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Executive Summary

It’s that time of year again. As we enter 2024, our annual exercise kicks in: examining the AR and VR events and lessons of the past year and predicting outcomes for the next year. The following pages will do just that… But first, what’s the high-level view of where we are in the XR lifecycle?

AR and VR – collectively known as spatial computing – continue to hold immense potential. Though they don’t represent the imminent tech revolution trumpeted in their circa-2017 hype cycle, they continue to show gradual progress. After a shakeout followed that hype cycle, AR and VR are now steadily growing at measured and realistic paces.

But the “spatial spectrum” deserves more nuanced analysis as there are varying growth curves across AR and VR subsectors, as well as their convergence in a new batch of passthrough-AR-based mixed reality devices. Spending categories seeing the most traction meanwhile include AR marketing & commerce, as well as consumer VR. Meta continues to advance the latter with massive investments and loss-leader pricing for Quest 2, not to mention the much-upgraded Quest 3 – its new VR flagship and a leading device within the new mixed reality class just noted.

Speaking of Meta, one thing that characterized 2023 was the rapid deterioration of metaverse mania. This fulfilled our prediction in last year’s version of this report that the hype bubble would burst in 2023. The thinking was that the technology is several years, or even decades, from materializing. So without any immediate gratification on the horizon, the herd-mentality-driven tech press and executive-penned Op/Eds will move on to other shiny objects.

That brings us to the big topic that defined 2023 inside and outside of the spatial computing realm: AI. With the rise of underlying AI technology from the likes of OpenAI, generative and conversational AI characterized the technological zeitgeist of the past year. But the big question is how it intersects with XR.

The knee-jerk reaction to AI’s rise is that it replaces the metaverse as a source of funding and attention. And that indeed may be true. However, it’s a mistake to lump AR and VR in with the metaverse’s replacement. Indeed, AI elevates XR in several ways.* For example, XR can be seen as the face of AI, while AI can be seen as the brains of XR. They go together.

This XR/AI convergence isn’t new, as seen in flavors and subsets of XR such as visual search and 3D navigation. However, it took on new forms and areas of applicability in 2023. For example, generative AI is being developed for 3D asset creation, thus automating and streamlining XR developer workflows.

On the user end, AI brings more meaning and personalization. For example, AI plays a key role in a use case that we’re particularly bullish on: captions for the real world. This involves line of sight intelligence that makes consumers empowered and situationally aware. It has become a defining principle and North Star for AR projects underway from Meta to Apple.

But the story doesn’t end there. The XR world is broad and contains several moving parts, many of which evolved in 2023 and are now primed for 2024. For example, what will be the impact of Apple Vision Pro? How are smart glasses evolving? And how is mixed reality becoming a new standard in VR? We’ll tackle such questions throughout this report.

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Methodology

This report highlights ARtillery Intelligence viewpoints, gathered from its daily in-depth market coverage. To support narratives, data are cited throughout the report. These include ARtillery Intelligence’s original data, as well as that of third parties. Sources are linked or attributed in each case.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 18 years in tech-sector research and intelligence. This includes the past 8 years covering AR & VR exclusively, as seen in research reports and daily reporting.

This approach primarily applies a bottom-up forecasting analysis, secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating figures in a disciplined way. More about our methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure & Ethics Statement

Unless specified in its stock ownership disclosures, ARtillery Intelligence has no financial stake in the companies mentioned in its reports. The production of this report likewise wasn’t commissioned. With all market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. ARtillery Intelligence’s disclosures, stock ownership, and ethics policy can be seen in full here.

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Executive Summary

June 5, 2023 was a day that the spatial computing world had been waiting for. Apple CEO Tim Cook took the stage at Apple’s annual WWDC event in Cupertino, CA to finally reveal the iconic company’s first attempt at a headworn AR device. The Vision Pro was born – the most powerful computing device Apple has built to date, and the most advanced AR headset the world has yet seen.

