Why Are Meta and Apple Fighting Over a “Failed” Product Category… And Why It’s Probably a Good Move

(NOTE: I originally wrote this about a month before the Vision Pro launched, but never got around to publishing it, until now. It’s held up pretty well, I think.

Several years ago, I was sitting in the office of an Apple marketing executive at 1 Infinite Loop (Apple’s old headquarters), just after we’d introduced the Apple Watch.

“We can’t have small products,” she said. “We need every product to be capable of generating at least a billion dollars a year.”

Which, if you’re a believer in The Innovator’s Dilemma, is a terrifying thing to hear. It was also undeniably true. A company Apple’s size — or Meta’s, for that matter — needs each product to have huge markets in order to be considered successful. And they need them to start out that way, or face years of sunk costs that look like bad decisions before being proven right.

From all outside measures, VR and AR do not yet appear to be big enough markets to justify the early investment. And yet, Apple and Meta are both willing to face off over this “failed” category as if their futures depend on it.

Why?

Apple’s introduction of the Vision Pro is an entry into the same space that Meta’s been exploring for years, whether Apple is willing to call it VR or not. And it’s almost certainly still too early for them. The Vision Pro isn’t at a price point or a level of function that will appeal to the average Apple consumer. The version of AR that we envision finding mass adoption is still a few hardware generations away, I think.

So why face off over a market category that’s almost guaranteed to get both companies beaten up in the short term?

I believe that both are implementing different product strategies with the same goal — to own the future of the operating system market. Apple is playing defensively, and Meta is looking for a crack in the market.

For Apple, this is as much about protecting their core business as it is introducing a new product category. Failure in this category could be disastrous for them, which I’ll explain in a second. And for Meta, it’s about trying to shove Apple, Google, and Microsoft aside, and disrupting them as the driver of operating systems of the future.

I Don’t Think Meta Actually Cares What the Metaverse Is. Nor Does Apple.

This is the first premise that I’m going to suggest as part of the answer. The concept of a metaverse is super vague. I think it’s difficult for anyone to clearly describe. But, at the same time, I actually don’t think that Meta cares specifically which version of the metaverse wins out, as long as they’re involved in learning from it.

What I think is happening is that Mark Zuckerberg and Tim Cook are both very aware of the concepts in The Innovator’s Dilemma, and believe (as I do) that large firms fade when they become over-protective of previous core products. In Meta’s case, it’s not reasonable to expect that Facebook and Instagram will always be able to dominate the social media space, and Meta has to figure out what comes next if it’s going to be relevant in 10 or 20 years.

Apple, for its part, understands better than anyone how fortunes can shift when disruptive products come onto the market. Because while normally all the advantages sit with the dominant market leader, the emergence of a new disruptive interface creates a generational crack in the armor.

Disruptive Hardware Should Scare OS Market Leaders:

The premise of this article is really pretty straight forward. Hardware changes have repeatedly been the wedge that allowed a new player to attack and take over the operating system market. Pick a generation of computer hardware, and you’ll find a corresponding operating system that ties to it. In the early days of the personal computer, DOS was prominent, and — along with Windows — kept Microsoft at the top of the OS game for years. Introducing a new computer with new operating system was very difficult against an established market leader, who had all the advantages of size and distribution.

Apple struggled to break that stranglehold for a long time in the computer market, but never really succeeded until they introduced a new category of computing: The Smart Phone.

Within a very short period of time, iOS became the most dominant single-creator OS in the world. That shift also opened the door for Android to surpass Windows and compete with Apple. Microsoft’s inability to compete on the newly-leveled playing field of the smart phone (aka the Windows Phone) now means that Apple and Google are the dominant players in the operating system market. If I’m right, Microsoft is again facing a secondary push to the back burner, as both Apple and Meta are imagining a future without existing desktops and laptops. As of today, most people have a laptop for serious work and a phone or tablet for support, but we’re nearing a future where phones and tablets — with an interface like AR — will be able to completely replace the desktop and laptop for the vast majority of consumers. While we’re not there yet, I believe we will be once AR glasses can simulate large screens in a form factor that is comfortable to wear in public. That version of AR has all the characteristics needed for a disruptive curve, which VR has never had in the initially targeted markets.

