Nobody is going to call the companies in this overview “small.” Most of them have revenues in the billions of dollars, but they aren’t public companies with trillion-dollar market caps like all the companies we covered in my State of XR Part 1 article, so they fall into second tier. These companies are still critical to the state of the industry, and many of them are pioneers in the XR space in one way or another. Let’s take a deeper look at what Snap, Niantic, Magic Leap and Valve are doing in XR in 2024.

Snap Shows Promise, But A Viable Consumer AR Headset May Be Years Away

Snap is an interesting company because it originally had a solid path to market with its Spectacles smart glasses, even giving an early prototype to creators to make content on. Yet even though Snap subsequently acquired Wave Optics, it has yet to deliver a commercial product since it announced the Spectacles development glasses in 2021. (That said, read on for more details on the new version of Spectacles that it recently released for the AR developer community.) When Snap restructured in 2022, it made AR one of its three strategic priorities; it remains to be seen when this will translate to commercially available AR glasses.

Still, the company has some key successes: with over 850 million monthly active users, the Snapchat app has built a lot of brand awareness in the fashion space for try-ons, plus it has expanded Snap’s partnerships beyond virtual clothes. Meanwhile, one of Snap’s greatest successes in AR has been its Lenses offering. More than 4 million Lenses have been published through Snap’s Lens Studio authoring tool, and Snap Lenses are now part of Disney’s PhotoPass service—something I had a lot of fun using on my visit to Epcot last year.

At the company’s Snap Partner Summit 2024, which I attended a couple of months ago, Snap unveiled its new second-generation Spectacles AR glasses, which improved upon the original design in nearly every way and introduced a new operating system. I recently wrote about this experience in detail; I found that Snap is applying its limited resources to make AR and AI work together to be more fun and engaging.

While the Spectacles themselves are still not a consumer product, it is quite clear that the company is working diligently to get closer to a standalone AR future. That said, it will probably be years before we see a mainstream product emerge from these efforts. Still, the new Spectacles are the closest thing we have to a consumer standalone AR headset in the industry today, even if they are still only for developers.

Niantic Is Ambitious, But The Market May Not Be Ready For It Yet

Like many other companies in this space, Niantic had ambitious goals for AR and even worked with Qualcomm to build a reference AR headset specifically for use with its Lightship platform so it could show off its ability to support games, especially Pokémon Go. In 2023, however, Niantic laid off hundreds of people—after already laying off nearly a hundred a year earlier. It also canceled two of its newest games (tie-ins with the NBA and Marvel) and closed its Los Angeles studio. Lightship can offer a cross-platform environment for AR apps on smartphones and AR headsets, but it has struggled to see success beyond Pokémon Go. (For anyone concerned that Pokémon Go might be dated, it currently has more than 150 million monthly active users, and I have seen old men in Taiwan walking around with five phones just to play the game to its maximum potential.)

I do believe that Niantic’s VPS technology has some of the best potential for monetization in the AR space because it is both platform-agnostic and location-based. Niantic also expanded its offering in 2022 with the acquisition of 8th Wall, a web-based AR platform, boosting the potential user base that Niantic could address. At AWE 2024, the company introduced Niantic Studio to increase ease of use and access to its capabilities for developers.

Niantic further demonstrated its platform-agnostic approach this year by launching the Hello Dot mixed-reality game on Quest 3 and VPS on Magic Leap, and by updating the MR skateboarding experience Skatrix Pro for the Apple Vision Pro headset to broaden the game to room-scale. Niantic has also partnered with Snap on the latest generation of Spectacles to enable its Peridot virtual pet, and to use Gaussian splats to create 3-D objects with a simple scan using technology from Scaniverse.

I believe that Niantic is still onto something important with its location-based, world-scale AR focus and with its acquisitions of companies, including 8th Wall and Scaniverse. In other words, I think it is headed in the right direction, even if the industry isn’t quite ready for it. Yet it remains to be seen whether Niantic will continue down the AR road as a freestanding company or be acquired.

The Sad Tale Of Magic Leap

Magic Leap had a platform and a headset for years. However, it struggled mightily to get its first headset out the door, incorrectly targeted consumers rather than commercial customers and eventually made a late pivot towards enterprise uses—like many other companies in the XR space. The company even shipped a quite good second-generation headset that addressed many of the problems of the Magic Leap One, but it was still too expensive and required a wired tether and compute/battery puck.