But despite those accomplishments, public reaction was mixed. We saw standard snickers from Apple haters and fanboys alike. The device is too bulky, doesn’t offer a compelling use case, and is way too expensive, were common refrains. That last complaint has been the most resounding. At $3,500, the price is the equivalent of a used Hyundai. The thinking goes: how will Apple fulfill its historical role in mainstreaming emerging tech if only the wealthy can buy it; and only the most ardent AR enthusiasts will want to?

In the many weeks following Vision Pro’s launch, the trolling and punditry continued, mostly from individuals who haven’t touched the device (more on that in a bit). Breathless editorials proclaimed that Vision Pro is a misguided attempt at AR glasses, and doesn’t represent the future of personal computing. Others proclaimed in certain terms that they won’t be buying the device when it releases in 2024.

But more prominent and powerful than any of these shouts from second-rate Op/Eds is the fact that Apple doesn’t care if they buy Vision Pro… This device is not for them. Rather, it’s Apple’s first play in a long game – a first-generation device meant to demonstrate what’s possible at any cost. Vision Pro will then become better, cheaper and more accessible over several generations, just like the iPhone’s evolutionary path. In other words, Apple is playing a long game.

Back to the breathless reviews from AR noobs, the majority of punditry around Apple Vision Pro has been from individuals who haven’t touched it, as noted, or those who aren’t versed in AR. The latter includes AR’s dynamics on technical and business levels; and historical perspective of what the industry and its players have (or haven’t) accomplished so far. These are important considerations in any analysis of VR hardware. In other words, be wary of assertive punditry from anyone without the above qualifications.

So why should you listen to us? In full disclosure, we haven’t worn Apple Vision Pro (yet). But we do tick the other box noted above: fluency in all-things AR. ARtillery Intelligence – and its sister publication AR Insider – have closely examined AR and the spatial spectrum since 2016. And we’ve been writing about Apple since 2001 as tech journalists and analysts.*

But that alone isn’t enough, given a lack of hands-on perspective with Vision Pro. So to scratch that itch, we’ve included perspectives and insights of trusted industry peers who were fortunate enough to demo the device under Apple’s supervision following its WWDC unveiling. We’ve peppered this report with companion videos of these hands-on reviews.

Otherwise, our analysis will focus on AVP’s market positioning rather than its specs and introductory details, which have been well covered. Among other things, we’ll apply our signature “follow-the-money” approach. This weighs Apple’s financial motivations as a primary consideration in triangulating AVP’s intended road map. We’ll tackle these questions through numbers and narratives, the goal being – as always – to empower you with a knowledge edge.

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Methodology

This report highlights ARtillery Intelligence viewpoints, gathered from its daily in-depth market coverage. To support narratives, data are cited throughout the report. These include ARtillery Intelligence’s original data, as well as that of third parties. Sources are linked or attributed in each case.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 18 years in tech-sector research and intelligence. This includes the past 8 years covering AR & VR exclusively, as seen in research reports and daily reporting.

This approach primarily applies a bottom-up forecasting analysis, secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating figures in a disciplined way. More about our methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure & Ethics Statement

Unless specified in its stock ownership disclosures, ARtillery Intelligence has no financial stake in the companies mentioned in its reports. The production of this report likewise wasn’t commissioned. With all market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. ARtillery Intelligence’s disclosures, stock ownership, and ethics policy can be seen in full here.

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Executive Summary

Like many research & intelligence firms, one of the things that ARtillery Intelligence does is market sizing. A few times per year, we go into isolation and bury ourselves deep in financial modeling. This takes the insights and observations we accumulate throughout the year and synthesizes them into hard numbers for the current and future spatial computing industry.

The latest such effort zeroes in on VR, whose aggregate global revenue is projected to grow from $9.04 billion in 2022 to $20.3 billion in 2027, a 17.6 percent compound annual growth rate (CAGR). This puts VR in the middle of the spatial spectrum in terms of revenue rankings. It trails mobile AR, given that the latter piggybacks on $3 billion+ global smartphones. But it exceeds headworn AR, given that it continues to be challenged on technical and cultural levels.