That would not be good news for Windows, tied at the moment to those systems.

Phones & tablets are dominated by Apple and Android. If the next generation of computing is screen-less computers — meaning a portable device (or your phone) that can do everything your laptop does at a quarter the size — I’m fairly certain that Meta and Apple are gunning to own that space as well.

Linux and Unix systems are successful mostly because of their customization for embedded systems and servers. The key takeaway is that if you were wanting to go after Apple, Google, and Microsoft, the opportunity to do it comes during a transition from one hardware paradigm to the next.

Like augmented reality.

Meta is Trying to Avoid Being Apple Maps. Apple is Also Hoping to Avoid Being Apple Maps, Again.

If owning the next generation of augmented reality is Meta’s goal, why does it look like they’ve invested so much in VR instead?

VR and AR are not really as separate as they seem. As much as Apple tried to avoid ever using the term VR in their product description, it’s clear that the Vision Pro is a VR headset, aiming for AR level technology. AR is what VR will grow into, once the other technical requirements catch up.

In the meantime, VR is a testing ground where a lot of those technical difficulties don’t interfere with the other things needed to create good AR. Part of the major challenge of augmented reality are things like computer vision and interpretation. In other words, your headset needs to know what you are looking at, and what’s happening around you. The processing power and ability to do that are difficult. But in VR, the computer is creating the entire world around you, and so it doesn’t need things like computer vision or interpretation to have interfaces and be useful.

In other words, people can do in VR today what we hope to be doing in the real world with AR tomorrow. Which means VR is the training ground for how to interact and create user experiences in a “spatial world.” Meta is tackling the long game of future computers from the bottom up. Develop and build out hardware and software for VR with consumer-targeted pricing. Learn from these experiences so that by the time the AR hardware catches up, they’re positioned to lead in the AR world. Create brand awareness, distribution channels, and partner relationships needed to deliver AR products over time.

Apple has an alternative, typically-Apple approach — develop intensely in secret, and reveal later in hopes that they’ve built more than the average consumer would have known to ask for.

One is anticipate and build. The other is build and ask for feedback.

Which Is the Right Strategy?

This is a hard one to guess, and only time will tell, obviously. But for the fun of it, I’m going to stake a bet on this one. And it’s a counter-intuitive bet. IF Meta can stay the course and not be pulled to the side by their existing business, I think they’re taking the smarter strategy. And at the same time they’re forcing Apple to rush their own product development and deploy a version of XR that doesn’t really do what they need it to, yet. My guess is that by the end of 2024, Apple will need to be saying things like, “It’s performed within our expectations, and we’re happy with our progress.”

And they’ll have to say that because it’ll be under fire for not generating meaningful revenue fast enough. People will be complaining, not because it didn’t gain traction, but because the scale of traction it would need to gain as a first product from Apple is far smaller than a $3,500 partial-AR system is going to be able to achieve. It will be successful, but seen as a limited success or failure.

But it will give Apple a chance to avoid another Apple Maps launch, where the initial product was so woefully under prepared for execution that it told people to drive into lakes. That’s of course the danger of the “anticipate and build,” without adequate chance for actual user feedback and learning.

Everything I believe in terms of product design says that the company that is open to actual user feedback — short of an extraordinary alignment at the top of “correct” product vision — has a better chance of winning than one that designs in the blind.

For all the criticism that Meta and Mark Zuckerberg have received for their huge investment into the “failed metaverse,” step back and consider for a second. Let’s for the sake of the hypothetical say that the vison of the AR-capable phone is destined to replace the traditional laptop in the next ten years. Who is currently positioned to compete with Apple at this point more than Meta?

Is it Microsoft, whose AR efforts have been really cool, but seem to have backed off the hardware development side for the average consumer? Google, who works in XR, but hasn’t really made significant progress in creating AR/VR products that are actually useful for consumers in terms of hardware?