Since its founding, Magic Leap has burned through $3 billion and ended up in the hands of the Saudi sovereign wealth fund after its original investors wrote it off as a complete loss. Magic Leap also changed CEOs late last year, installing Ross Rosenberg, a former executive from Bain Capital. This made it clear that Magic Leap was up for sale; as of July 18, 2024, the company laid off its entire sales staff and its defense and public sector teams. Some of the people who were laid off also mentioned a shift away from hardware, which to me indicates an impending sale of IP and possibly the remaining talent in the company.

Magic Leap’s story is a sad one, mostly because there were many chances for the company to be successful, but it quickly transformed from an AR industry darling into a major warning sign. After the July layoffs, I wrote about Magic Leap’s exit from the headset market here.

Valve Keeps Doing Things Its Own Way

Some of you may have never heard of Valve, while others (like me) have known about it for over 20 years. The company started out as a developer for PC games and evolved into the world’s first successful digital games marketplace. This marketplace, called Steam, generates more than $10 billion a year in revenue and has over 132 million monthly active users. To put it another way, if you want to launch a game successfully on the PC, Steam is usually your ticket to success. Steam has also set the standard for app-store economics with its 30% cut of developer revenues that is now so familiar from Apple, Google and others. That 30% share funds most of Valve’s activities, including its many forays into hardware. Steam is the basis of the VR platform that Valve created in partnership with HTC in 2016, with SteamVR serving as the software component and HTC Vive bringing the physical headset, controllers and lighthouses. Eventually, Valve shipped its own product with headset and controllers—the Valve Index—which was targeted at the high end of the market.

Valve’s current hardware ambitions appear to be focused mostly on the Steam Deck, a Linux-based gaming handheld designed to compete with the Nintendo Switch. The company released two versions of the Steam Deck in 2022 and 2023 before it refreshed the Index. It recently announced that it would be porting its SteamOS to third-party hardware such as ASUS’s ROG Ally. This has taken the company away from focusing on its own VR efforts such as the Valve Index. Valve’s corporate structure is very flat and virtually any employee can work on anything, which tends to cause projects to take longer to launch—for example the company’s first AAA VR game, Half-Life: Alyx.

The Valve Index VR headset is now five years old, and instead of delivering a new version of it, the company has decided to create a Steam Link app for the Meta Quest platform. This is, in some people’s eyes, a brilliant move, considering the current install base for PC VR and how much of it is already represented by Meta Quest users.

The Steam Link app for Meta Quest enables a more robust VR experience with an even lower-latency connection to the PC and easier setup than Meta’s own link app. As of the October 2024 Steam Hardware Survey, the Meta Quest 2 represents 35% of all VR headsets, and the Quest 3 is 18%, while the Valve Index represents 16%. If you add the complete lineup of Meta’s Quest and Rift headsets, Meta’s share of the entire PC VR market is more than 60%. Valve seems to be comfortable with SteamVR being the platform for headset vendors including PiMax, Varjo, Meta and Pico. Valve has also been stingy with VR AAA titles, delivering only Half-Life: Alyx and leaving the industry waiting for the next bestseller title. Valve still develops new games, just not many for VR.

Valve really does do things on its own schedule and scale, and I’m fairly confident we’ll see more Steam Deck refreshes before we get an update to the Index headset. That said, the Index controllers (codenamed “Knuckles”) are still the most innovative and easy-to-use controllers for VR applications on the PC. In my estimation, Valve will continue to take a conservative, slow and steady approach to VR since it never seems to be in any rush. Valve’s Deckard headset has been rumored for years now and is expected to take a hybrid approach with both PC-streaming and standalone capabilities likely running off some version of SteamOS.

Next Up: Headsets And More

Now that we’ve established the state of platforms, the next parts in the series will follow the headset makers and the technology providers that enable them. It is quite clear that the XR market is still very much in a state of flux, and we can expect some of the biggest players to make significant moves in the next few years. What is abundantly apparent is that mixed reality is now the standard for the industry, with AR still far away for consumers, even though it is very real for enterprise uses today.

As with many technology segments before them, spatial computing and XR will need to be successful and work out many of the kinks before they become consumer technologies. 2023 and 2024 have been challenging for a lot of companies in this space, but the industry continues to move forward and show resilience as its constituent companies work to bring spatial computing to everyone.