Segmenting the above VR figures, revenue is bisected by consumer and enterprise markets. The former is larger, and driven by gaming. VR conversely has valuable but relatively-narrow use in enterprise settings due to its sensory immersion that compromises safety, social presence, and ergonomics. Exceptions include immersive training and design collaboration, where VR’s immersion is aligned and additive.

In all cases, VR’s biggest accelerant is Meta. Its Quest 2 remains competitive at sub-$500 levels. This is a central piece in Meta’s longer-term strategy to reach network effect by gaining early market share through loss-leader pricing. Though strategic and self-serving, this brings VR’s cost down in a way that benefits consumers.

To that end, one of Meta’s goals has been to reach 10 million in-market VR units – a critical mass to attract developers en masse. As resulting content libraries grow, so does the user base, thus attracting more reach-driven developers. It’s a classic flywheel effect. More importantly, Meta has surpassed that target, with signals indicating 20 million+ Quest headsets sold to date.

The remaining question is if that flywheel effect has kicked in. Will adoption accelerate in the above ways? So far, we’ve seen the opposite effect in depressed Q2 revenue for Meta Reality Labs. But these declines could be short-lived, due to a saturated market for Quest 2 as Meta prepares for its next VR inflection with the launch of Quest 3. This principle has played out across the VR landscape as the next generation of devices – built around the advantages and expanded use cases of mixed reality – penetrates the market.

In that sense, it’s not just about Meta. As we’ll explore throughout this report, there’s notable activity from Valve, Pico, Sony, and HTC. The latter has executed a notable VR comeback, establishing a strong foothold in enterprise markets, and arguably beating Meta’s VR quality standards at the high end, given its lauded VIVE XR Elite.

So how do all these principles translate to revenue projections? That’s what we’ll quantify and qualify throughout this report…

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Methodology

ARtillery Intelligence follows disciplined best practices in market sizing and forecasting, developed and reinforced through its principles’ 17 years in research and intelligence in tech sectors. This includes the past 7 years covering AR & VR as a primary focus.

This report focuses on revenue projections in various sub-sectors and product areas. ARtillery Intelligence has built financial models that are customized to the specific dynamics and unit economics of each. These include variables like unit sales, company revenues, pricing trends, market trajectory and several other micro and macro factors that ARtillery Intelligence tracks.

This approach primarily applies a bottom-up forecasting methodology, which is secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating revenues and projections in a disciplined way. For more information on what’s included and not included in the forecast (a key consideration when evaluating the findings) see the next slide.

More about ARtillery Intelligence’s market-sizing methodology can be seen here and more on its credentials can be seen here.

Disclosure & Ethics Statement

Unless specified in its stock ownership disclosures, ARtillery Intelligence has no financial stake in the companies mentioned in its reports. The production of this report likewise wasn’t commissioned. With all market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. ARtillery Intelligence’s disclosures, stock ownership, and ethics policy can be seen in full here.

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Executive Summary

AI is the new black… especially generative AI such as DALL-E 2 and Midjourney. Generating artwork on the fly with text inputs seems to be blowing everyone’s minds. Similarly, conversational AI like ChatGPT continues to preview the future of information retrieval.

Some have even called this the death of the Google-dominant era of search. Though that could be overblown, there’s ample promise in the applications and endpoints for technology from the likes of OpenAI. This competitive landscape will explode in the coming years with several more players.

Amidst all that excitement, one question we’re often asked is how generative AI will converge with XR. And though it’s early in the conceptualization of generative AI, we already see several ways that the technology could merge with AR and VR to engender new functions, use cases, and points of value.

These possibilities are split between user-facing and creator-facing features. Starting with the former, generative AI could be used to create serendipitous AR experiences on the fly, based on voice prompts.

This contrasts the ways that AR and VR are experienced today which is mostly preordained. AR experiences and interactions are deliberately and painstakingly developed in advance, then experienced when activated in deliberate use cases. AI-generated XR – let’s call it “generative XR” – could be more open and flexible in creating experiences dynamically.

