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Analysis

The trouble with Magic Leap

The much-hyped AR startup is reportedly looking for a buyer. What went wrong?

A woman uses a Magic Leap AR headset

When the Magic Leap One was finally released in 2018, developers didn't quite know what to use it for. Was it an enterprise computing tool, a gaming machine, or the key to a still-to-be-determined Magicverse?

Photo: Chesnot via Getty Images

Revolutionary! Overhyped! The future of computing! A multibillion-dollar failure!

Few companies have elicited as many strong opinions in recent years as has Magic Leap, the augmented reality startup that has raised some $2.6 billion since 2011. Late Wednesday, news that the company may be looking for a buyer gave skeptics some additional ammunition — and made everyone else wonder: What went wrong with Magic Leap?


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Here are a few key issues the company has struggled with over the years.

A lack of focus

Magic Leap's goal has always been to reinvent computing as we know it — to build a new medium from scratch and redefine how we play, work and consume entertainment. And with $2.6 billion in funding, Magic Leap thought it could do it all: gaming, media, enterprise, and even military contracts.

All the while, the company insisted that it was getting ready to create much more than just hardware: Magic Leap executives have long talked about creating what they called the "Magicverse," which is essentially a spatial information layer for the real world — think of it as a kind of Google Maps for AR, complete with the ability to attach all kinds of data to real-world objects. And if all of that wasn't enough, Magic Leap has also been looking to use blockchain technology for distributed user data repositories.

This lack of focus not only contributed to Magic Leap's massive cash burn, it also complicated selling the developer hardware itself when it was finally released in 2018. Developers simply didn't know what they were supposed to be buying the headset for. Was it an enterprise computing tool, a gaming machine, or the key to a still-to-be-determined Magicverse?

In recent months, Magic Leap has been trying to reinvent itself as an enterprise AR company, complete with a redesigned website, promising that the headset will help customers "rewrite the rules of [their] industry." However, the rebrand may be too late. Plus, actually selling to enterprise customers is a lot harder than it may seem, as the case of failed AR startup Daqri shows.

No foothold in mobile

Apple, Facebook, Snapchat and even Google: Most of Magic Leap's major competitors have started their AR efforts with mobile apps and frameworks. This has allowed them to seed a developer ecosystem and at the same time collect valuable real-world data about use cases and challenges.

Magic Leap doesn't have any foothold in mobile. Instead, it has a comparably small developer community building apps that no ordinary user ever gets to try, as headsets still remain a rare commodity. Effectively, it's testing AR in a lab, with little to no real-world exposure.

The company has for some time realized that it will have to build a bridge between its devices and mobile AR. The company's chief content officer, Rio Caraeff, admitted as much in 2018, saying: "We need an interoperability solution." The following year, Magic Leap began looking for engineers to build a cross-platform framework that could extend its apps to mobile devices, and more recently, it has talked about enabling a "spectator view" on phones.

Still, to this day, Magic Leap's only presence in mobile app stores is its headset companion app, which has been downloaded fewer than 5,000 times on Google Play.

Florida is far away from top tech talent

Ask industry insiders about some of Magic Leap's biggest challenges, and you'll often hear one that has nothing to do with its technology. The company's headquarters has been in Plantation, Florida, ever since its was founded in 2011 — roughly 3000 miles from Silicon Valley, and just as far away from other tech epicenters, including Seattle and Los Angeles. That distance alone has made it much harder for Magic Leap to attract top talent, especially in a hyper-competitive market that includes deep-pocketed giants like Apple, Google and Facebook.

To be fair, there are also some good arguments for being outside of the Valley these days, including ever-increasing Bay Area housing prices. And Magic Leap does have offices in San Francisco and Sunnyvale, as well as a number of other cities around the world. However, there has reportedly been friction between the company's headquarters and its Silicon Valley satellite offices, and the company is still requiring relocation to Florida for many of its open positions.

Speaking on the condition of anonymity, one applicant who went through the company's interview process for an executive role described the issue this way: "They wanted me to relocate, which would have been very difficult. Ft. Lauderdale/Miami was not a viable option, and the commute would have been difficult."

Hard problems, lofty goals

To be fair, even if Magic Leap had addressed a lot of those issues early on, it still might find itself in a difficult situation today. That's because ultimately, the company has been trying to solve some really hard problems. Visual computing is very challenging, and it might still take years until we get the type of device that Magic Leap set out to build.

One of the most consistent voices of reason in the industry has been Facebook's Reality Labs chief scientist Michael Abrash, who warned all the way back in 2012 that consumer-ready AR hardware is "not going to happen anytime soon." Abrash has since frequently updated us on the progress of the technology, telling audiences in 2018 that the technology for socially acceptable AR glasses simply didn't exist yet.

These days, Facebook is working on its own set of AR glasses, as are companies like Snapchat and Apple. But you won't hear much about that work until it's done. That's very different from the approach Magic Leap has taken over the past several years. The company went out early with effects-heavy videos, aiming to sell the idea of visual computing even before it had any hardware to sell.

Splashy marketing may have been necessary to attract the VCs Magic Leap needed to raise billions of dollars. However, it turned into a catch-22 when it became clear that the company's first product wasn't able to deliver on the hype — and it may make it a lot harder to sell Magic Leap's business, especially for the $10 billion valuation quoted by Bloomberg on Wednesday.

A Magic Leap spokesperson declined to comment on a possible sale.

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