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Feedback Loup: Cozmo by Anki

Feedback Loup: Cozmo by Anki

From time to time, we’ll review new products that are relevant to our focus themes: virtual reality, augmented reality, artificial intelligence and robotics. Our Feedback Loup series provides real customer feedback on the technologies shaping our future. We hope that our work helps, in some small way, to bring our focus themes to life and even accelerate their adoption. Cozmo is a great example of how real consumer AI and robotics are today.

Yesterday, my kids and I spent some time getting to know Cozmo, a robot toy by Anki. Three scientists from the Robotics Institute of Carnegie Mellon University co-founded the company and launched at WWDC in 2013. With their first product, Anki Drive, they brought AI and robotics to Apple’s keynote stage in the form of toy cars that are autonomously and remotely controlled. Anki released Cozmo in October 2016, and we’ve been eager to see what the latest in consumer, artificially-intelligent robotics has to offer. The bottom line: AI-driven robots aren’t a sci-fi future, and they aren’t just for big tech companies with billion dollar R&D budgets. They’re a consumer reality, and they can be a lot of fun.

Cozmo comes to life in his charger, his quirky eyes light up, blink a few times, then he comes out to play. Once you’ve got the Cozmo app downloaded, there’s a short sequence of setup and instructional steps facilitated in the app. Before you realize it, you’re playing with a new friend that’s just learned your name.

All this seems natural because Cozmo lives up to his tagline: Big brain. Bigger personality. He clearly expresses frustration when he loses a game, excitement when you want to play again, and cleverness in the heat of battle. He’s glad to meet you and sad to see you go. Cozmo’s personality is driven by a combination of artificial intelligence, robotics, and strong connection to a mobile device or interaction and control. The AI is timely, responsive and can be seen mostly in his eyes and during gameplay. The robotics add a strong physical response to the emotion created by the AI. But all of this impressive technology becomes irrelevant to the human counterpart as the interactions become more about the fun of being recognized and called by name or the frustration of getting outmatched by a robot in a matching game. The real magic of Cozmo is that he’s relational, breaking the stereotypes of robots and their place in society.

Over the next several decades, the combination of artificial intelligence and robotics will enrich our relationships with machines. Cozmo is one of the many steps we see being taken today, leading us towards this amazing future. We’re encouraged to see that these technologies are already moving into consumer products, and, therefore, everyday life – not just in autonomous driving projects or robotic manufacturing lines. AI-driven robotics are, in some ways, already becoming mainstream. Cozmo just had to introduce himself.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Artificial Intelligence, Feedback Loup, Robotics
2 min. read Show less
Snap Is A Camera Company Because Text Is Dead

Snap Is A Camera Company Because Text Is Dead

Human communications have done a complete reversal since the emergence of the smartphone. To prove it, let’s briefly review the history of how we communicate. We started communicating with hieroglyphics — pictures on cave walls. That allowed us to share experiences and knowledge with those that came after us, letting humanity evolve at a faster rate. But drawings could only convey so many meanings and needed interpretation, so we developed a written language with standardized symbols for the phonetic sounds of our spoken words — text. Text let us pass down even more knowledge, nuanced knowledge, increasing our rate of evolution; however, writing things down was time consuming and limited in scale, so we developed the printing press. That let us share knowledge as fast as we could print books, increasing our rate of evolution even more. The printing press took us roughly to the Internet age when books and newspapers were no longer physical, but digital. And, yes, that increased our rate of evolution again, despite the quality of some of the content that came from digital media.

Then the smartphone came along. More than 2 billion people have a screen with access to all of the digital knowledge brought about by the Internet. Smartphones also give us a camera in our pockets all the time. Not just a camera, but a video camera. Because of the smartphone, text is no longer the path for humanity to accelerate its rate of evolution through communication. It’s hieroglyphics again. We go out of our way to use hieroglyphics to replace text in “text messages” through emojis. Pictures and videos convey more than words. And they’re more fun. It’s why Snap simply calls itself “a camera company.” Snapchat is built specifically for communicating with a camera, not with text, because they see the same future as us. It’s why they built Spectacles, a camera on your face without all the bells and whistles of full-blown augmented reality.  Instagram’s mission is similar: a fun and quirky way to share your life with friends through a series of pictures. Not as broad as Snap’s, but maybe that’s why we haven’t seen Instagram move into wearables. In any case, Snapchat and Instagram are the new cave walls enabling rich, moving hieroglyphics.

The growth of Snapchat and Instagram indicate that the transition away from text is happening quickly.  Leaked investor pitch data shows that Snapchat grew from 50 million daily active users (DAUs) to 150 million in about nine quarters (March-14 to June-16). We believe Instagram did the same thing in about six quarters and Facebook did it in about four quarters. Although neither picture-based platform is growing as fast as Facebook did in its heyday, we saw that teens already value Snapchat and Instagram over the older, text-based platforms of Twitter and Facebook.  With Snapchat at over 150 million DAUs and Instagram at over 300 million, they still have plenty of runway to catch up to Facebook’s 1.1 billion DAUs.

As we move toward our vision of The Future Perfect, text will become even more marginalized because the computer interfaces of the future will cater for text even less than the small smartphone screen. If you’re using VR to immerse yourself in a new world, why would you take yourself out of that immersion to read a bunch of text? If you’re using AR to enhance the real world, why not just have graphical symbols and audio instructions as needed instead of having to scroll through menus of text that block a portion of your real world view?