Similarly, with the help of generative AI, AR could evolve into more of a utility. Like search, information could be pull-based. Users could activate and observe 3D animations on demand, with possibilities from entertainment to “how-to” content (e.g., tying a tie).

As for creator-facing features, generative AI could accelerate developer workflows. This includes generating 3D models that are the ingredients for XR. Such outcomes would fill a key gap in XR’s value chain as 3D content is currently a bottleneck.

Think of this sort of like a creative assistant. During creative workflows, AI can be utilized to build rote elements of 3D environments, such as backgrounds or placeholder assets. This is similar to Meta’s concept of a ”builder bot” for 3D worlds, which doesn’t yet exist but could be a model or target.

Beyond AI’s role as a creative assistant, some AR creators are already using it as an inspirational tool. As part of their ideation process, they can prototype or storyboard AR lenses by generating artwork through tools like Midjourney. This can help them refine ideas or spark new creative directions.

Of course, the above just outlines a few ways that AI converges with XR. Other possible avenues include utilizing conversational AI (e.g., ChatGPT) for intelligent assistant functions in AR & VR headsets. Indeed, inputs that control these devices are still being conceived, so it could be an opportune time for intelligent voice assistants to emerge. These would require more capability than currently offered by Siri.

But all the above is admittedly early and speculative. Watching the convergence of AI and XR will be the fun part, which will take years to fully materialize. As we’ve learned from past tech cycles, the use cases and endpoints are discovered organically… and slowly. That said, it’s never too early to start to map out potential outcomes and opportunities. To identify and mine these opportunity gaps, the name of the game, as always, will be to maintain a knowledge edge.

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Methodology

This report highlights ARtillery Intelligence viewpoints, gathered from its daily in-depth market coverage. To support narratives, data are cited throughout the report. These include ARtillery Intelligence’s original data, as well as that of third parties. Sources are linked or attributed in each case.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 17 years in tech-sector research and intelligence. This includes the past 7 years covering AR & VR exclusively, as seen in research reports and daily reporting.

This approach primarily applies a bottom-up forecasting analysis, secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating figures in a disciplined way. More about our methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure & Ethics Statement

Unless specified in its stock ownership disclosures, ARtillery Intelligence has no financial stake in the companies mentioned in its reports. The production of this report likewise wasn’t commissioned. With all market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. ARtillery Intelligence’s disclosures, stock ownership, and ethics policy can be seen in full here.

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Though we spend ample time examining consumer-based AR endpoints, considerable adoption and impact are demonstrated today in the enterprise.

This takes many forms including data visualization in corporate settings, or software to create customer-facing AR experiences for brands (B2B2C). ARtillery Intelligence’s market sizing factors all these spending categories. But the greatest area of enterprise AR impact today is realized in industrial settings.

These use cases include AR visualization to support assembly and maintenance in manufacturing contexts. It can also include visual guidance (in both mobile and headwork form factors) for IT field support. The idea is that AR’s line-of-sight orientation can make front-line workers more intelligent and empowered. Compared to the “mental mapping” they do with 2D instructions, visual support makes them more effective.

This effectiveness results from AR-guided speed, accuracy, and safety. These micro efficiencies add up to worthwhile bottom-line impact when implemented at scale in industrial operations. Macro benefits meanwhile include lessening job strain and the “skills gap,” which can help preserve institutional knowledge.

For example, AR leader PTC reports up to 40 percent improvements in new employee productivity, 30 percent greater first-time fix rates, 50 percent reductions in training costs, and 25 percent reductions in materials scrap.

But it’s not all good news. Though all these benefits are valid, it’s challenging to get to the point of realizing them. Practical and logistical barriers loom, including organizational inertia, politics, change management, and fear of new technology among front-line workers.

Sticking with some of those organizational hurdles, the biggest symptom is the dreaded “pilot purgatory.” As its name suggests, this is when AR is adopted at the pilot stage, but never progresses to full deployment. It’s one of industrial AR’s biggest pain points today.

