Snap Heightens Reality of Augmented Reality

Snap, owner of the messaging app Snapchat, has gobbledOpens a new window up the remaining assets and staff of augmented reality start-up Daqri, which shut down in September, to help make its own augmented offerings more real in a tough business climate.

Note for the neophyte: Augmented reality (AR), a cousin of virtual reality, refers to the likes of bunny ears superimposed on photos and instructions overlaid on realtime images of factory equipment.

California-based Snap reported a $34-million acquisition at the end of last year, which corresponds to the time it says it bought the Daqri assets. Snap confirms, too, that it hired two dozen former Daqri employees for its Vienna office. Daqri former chief technology officer Daniel Wagner runs that office.

The asset grab fits with Snap’s long-running commitment to staying competitiveOpens a new window in augmented reality. The Snapchat messaging app has captured the imagination of young users with filters for AR. The filters let users put bunny ears on photos and add baby lenses, even gender-swap images, to selfies.

To further its role in AR, the company announced in mid-2019 it would raise $1 billion in development funds, largely for acquisitions and other initiatives. As proof, Snap acquired AR software developerOpens a new window AI Factory for $166 million in January this year.

Tough macro environment

These moves show Snap’s AR strategy has held steady despite difficulties facing the AR market last year. Daqri’s demise came after the failure of AR headset maker Meta, which sold off assets at the start of 2019, and the closure of AR glasses developer Osterhaut Design Group. In a separate case, AR start-up Magic Leap faces trouble after reportedly selling just 6,000 of its $2,295 headsets in the first six months of last year, way short of its target of 100,000. The developer had raised funding of $2.6 billion.

Daqri was founded in 2010 and four years later unveiled an AR helmet-style headset aimed at manufacturers, construction companies and the military. The headset overlaid key information on images of real objects to help manage machinery, make repairs and completed other tasks. The helmet cost $15,000 but it was reported that workers found it cumbersome to wear and saw little benefit in using it. The company also struggled to get certification from work sites.

Daqri reportedly raised $275 million from investors in 2017.

Snap had struggled before to sell its Spectacles AR glasses and got stuck with about 300,000Opens a new window unsold pairs in 2017. The company unveiled the third iteration of the glasses before Christmas, backed by a trippy filmOpens a new window shot entirely using the tool called Spectacles 3. Regardless of vendor, consumers so far hesitate to shell out hundreds of dollars for Spectacles.

Microsoft counters with HoloLens

Microsoft unveiled last year what’s being widely watched as a groundbreaker. That’s the HoloLens 2 AR system for use in construction and manufacturing. The device improves on the field of vision and optics compared to the first version, Microsoft optics engineering GM Zulfi Alam saidOpens a new window last year.

Microsoft has struck a deal with the U.S. military to supply a version of the HoloLens 2 that overlays information about a soldier’s location on the battlefield. The deal was worth $479 million. It’s unclear so far whether private industry will take up the new tool.

Investors in Snap will demand a return on the huge sums that the company has invested in AR start-ups and development. To satisfy that demand, the youth-focused messaging service could surprise the industry and segue into the enterprise market, where that return is more likely.