Eyeing a future where smart glasses could take the place of the smartphone, Snap is going to buy WaveOptics, a UK augmented reality (AR) technology company.

At half a billion dollars, the startup, which makes lenses and other parts used in AR glasses, is Snap's biggest acquisition ever. And the eye-popping price tag demonstrates just how important AR is to the future of the Snapchat app.

Snap announced its newest Spectacles AR glasses last week, which are largely made using WaveOptics technology, and for now are only available to developers. Despite efforts by Facebook and Apple, this made Snap the first big tech company to unveil AR glasses. Facebook aims to unveil its AR glasses this year, while Apple has said its own will come no sooner than next year.

Both AR and virtual reality are expected to be technologies that will boost demand for 5G networks. Some public opinion research has suggested AR in particular could prove the "killer app" driving quicker adoption of 5G. In polling, respondents who are most interested in VR and AR, and may already own such devices as an Oculus, are the most enthusiastic about 5G.

Waving hullo

WaveOptics, based near Oxford, raised $65 million venture capital funding from Bosch, Octopus Ventures and tech founders including Stan Boland and Ambarish Mitra.

The company was founded in 2014 by three former British Aerospace engineers who had worked on technology for fighter pilot helmets. Pitchbook recently estimated its value at $105 million.

The jump to over $500 million is a sign of both the technology advances that WaveOptics have made and the growing demand for this type of technology. Its systems have been able to dramatically compress the size and load of hardware for processing and displaying AR images. The display, a light source and a lens on which to project the image, is an AR device's most important component, and could comprise up to half its total cost.

WaveOptics have developed promising waveguides – prisms that sit inside the frames that help to make the AR images. Theirs are based on hologram physics, and compete with others made by Lumus in Israel, Vuzix in New York, Digilens in California and Dispelix in Finland. WaveOptics is also known for another promising technology, photonic crystals.

Snap's acquisition is a joint cash-and-shares deal, with Snap paying about half the price immediately in stock and the remainder after two years in either cash or stock.

Inspirational Snap year

Evan Spiegel's company has been on a buying spree since January. In that time, it has acquired Pixel8Earth, which makes crowdsourced 3D maps, and StreetCred, a New York startup building a platform for location data.

It also bought Fit Analytics, which lets users enter their own measurements into a machine learning tool that helps them find clothes that fit.

Want to know more about 5G? Check out our dedicated 5G content channel here on Light Reading.

Coronavirus has focused internet retailers' minds, so helping bring AR to ecommerce may be a timely bet. A possibility, though, is scrutiny by the UK's Competition and Markets Authority. The regulator has been keen lately to investigate big US tech companies buying smaller British ones.

Generation Snap

With the company now banking nearly $770 million in the most recent quarter in revenues, mostly from advertisements, it is eyeing other ways to diversify its earnings streams somewhat.

In the first three months of 2021, Snap still made a net loss of $287 million. Granted, this was an improvement on losing $306 million in the first quarter of 2020. Its daily users jumped 22% from a year before, to 280 million.

Only three countries in the world have populations bigger than Snapchat's daily users.

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— Padraig Belton, contributing editor, special to Light Reading