ARtillery Intelligence has identified sources and solution areas for pilot purgatory. Known as the “3 Ps,” they include people, product, and process. These are the areas where effective AR implementation strategies should focus (explored later in the report).

With that backdrop, we continue the narrative in this report on enterprise AR, including new ARtillery Intelligence market sizing data. Moreover, we devote the bulk of this report to “show rather than tell.” We’ll do this through case studies that demonstrate enterprise AR’s ROI potential and best practices.

To adequately represent these factors, we’ve reached out to leading enterprise AR players to collect their top case studies. We’ve then relayed these through our own lens and analytical rigor. We’ve prioritized case studies that have quantifiable results, actionable takeaways, and a wide range of business verticals.

The goal in all the above is to reveal the why and how of enterprise AR. Through the lens of industry best practices, why should enterprises invest in AR? And how should it be implemented? The name of the game is to set up enterprise AR to succeed by deploying it from a place of confidence and knowledge.

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Methodology

This report highlights ARtillery Intelligence viewpoints, gathered from its daily in-depth market coverage. To support narratives, data are cited throughout the report. These include ARtillery Intelligence’s original data, as well as that of third parties. Sources are linked or attributed in each case.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 17 years in tech-sector research and intelligence. This includes the past 7 years covering AR & VR exclusively, as seen in research reports and daily reporting.

This approach primarily applies a bottom-up forecasting analysis, secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating figures in a disciplined way. More about our methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure & Ethics Statement

Unless specified in its stock ownership disclosures, ARtillery Intelligence has no financial stake in the companies mentioned in its reports. The production of this report likewise wasn’t commissioned. With all market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. ARtillery Intelligence’s disclosures, stock ownership, and ethics policy can be seen in full here.

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Executive Summary

Like many research & intelligence firms, one of the things that ARtillery Intelligence does is market sizing. A few times per year, we go into isolation and bury ourselves deep in financial modeling. This takes the insights and observations we accumulate throughout the year and synthesizes them into hard numbers for the current and future spatial computing industry.

The latest such effort zeroes in on Headworn AR, which is projected to grow from $2.32 billion in 2022 to $35.26 billion in 2027. This trails other XR sectors we track, such as mobile AR and VR, as they’re at more advanced stages. Though headworn is AR’s endgame, it’s underdeveloped today, due to its highly-advanced technological requirements.

Meanwhile, there continues to be ample anticipation for AR glasses in the tech press and broader culture… but also a looming reality check. Futuristic visions of pervasive all-day glasses hit a brick wall when considering technological requirements. Not only are these requirements intense – involving nuanced optical and display systems – but achieving stylistic viability adds another layer of complexity. Approaching ubiquity is more of a 2030 reality than a 2023 one. But if anything could accelerate that, it’s immense R&D spending* from Apple, Meta, Google. and Microsoft.

Zeroing in on the most influential of these players, Apple will advance AR adoption with its “halo effect,” flowing from the Vision Pro. Its market impact will take a few years, due to the device’s price point, but it will be influential in bringing AR to a wider swath of mainstream enterprises and consumers (in that order). On a technical note, though its AR capabilities involve passthrough cameras (like Quest Pro, which is tracked in our VR forecast), its primary use case is AR. When putting on the device, the first thing users see is the world around them. So we’ll cover it in this report.

As all of that materializes, headworn AR has already found traction by helping industrial and corporate enterprises boost productivity. For example, it helps IT services field reps operate with greater speed and effectiveness through line-of-sight guidance and remote support.

Speaking of enterprise adoption, it not only happens in a B2B sense but with B2B2C. We’re talking consumer endpoints such as games, entertainment, marketing, and commerce. The technology to create and support these functions is bought by developers and brands who lean into AR as an interactive touchpoint with customers or marketing targets. This principle is already playing out in mobile AR, such as branded AR lenses, but will follow in headworn AR as the field evolves.

