The Most Obvious Consumer Hardware + Software Opportunity Today

It's Apple and Zoom's to lose, and Amazon, Facebook, Google, Microsoft, NVIDIA, or others' to gain.

Welcome to issue #24 of next big thing.

Two quick announcements:

First, I went on The Pomp Podcast last week. Pomp and I discussed several of the topics I’ve written about here (solo capitalists, democratizing access, the consumerization of healthcare, consumer subscriptions), as well as a few of my investments (Canva, ClassDojo, and Color). Check out the episode here, or in your favorite podcast player.

Second, I published a new screenshot memo on my investment in AltoIRA (which, by the way, very much falls under the thesis of democratizing access).

This week’s essay is a bit different to some of my prior ones. It’s about an idea I’ve been noodling on since the start of the pandemic, and I’m sure an area many of you have been thinking about too:

Home video meeting setups.

I have a confession: my setup isn’t great. I use the built-in camera on my MacBook Pro. I have a desk light, and I’ve tried to adjust the lighting in my room so that I’m not entirely backlit and can be seen reasonably well on video calls. I’ve checked out a bunch of resources on how to have a professional setup — like this one by Christoph Janz. But the combination of lighting, camera, lens, tripod, video capturing device, not to mention microphone and sound, is daunting. And judging by most of the video calls I do, I’m not the only one who feels this way. This brings me to what I think is perhaps the most obvious consumer technology opportunity today:

A high quality, easy-to-use, integrated hardware and software videoconferencing system to democratize access to professional-looking video calls.

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The Opportunity

While I do believe that a bunch of us will go back to working in offices post-pandemic, I also believe that work-from-home, flexibility in where to work, and entrepreneurship from home, is here to stay for many.

While Zoom* has, in my opinion, created the best software for video calls, it has not (yet) solved the larger problem that many people don’t look and sound great on video calls. This is not an easy problem to solve. It requires the integration of hardware, of cameras and lights and microphones and displays, as well as audio and video processing technology, and software.

Instead of many pieces of equipment to solve it, it could be boiled down to one integrated system. A computer or screen that has a very high quality built-in camera, lighting, microphone, and more to enable anyone to simply put themselves in a professional-looking video meeting.

I believe this is a very large opportunity for the companies that solve it. Zoom is already worth over $100 billion as a public company focused exclusively on video conferencing software. The pandemic has expanded the market for video meeting technology, and has shown for many professionals that productive work can happen over video instead of in-person.

But when in-person meetings become normal again, there will be debate about which meetings should be over video versus in-person. A core way for people to justify a video call will be the high audio and video quality of that call, and the closer the virtual is to being in-person, the more it will be used.

Why do higher quality video meetings matter? They can enable anyone, regardless of where they are in the world or their ability to travel, to be more professional, to get more done, and to close more business. This can increase global productivity and GDP, without increasing (or perhaps even while decreasing!) emissions. It can also increase global happiness, and can lead to people feeling more connected with others, as well as more supported when they need help. Higher quality video calls aren’t alone going to solve the climate crisis or the mental health crisis, but I do believe they can connect more people to other people and to opportunities, and that’s a good thing.

The opportunity to expand access to professional-grade video calls should be important to most of the big technology companies, for they already have a stake in it.

I believe that Apple* and Zoom are the companies best poised to capture it, but that Amazon*, Facebook*, Google*, Microsoft*, NVIDIA, as well as several smaller companies such as CORSAIR (owner of Elgato), could challenge them for the prize.

Apple and Zoom’s Opportunity To Lose

Apple is the leading consumer hardware technology company in the world. Its competitive advantage lies in its integration of hardware and software, but increasingly, as Ben Thompson pointed out in a great piece last week — Apple’s Shifting Differentiation it is Apple’s hardware (and now silicon chips) that increasingly brings it differentiation.

When Apple announced a new lineup of Macs last week, I was most interested in the camera, and whether it would make a leap forward for better quality video calls. John Gruber of Daring Fireball just came out with his review, including the following:

The one spec on these new MacBooks that elicited a universal groan was the “720p FaceTime Camera”. 720p is the same resolution as Apple’s Intel-based MacBooks, whose cameras are universally regarded as craptacular. You can’t judge any camera by resolution alone, though, and Apple is billing the camera systems in the M1 MacBook Air and Pro as being improved by dint of the M1’s image signal processing. Quoting from the MacBook Pro product page:

Thanks to M1, the FaceTime HD camera can now take full advantage of our latest image signal processor — improving image quality in video conferences and pulling out more details in both shadows and highlights.

Is the camera quality very noticeably improved? Yes.

Is the camera quality now good? No.

