, he says, a GVS system could make those barrel rolls in an Oculus Top Gun simulator feel all the more real.

Then he lets the geeks in on a little secret. While they could buy a GVS system for roughly the price of a small car, they should really try building one themselves. “If you Google around for GVS schematics . . . you can actually do it for 10 bucks in parts,” he told his admirers at a games conference last year.

The DIY approach has certainly worked for Mr Luckey. Using money he earned fixing iPhones and trading Bitcoin, the teenage Mr Luckey beat Sony PlayStation and Microsoft Xbox to create the most impressive, immersive VR system in decades.

This week the 21-year-old Mr Luckey sold Oculus to Facebook for $2bn, the social network’s second-biggest acquisition to date.

Mark Zuckerberg, Facebook’s foun­der, said VR is “the next major computing platform”, which could allow its users to share “not just moments with your friends online, but entire experiences and adventures”.

Mr Zuckerberg’s acquisition has thrown Silicon Valley, which thought VR was a niche concept for gamers and that Facebook was just a place to post photos, off balance. More than making flight simulators feel more realistic, Mr Zuckerberg believes we could soon be visiting our doctors or going shopping through a VR headset.

“We’re making a long-term bet that immersive virtual and augmented reality will become a part of people’s daily lives,” he said.

Mr Zuckerberg has made some big and unexpected bets lately. Just 48 hours after announcing the Oculus deal, he posted a status update about Facebook’s scheme to “beam the internet to people from the sky”.

Facebook’s new Connectivity Lab is building “drones, satellites and lasers” to bring connectivity to remote parts of the planet. After poaching engineers from Nasa’s Jet Propulsion Laboratory and pioneers in “free space optics” – connecting satellites to each other through lasers, rather than bouncing signals off the earth – Facebook now says it is looking to hire experts in aerodynamics, physics and communication systems.

All of this is a long way from pokes, likes and status updates. Facebook’s moves are its opening shots in the battle for the next generation of technology. Like Google’s self-driving cars, mysterious barges and Glass headset, Facebook’s push into VR and “free space optics” is aimed at defining the next big thing before someone else does. The problem is that nobody in the tech industry seems to agree on what that might be.

Last year Google launched Project Loon, a plan to bring the internet to remote areas using a network of low-flying balloons. At the same time, it was also stealthily buying robotics companies such as Boston Dynamics, the organisation behind “Big Dog”, an animal-like android that can steady itself when it slips on ice and gambol through a rocky forest. In January it paid $3.2bn for Nest Labs, maker of nifty “smart home” appliances that allow users to turn up their heating or switch off a smoke alarm from anywhere with a smartphone app. Google hopes these will help them own the “internet of things” that many see as the successor to the web.

Larry Page, Google chief, said last week that he believes companies have failed because they “missed the future”. His plan is for Google to create its own future. “Especially in technology, we need revolutionary change not incremental change,” he told the TED conference.

Mobile is now the last thing. It isn’t clear if the next thing is virtual reality, the internet of things or drones

– Fred Wilson, investor at Union Square Ventures

Until this week, Facebook’s acquisitions seemed more of the incremental variety. Only a month ago Mr Zuckerberg spent $19bn to buy Whats­App Messenger, a chat app with 500m users. In 2012 it paid almost $1bn for Instagram, the photo app. These helped move Facebook from the desktop to the mobile phone.

But Oculus and the drone programme are Mr Zuckerberg’s attempt to create a new platform altogether – the sequel to the smartphone, the next personal computer or even a new internet. “History suggests that there will be more computing platforms to come,” Mr Zuckerberg said, “and that whoever builds and defines these will not only shape all the experiences that our industry builds, but also benefit strategically and financially.”

It is not just Facebook and Google trying to conquer new territories. But they are doing it most publicly.

Apple is taking a different ap­proach. Instead of paying billions for start-ups, it is toiling away in its labs, readying health-tracking wristbands, payment systems and different spins on the television set in the hope of inventing the next market. As its iPhone has proved, companies that do not own the platform are nothing more tan apps running on someone else’s device.

Amazon, which is next week expected to make another play for the living room, takes a similarly secretive approach – when its chief executive Jeff Bezos is not talking about far-off drone delivery systems to drum up holiday sales.

If Silicon Valley’s frenzy of speculative building and scattergun buying sounds a bit desperate, it is. Not satisfied with making billions of dollars from the world’s most popular smartphone, search engine or social network, Apple, Google and Facebook are starting to panic about what the next big thing might be.

In Silicon Valley it pays to be paranoid. Oculus is just the latest reminder that the tech industry cliché of a kid in a garage threatening huge disruption is alive and well.

“The nature of this business is it’s very humbling because it often surprises you,” says Chris Dixon, who as a partner at Andreessen Horowitz, invested in Oculus VR last year. “I don’t think anyone in 1998, when Google was the 13th search engine with no business model, would have believed the idea that they would have been the ones to displace Microsoft . . . People have seen this pattern enough, and seen how surprising the end result is, and adopted methods that mitigate for that.”

Unlike Microsoft before them, Apple, Facebook and Google have all adapted well to the most recent platform shift, when consumers suddenly swapped PCs for smartphones and tablets. Google’s Android – itself born from a speculative acquisition in 2005 – runs on more than three-quarters of the world’s smartphones. Apple’s iPhone commands most of the handset industry’s profits.

Concerns that brands would not buy advertising on those small screens dogged Facebook’s initial public offering in 2012. Now, the group makes more than half its advertising revenue from mobile and its stock price has rocketed. Whether it can make money from VR devices remains to be seen, but Mr Zuckerberg is not about to be left behind twice.

“Mobile is now the last thing,” said Fred Wilson, investor at Union Square Ventures, in a blog post this week. “It isn’t clear if the next thing is virtual reality, the internet of things, drones, machine learning, or something else . . . But the race is on to figure it out.”

With a share price that has tripled in 18 months, Mr Zuckerberg can afford to throw some stock around to make sure he wins that race.

The Oculus deal prompted outcry from many in the gaming community who were rooting for Mr Luckey to overthrow the old order, not sell out to it. “I have seen a lot of cases where big-ticket acquisitions seem to actually slow innovative start-ups down,” said Jaron Lanier, the author whose 1980s company VPL is credited with pioneering VR.

Mr Zuckerberg has promised Oculus autonomy – and Mr Luckey seems to believe he will get it. Part of the advantage Mr Zuckerberg and Mr Page have over their peers is Silicon Valley’s cult of the founder. Even beyond the billions of dollars they offer, the fact that both are entrepreneurs who still control the companies they created gives them an empathy and authority that mere managers lack. Both have led recent deals personally, and moved fast to win them – often in competition with each other.

“A lot of these founders are visionary founders,” says Brian Singerman, a partner at Founders Fund. “They want to go to where they are going to be able to see their mission through. That is important. Back in the day, if you had Steve Jobs show up at your doorstep that would mean something.”

Not everyone, however, agrees that today’s founders can predict the next big thing as well as Jobs did.

Om Malik, the veteran Silicon Valley commentator turned venture capitalist, describes the process as “billion dollar dart throwing”.

“Are the smartest minds of our time as clueless about the future as the rest of us?” he asks.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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