We’re not there yet, due to low hardware penetration, but we’ll prepare for such market opportunities by beginning to project B2B2C spend in this forecast. With AR hardware from Apple, Meta and others on the horizon, B2B2C revenue models could develop in the next few years.

So how do all these principles translate to revenue projections? That’s what we’ll quantify and qualify throughout this report…

Price: $1999

The fastest and most cost-efficient way to get access to this report is by subscribing to ARtillery PRO (Startup tier or higher for forecast access). You can also purchase it a la carte.

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Methodology

ARtillery Intelligence follows disciplined best practices in market sizing and forecasting, developed and reinforced through its principles’ 17 years in research and intelligence in tech sectors. This includes the past 7 years covering AR & VR as a primary focus.

This report focuses on headworn AR revenue projections in various sub-sectors and product areas. ARtillery Intelligence has built financial models that are customized to the specific dynamics and unit economics of each. These include variables like unit sales, company revenues, pricing trends, market trajectory and several other micro and macro factors that ARtillery Intelligence tracks.

This approach primarily applies a bottom-up forecasting methodology, which is secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating revenues and projections in a disciplined way. For more information on what’s included and not included in the forecast (a key consideration when evaluating the findings) see the next slide.

More about ARtillery Intelligence’s market-sizing methodology can be seen here and more on its credentials can be seen here.

Disclosure & Ethics Statement

Unless specified in its stock ownership disclosures, ARtillery Intelligence has no financial stake in the companies mentioned in its reports. The production of this report likewise wasn’t commissioned. With all market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. ARtillery Intelligence’s disclosures, stock ownership, and ethics policy can be seen in full here.

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Executive Summary

How do consumers feel about mobile AR? Who’s using it? How often? And what do they want to see next? Perhaps more importantly, what are non-users’ reasons for disinterest? And how should app developers build mobile AR experiences accordingly?

These are the questions we set out to answer. Working closely with Thrive Analytics, ARtillery Intelligence wrote questions to be fielded to more than 75,000 U.S. adults through Thrive’s established consumer survey engine. As the sixth wave of this mobile AR research, results are in and we’ve synthesized the takeaways throughout this report.

This follows several ARtillery Intelligence monthly reports that examine various segments of, and developing use cases for, consumer AR. Now a deeper view into real consumer usage and attitudes validates those narratives while providing new dimension on mobile AR strategies and opportunities.

So what did we find out? At a high level, mobile AR usage has grown to 32 percent of U.S. adults. Many of these users experience AR through AR apps, such as those built on Apple’s ARKit and Google’s ARCore. But there’s greater engagement with lower-friction experiences such as “AR-as-a-feature.”

Mobile AR users also appear active and engaged, with 46 percent reporting that they use it at least weekly. The top app category is gaming, which we attribute to Pokémon Go’s sustained traction. But other categories such as AR shopping and visual search continue to make headway. Mobile AR users also indicate high levels of satisfaction.

Beyond the positive results and demand signals outlined in on the previous page, there are negative signs and areas for improvement. For example, non-mobile AR users report low likelihood of adopting, and an explicit lack of interest in the technology.

This disparity between current-user satisfaction and non-user disinterest continues to underscore a key challenge for AR: you need to experience it to see its benefits. But there’s little motivation for non-users to do so. This creates a classic “chicken & egg” dilemma that represents a core marketing challenge for AR.

Put another way, AR’s highly-visual and immersive format is a double-edged sword. It can create strong affinities and high engagement levels. But the visceral nature of its experience can’t be communicated to prospective users through traditional marketing, such as ad copy or even video.

The same chicken & egg challenge was uncovered in the corresponding VR consumer research that we published last month. This makes it a common challenge for immersive tech, though AR is relatively advantaged by mobile ubiquity. Still, it will take time and acclimation before AR reaches a more meaningful share of the population. This will require patience.

Meanwhile, there are strategies to accelerate that process and to build AR apps that align with consumer affinities. And these strategies will be a moving target as AR evolves from mobile – the predominant form factor today – to its real endgame: headworn. We will end this report with a data point that quantifies this early transition from handheld to headworn AR.