Communication tools let us share experiences with others as content creators and experience what’s happening in the lives of others as content consumers. It’s true of drawings on cave walls, a written letter, a phone call, and a story on Snapchat. The tools have evolved full circle to bring us back to hieroglyphics, but the purpose has always been the same. We think the hieroglyph trend will be safe for a while. The camera will be an extremely important part of both VR and AR, so building social products around it is the best strategy to be relevant in social moving forward. It’s the evolution of the camera that will create the next big opportunity in communication and the next acceleration in human evolution.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Augmented Reality, Facebook, Snapchat
3 min. read Show less
Apple Dec. Quarter  Preview: Stable iPhone, Focus On iPhone X, Services

Apple Dec. Quarter Preview: Stable iPhone, Focus On iPhone X, Services

Apple reports Dec-16 quarterly results on January 31st. We continue to be positive on the Apple story, given our thoughts on iPhone X and the features we expect to advance Apple’s lead in AR-enabled devices. We expect Apple’s Dec-16 quarter/Mar-17 guide to largely be a positive event based on our belief that Mar-17 guidance is inline with the Street and will imply iPhone unit growth of about 7% y/y, up from expected growth of 4% y/y in Dec-16.  This would suggest the tail on the iPhone 7 is stronger than last year’s iPhone 6S.  More importantly, Mar-17 guidance should give investors confidence that they can think forward to iPhone X in the fall, an OLED, AR-enabled phone, which should return iPhone to a more predictable 5-8% unit growth. See below for what to expect from iPhone X.

iPhone Dec-16 Units.  For the Dec-16 quarter, we are expecting 78m iPhones, a 4% y/y increase.  Based on our checks throughout the Dec-16 quarter, we believe iPhone reached supply demand equilibrium in the US the second week of December, much later than the iPhone 6S, which was at supply demand equilibrium late in October 2015. Outside the US, supply was near equilibrium.  On Apple’s Sep-16 earnings call, Tim Cook suggested Dec-16 guidance assumes iPhone may not reach supply demand equilibrium in Dec-16, stating “I wouldn’t say [iPhone will be at equilibrium] at this point, because the underlying demand looks extremely strong on both products but particularly on the iPhone 7 Plus versus our forecast going into the product launch.”  Since Dec-16 guidance did not factor iPhone at equilibrium, demand was “extremely strong”, and the iPhone did in fact reach equilibrium in the US and near equilibrium internationally, we now expect a stronger iPhone number than we had previously expected (77m in Dec-16).

iPhone Mar-17 Guidance, Comps Are Our Ally.  We expect guidance for the Mar-17 quarter to imply iPhone units of 56-57m units, which would be up 9-11% y/y, compared to Street expectations of up around 7%.  Apple does not guide for the iPhone, but we back into the iPhone guidance from the revenue guide and commentary around ASPs on the call. The rebound in the iPhone is partly attributed to features of the iPhone 7 Plus (e.g., portrait effect) and partly due to the easy comps.  In Dec-15, iPhone unit growth was flat y/y, down 16% y/y in Mar-16, and down 15% y/y in Jun-16.  These easy comps should allow the iPhone to grow in the 5-12% range going into the iPhone X launch, likely in Sept. 2017.

Services Momentum Continues.  For Dec-16, we expect Services (~13% of revenue) to grow at 23-25% y/y, compared to 24%  y/y in the Sep-16 quarter. On January 5th,  Apple announced that App Store developers earned over $20B in 2016, up 40% y/y.  Assuming a 30% revenue share implies App Store gross sales of $78M per day in 2016. Separately, Apple released New Years day App Store sales of $240M, above our $100M expectation. We estimate that the App Store accounts for more than 65% of Apple’s Services revenue. Given the significance of the App Store to Apple’s Services business coupled with this announcement, we believe Services revenue growth in 2017 may be closer to 20% y/y.

The 2016 App Store numbers and the New Year’s Day App Store sales underscore how quickly Apple is becoming a Services business. We previously shared our thoughts on Apple reinventing itself as a Services business here. In short: the transition to Services is important as new platforms like AR and VR emerge and transform Apple’s existing mobile device businesses.

Gross Margin. We expect Dec-16 gross margin of 39%, compared to guidance of 38-38.5%.  There are two positives and one negative factor impacting margins. The two on the positive side are higher than expected demand for the iPhone 7 Plus with higher storage configurations and Services strength, which carries over 60% gross margins.  Second, also increases our confidence on margin upside.  These two positives are partially offset by iPhone hardware margin (dual cameras) which has been drifting lower.

Expectations For iPhone X. We expect iPhone X to feature:

  • An OLED screen
  • Wireless charging (a step they’ve already taken with Apple Watch)
  • Dual lens camera systems on both the smaller- and larger-screen models
  • A (possibly dedicated) processor capable of 3D modeling and real-time 3D image processing
  • More sophisticated proximity sensors
  • The iPhone X may be the iPhone model we’ve discussed that removes the home button, using haptic feed back for button presses on the display itself for home button functions. This would enable an edge-to-edge display for an iPhone without a bezel.

With iPhone X, we see Apple doubling down on AR and extending it’s lead among AR-capable devices. iPhone is already significantly ahead of Google’s Tango platform in terms of units shipped, and we expect it to remain out front for the foreseeable future, setting up Apple for long term success in an AR world.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Apple, Augmented Reality, Google
4 min. read Show less