MacBook FaceTime camera image quality was so bad that there was plenty of room for the M1 MacBook camera to get a lot better and yet still be described as “not bad” at best. Here’s an A/B comparison from a FaceTime call with my friend Adam, conducted at night, with no attempt whatsoever to adjust the lighting in my office in a flattering way. One shot is from a 2019 16-inch MacBook Pro, the other from the M1 MacBook Pro. The difference is striking, even if the M1 camera remains on the whole unsatisfying. (I look oddly pleased, if not downright eager, in Adam’s capture of my image from the M1 camera, and I will get him back for this someday.)

While I’m happy to see the camera quality improved, it still comes nowhere close to a professional setup with a DSLR camera, lighting, and more. Check out the image and post below as one example for what this can look like.

With Apple’s expertise in cameras, in the integration between hardware and software, and now armed with its own chips in Macs for image signal processing, one would expect them to be in the lead to solve this problem and to democratize access to high quality video calls.

Apple doesn’t have the leading software to power video calls, however. That mantle belongs to Zoom, which has become the verb to describe video conferencing today.

Zoom has perhaps the most to both gain and lose from this opportunity. Its entire business is video conferencing, and as a software provider today, it has the chance to win or lose the race to integrate hardware and software for the best quality video meeting experience.

In July, Zoom announced a line of hardware, including Zoom for Home in collaboration with DTEN. I haven’t seen any high quality reviews of the product yet (please comment with links if you have!) but here’s a 1 minute video from Zoom that gives you a glimpse of what this device can do:

This product makes a ton of sense for Zoom in the context of attacking this opportunity. I expect we’ll see Zoom go further down the path of integrating hardware and software, and perhaps trying to collaborate more closely with the large consumer hardware technology companies that could help to deliver a great integrated experience.

The problem for Zoom, though, is that many of those companies offer video conferencing software themselves. Amazon has Chime, Apple has FaceTime, Facebook has Messenger, Google has Duo, Hangouts and Meet, and Microsoft has Skype and Teams. It will be fascinating to see how Zoom collaborates and competes with these companies and their offerings as the importance of hardware and an integrated solution in this space continues to grow.

Amazon, Facebook, Google, Microsoft, NVIDIA and Others’ Opportunity To Gain

Beyond the software products referenced above, there are several hardware products from these companies that could be precursors to high quality integrated hardware and software for video conferencing.

Amazon, for example, has Echo Show, which has a built-in display and camera for video calling, but it also owns Ring, the video doorbell and security camera, which brings camera technology to the home already, albeit for a different use case.

Facebook has Portal, its video calling hardware product, which already integrates with Zoom and other video meeting software, as well as with Amazon Alexa, showing Facebook’s willingness to work with third-party software in a way that others do not yet.

Google has the Nest Hub, a similar product to Echo Show and Portal with a display and camera for video calling, and it also has Nest Cam, both for indoor and outdoor security. A very high quality integrated hardware and software product for video calls does not seem a stretch from this existing set of products, along with the Duo, Hangouts and Meet software that Google already offers.

Microsoft doesn’t build hardware itself, unlike the above three companies or Apple, but surely recognizes the importance of the combination of hardware and software to delivering a great video meeting experience.

NVIDIA has a different approach, a cloud-AI video-streaming platform called Maxine. The technology improves the quality of the call via an SDK and may be used by several of the companies above, as well as new entrants, to compete with one another.

And of course, there’s a sea of other companies that smell this opportunity too. Logitech has long been a provider of webcams and other hardware for video capture. I’ll be honest that I had not heard of another player, Elgato, until the pandemic, but its hardware and software products frequently show up in resources on how to put together a professional video meeting setup at home.

In fact, one of Elgato’s products, EpocCam, is an iOS app that transforms the iPhone into a high quality web camera. The app has risen up the App Store (thanks Jeff Chang for flagging this for me!) and is currently #14 in the charts for all paid apps, per the below screenshot.

The demand for EpocCam is one further indication, if we need it, of the opportunity to enable professional-grade video calls for the masses.

The Race Is On

Five years from now, I expect most of us to look way better in video meetings than we do at the moment. It will feel much more like meeting someone in-person than it does today, and will be a perfectly normal way to get to know someone better, or have a very productive meeting 1:1 or with a group, as a result.

I’m very excited to see how the race to capture this opportunity plays out. Hundreds of billions of dollars will be gained and perhaps lost too in the process of competing to win it. Who are you betting on?

I started next big thing to share unfiltered thoughts. I’d love your feedback, questions, and comments!

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*for a list of companies I'm affiliated with as an investor, see my Substack about page.