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Methodology

ARtillery Intelligence has partnered with Thrive Analytics by writing the questions for the Virtual Reality Monitor consumer survey. These questions were fielded to more than 72,000 U.S. Adults. ARtillery Intelligence wrote this report, containing its insights and viewpoints on the survey results.

For market sizing and analysis, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 17 years in research and intelligence in the tech sector. This includes the past 7 years covering AR & VR exclusively, as seen in research and daily reporting.

Thrive Analytics likewise follows best practices in consumer research, developed over its long tenure as a consumer research firm. More details about the survey sample can be seen in this report’s introduction and more on ARtillery Intelligence research methodology can be read here.

More about ARtillery Intelligence’s market-sizing methodology can be seen here and more on its credentials can be seen here.

Disclosure & Ethics Statement

Unless specified in its stock ownership disclosures, ARtillery Intelligence has no financial stake in the companies mentioned in its reports. The production of this report likewise wasn’t commissioned. With all market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. ARtillery Intelligence’s disclosures, stock ownership, and ethics policy can be seen in full here.

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Executive Summary

Like many research & intelligence firms, one of the things that ARtillery Intelligence does is market sizing. A few times per year, we go into isolation and bury ourselves deep in financial modeling. This takes the insights and observations we accumulate throughout the year and synthesizes them into hard numbers for the current and future spatial computing industry.

The latest such effort zeroes in on mobile AR, which is projected to grow from $15.1 billion in 2022 to $39.8 billion in 2027. In fact, mobile AR revenue today exceeds other XR sectors we track, such as headworn AR and VR, as it piggybacks on a global base of 3.6 billion smartphones.

But that installed base doesn’t always translate to revenue. For example, consumer spending in mobile AR is relatively low, including digital goods such as in-app purchases in Pokémon Go. Though the game is still going strong, it’s a bit of an outlier as most consumers aren’t otherwise paying for AR experiences. Those that do mostly execute in-app purchases – an established and comfort-advantaged behavior due to its firm footing in mobile gaming. Bottom line: consumers largely aren’t buying AR apps.

Consumers are however buying physical goods with the help of AR. This involves AR product visualization and try-ons that add more dimension and consumer confidence in eCommerce consideration phases. This has resonated with consumers – especially in the eCommerce-heavy Covid era when AR got the chance to shine – as well as brands and retailers. These entities have meaningfully adopted AR in their marketing, as it helps them to demonstrate products with greater detail and dimension.

This brand adoption represents an area of AR spending we classify as B2B2C. It involves brands that utilize AR to create experiences for their customers or marketing targets. Put another way – and synthesizing a few points made so far – most mobile AR usage today is brand sponsored rather than consumer purchased. This same B2B2C principle applies in other categories in this forecast, including AR media & games development, as well as commerce enablement.

Beyond B2B2C, there’s also B2B spending in AR. This mostly involves AR that helps industrial and corporate enterprises boost their effectiveness or productivity. For example, AR can help IT services companies empower their field reps to operate with greater speed and effectiveness through line-of-sight guidance and remote support. This enterprise productivity holds the most promise in headworn AR but today remains prevalent in mobile AR, due to smartphone ubiquity.

So how do all these principles translate to revenue? That’s what we’ll quantify and qualify throughout this report…

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Methodology

ARtillery Intelligence follows disciplined best practices in market sizing and forecasting, developed and reinforced through its principles’ 17 years in research and intelligence in tech sectors. This includes the past 7 years covering AR & VR as a primary focus.

This report focuses on mobile AR revenue projections in various sub-sectors and product areas. ARtillery Intelligence has built financial models that are customized to the specific dynamics and unit economics of each. These include variables like unit sales, company revenues, pricing trends, market trajectory and several other micro and macro factors that ARtillery Intelligence tracks.

This approach primarily applies a bottom-up forecasting methodology, which is secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating revenues and projections in a disciplined way. For more information on what’s included and not included in the forecast (a key consideration when evaluating the findings) see the next slide.

