Palo Alto – October 7, 2024 – There are currently about 250 companies in the head mounted wearables category and these companies in aggregate have received over $5B in funding. $700M has been invested in this category just since the beginning of the year. On the M&A front, there have already been a number of significant acquisitions in the space, notably the $500M acquisition of WaveOptics (UK) by Snap in 2021. Now, the market for head mounted wearables is segmenting into two distinct categories; AR/XR headsets which contain technology to display an image overlay on the physical world, and Smart Glasses which feature a world-facing camera but no display. AR/VR headsets cost thousands (or tens of thousands) of dollars and are used, for example, in specialized commercial applications. In contrast, Smart Glasses typically cost less than $300 and are entering the mainstream consumer market.

Augmented Reality (XR/AR) headsets/glasses have traditionally been equipped with:

• A wireless or wired connection to a computer or smartphone.
• A world-facing camera.
• A microphone and headphones.
• A specialized display that presents information to the wearer as an augmented reality overlay to the physical world.

In 2012, Google first announced Google Glass and released the Explorer Edition to a limited number of testers in 2013. The product was made available to the public on May 15, 2014, at an initial price of $1500. However, it failed to gain traction due to its high price and numerous technical issues, such as short battery life, slow upload times, poor camera quality, and unreliable voice control and recognition.

Since then, multiple companies have entered the AR/XR headset market. Notable examples include Microsoft’s HoloLens, Magic Leap, and Apple’s Vision Pro. Yet, none of these products have seen success in the consumer market, largely due to their bulky designs and high price tags.

However, the market is now changing thanks to two key technologies that didn’t exist when Google Glass was introduced:

1. Vision OS built into smartphones (with Apple’s VisionOS, and an Android version from Google expected later this year).
2. Conversational AI with voice interfaces based on Large Language Models (LLMs).

In contrast to AR/XR headsets, smart glasses do not feature any display technology. A good example of this new class of product is the smart glasses from Ray-Ban Meta, which retail for $299. These glasses are available with prescription or sunglass lenses, making them easy to distribute through opticians and sunglass stores.

These smart glasses serve as an accessory to the smartphone. They don’t enable anything that the smartphone itself can’t already do; instead, they make these spatial computing features accessible hands-free.

Meta’s recent demonstration of their Orion AR glasses has reinforced my view that low-cost, display-free smart glasses will dominate the consumer market for the foreseeable future. Meta had originally planned to sell Orion but decided not to because of the product’s huge BOM cost (reportedly over $10,000). Another interesting aspect of Orion is that it needs to be used in conjunction with a wireless compute puck. I expect this is because Meta doesn’t make a mobile phone which could otherwise take the place of the puck.

The advent of smart glasses equipped with embedded always-on cameras marks a significant leap forward in wearable technology. Seamlessly blending with computer vision, they create a new realm of interactive, intelligent applications, offering hands-free access to real-time information about whatever the user is looking at. Key applications include:

1. Assisted Living and Accessibility: Smart glasses can be vital for individuals with visual impairments or other disabilities. With computer vision, these glasses can recognize and describe surroundings, read text aloud, or alert users to obstacles. This enhances mobility and independence, making daily activities more manageable.
2. Retail and Shopping: In retail environments, smart glasses can offer a personalized shopping experience. By scanning barcodes or recognizing products, users receive instant information on product details, reviews, and price comparisons. These glasses can also assist in inventory management and streamline the checkout process through automatic recognition and payment systems.
3. Healthcare: Medical professionals can use smart glasses to access diagnostic information in real-time, hands-free, allowing for more efficient and precise treatments.
4. Social and Communication Tools: Smart glasses can enhance social interactions by providing real-time facial recognition and contextual information about people encountered. They also facilitate video calls, allowing users to share their surroundings seamlessly.
5. Language Translation: Smart glasses can automatically translate foreign language signs, newspaper articles, and product labels in real-time.
6. Tracking Misplaced Items: These glasses can remind users where they left their car keys or parked their vehicle.
7. Photos & Videos: Smart glasses enable the wearer to quickly take a photo or video (via a voice command) of whatever they are looking at without first having to fumble around getting the phone out of their pocket and launching the camera app.

The hardware in smart glasses has been commoditized so opportunities for startups in this emerging market fall into two (software) categories; Apps that ride on top of the Vision operating system in the smartphone, and privacy-centric solutions.

Privacy Concerns
The integration of always-on cameras in smart glasses raises significant privacy concerns. The continuous capture of visual data can inadvertently record sensitive or private moments of individuals without their consent. This may include conversations, personal interactions, and other private activities captured unknowingly. Balancing innovation with privacy and ethical considerations will be essential for widespread adoption. The current privacy concerns with smart glasses include:

• Informed Consent: People around a smart glasses wearer may not be aware they are being recorded, raising issues of informed consent. Individuals should have the right to know when and how their image or actions are being captured and used.
• Data Security: The storage and transmission of visual data present potential security risks. Unauthorized access or data breaches could expose sensitive information. Companies must prioritize robust encryption and secure data handling practices to safeguard user privacy.
• Surveillance and Monitoring: The potential for these devices to be used for covert surveillance raises ethical concerns. Regulations and safeguards need to be established to prevent misuse, ensuring that smart glasses are used responsibly and within legal boundaries.
• Interest Monitoring: Embedded eye-tracking cameras could monitor a wearer’s interests continuously. For example, simply looking at a product in a store window might trigger a text alert with a discount offer for the item, without the user having to click any links.

In summary, low-cost smart glasses targeted at the consumer market are emerging as a product category distinct from AR/XR headsets and due to the high cost of near-eye display technologies, and the relatively bulky designs that are required to support them, it will likely be at least 5 years before these product categories start to converge. The consumer market for smart glasses will be dominated by the smartphone and large social media companies. Meanwhile, the market for XR/AR glasses will remain more specialized and fragmented and thus continue to provide opportunities for new market entrants. In aggregate, the market for head mounted wearables is projected to reach USD $26.4B by 2029 from USD $7.5B in 2024 (MarketsandMarkets, 2023). We can expect an exciting wave of innovation and M&A activity in this space over the next few years!