I think there’s a possibility that Meta is the only company whose public and self-identity have been reshaped to the point that they have to win this. Everyone else can retreat to the safety of existing revenue streams without it damaging the company identity. I’m almost certain that this “burning the boats” approach was the primary driver for the name change — it makes it hard for self-doubt to change the long term direction. Because diving into a secondary space like this is really painful — though necessary — and it’s a rare company that can politically sustain the short-term cost of it.

But trying to avoid this sort of fight leads to decisions that optimize what you’re already good at, at the potential expense of your future. Just like Microsoft dropped the Windows Phone, and may be facing OS relegation as a result. While the Vision Pro is impressive, it’s not anywhere in the same category of actual use for the average person compared to the Quest, at sub-$500, which is a much more mature product for what it can do today. It’s a question of whether or not Meta can refine their way to the disruption point before Apple divines it from above… or gives up trying.

Apple is financially in a far better position to take on this space than Meta, but will face its own headwinds when trying to shape the next generation of computing. I’m not entirely sure that Apple will be able to justify the scope of investment into functional AR long enough to reach the threshold of being disruptive for the average consumer. The Newton is a classic example of this — how much earlier would we have had the iPhone if it hadn’t been considered a costly mistake?

There may be too much pressure to retreat to their existing products, where small improvements lead to huge gains, but for a limited time. And Meta is already facing tremendous pushback on their investment into VR and the metaverse. If I were Mark Zuckerberg, I’d be deeply scared that an otherwise successful strategy may fail because of lack of follow-through.

Though to be clear, I personally am not claiming to know what the “right” strategy is.

My Final Thought for the Day

If you Google around for current thoughts on Meta’s investment in the metaverse, or Apple’s Vision Pro introduction, you’ll find lots of strong opinions about the mistakes both are making. I actually think it’s really hard to know right now if that’s actually true. I think that both have a similar vision, and see a similar market disruption on the horizon. I think both are trying to maneuver themselves to take advantage of it, or survive it on top. I think the greatest risk that both have — because I believe in that vision myself — is not product failure, but the internal forces that require them to shift direction before reaching the disruption point.

And I believe that it will be tremendously dangerous for either of them to deviate or give up on the vision. Because while giving up in the short term may lead to minimizing losses, and maximizing gains on existing products, I think there is a true risk that this is a product category that will change everything long term.

Augmented Reality Is Almost Certainly Going to Be The Next Interface Shift:

As cool as virtual reality is, it’s not ever going to be disruptive in the ways that many hoped during it’s initial rebirth. This is not me being pessimistic — VR has tremendous application, and will be disruptive in entire industries. It will not, however, be replacing the way that the average user interacts with their computer. For reasons I’ll go into in another article, VR has never fit the disruptive models in the industries that it initially targeted, and will never fit those models in the general market.

One simple reason for this is that it competes with other activities by its very nature. Unlike a TV, your cell phone, or a traditional monitor, VR is immersive, and requires you to block out other things when using it. You’ll never see a mobile user throw on VR for a few minutes in the subway between stops, for example — so mobile computing is never going to be disrupted by VR.

But augmented reality is — I think — where users will begin mass adopting these technologies. My long standing dream is to have a pair of glasses that I feel comfortable wearing in a coffee shop, connected to my phone, with a mouse and keyboard and three monitors projected in front of me. We’re quickly approaching an era where keyboards will be the biggest component of a computer, and traditional laptops will begin to morph into screenless systems. Whether or not I’m correct about that, I think it’s enough to say that — in general — people trying to see the next big thing consider AR to be a big deal. The rise of AI as an area of interest doesn’t displace that — AI is essentially what we will interact with in the future, but not how we’ll interact with it. It isn’t a disruptive interface by itself.

In short, I think that the reason that Meta — and now Apple — are investing so heavily in VR and the Metaverse is not because they believe those products themselves are THE product. Instead, they’re the learning grounds for the truly disruptive products to come. They see AR as one of those disruptive points were the interface of technology will change, which requires a new operating system, and a new paradigm for how people interact with software.

These companies are engaged in early maneuvering around that opening in the OS market. That crack that could lead to Apple and Google losing dominance, and companies like Meta reaching beyond social media and games.