More about ARtillery Intelligence’s market-sizing methodology can be seen here and more on its credentials can be seen here.

Disclosure & Ethics Statement

Unless specified in its stock ownership disclosures, ARtillery Intelligence has no financial stake in the companies mentioned in its reports. The production of this report likewise wasn’t commissioned. With all market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. ARtillery Intelligence’s disclosures, stock ownership, and ethics policy can be seen in full here.

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Executive Summary

Spatial computing continues to evolve and take shape as an industry. Like other tech sectors, it has spawned several sub-segments that comprise an ecosystem. These each represent standalone topics in ARtillery Intelligence’s ongoing analysis, including monthly intelligence briefings like this.

Prominent sectors so far include industrial AR, consumer VR, and AR shopping. But existing alongside all of them – and overlapping to some degree – is AR marketing. Among other things, this includes sponsored AR lenses that let consumers visualize or virtually try-on products.

Supporting AR marketing are several components. For example, lens creation software arms brands and developers with low-code tools to author AR experiences. Social networks like Snapchat and Instagram meanwhile offer the additional ability to amplify lenses throughout their social graphs. That paid amplification is projected to drive $4.4 billion in brand spending this year and $7.8 billion by 2026.

As we’ve examined in past reports, the factors driving this brand spending include advertisers’ growing affinity for, and recognition of, AR’s potential. Its ability to demonstrate products in immersive ways resonates with their creative sensibilities, transcending what’s possible in two-dimensional formats.

Beyond that appeal, there’s a real business case. AR marketing campaigns continue to show strong performance metrics. This was the case in “normal” times and accelerated during the Covid era when retail lockdowns compelled AR’s ability to visualize products remotely. That exposure has led to sustained traction in the Post-Covid era.

AR marketing’s proof can be seen in the numbers, such as campaign performance metrics analyzed in past case studies. We’re now doubling down on those narratives with another round of case studies.

The goal is to explore not only the what and why of AR marketing – well-worn topics – but also the how. This takes shape in AR campaign breakdowns. What’s working and not working in these early stages while the AR marketing playbook is still being written?

Another ongoing theme carried forward in this report is how AR marketing campaigns can map to brand marketers’ varied goals. This builds on AR’s versatility and its unique ability to span the consumer purchase funnel – from upper-funnel reach-driven campaigns to lower-funnel conversion-driven campaigns.

The case studies in this report will accordingly span funnel stages. Similarly, we’ll examine varied and evolving analytics. In fact, a looming question in AR marketing is what are the best metrics to track effectiveness? This will be a moving target.

As a bonus, ARtillery Intelligence has created a library of AR ad campaigns. Known as Campaign Tracker, it lives on ARtillery Pro (login required). It includes AR ad campaigns at-a-glance and in-depth. It’s meant to supplement this report with ongoing all-year education around AR marketing best practices. As always, the goal is to empower you with a knowledge edge.

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Methodology

This report highlights ARtillery Intelligence viewpoints, gathered from its daily in-depth market coverage. To support narratives, data are cited throughout the report. These include ARtillery Intelligence’s original data, as well as that of third parties. Sources are linked or attributed in each case.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 17 years in tech-sector research and intelligence. This includes the past 7 years covering AR & VR exclusively, as seen in research reports and daily reporting.

This approach primarily applies a bottom-up forecasting analysis, secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating figures in a disciplined way. More about our methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure & Ethics Statement

Unless specified in its stock ownership disclosures, ARtillery Intelligence has no financial stake in the companies mentioned in its reports. The production of this report likewise wasn’t commissioned. With all market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. ARtillery Intelligence’s disclosures, stock ownership, and ethics policy can be seen in full here.

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Executive Summary

Like many research & intelligence firms, one of the things that ARtillery Intelligence does is market sizing. A few times per year, we go into isolation and bury ourselves deep in financial modeling. This takes the insights and observations we accumulate throughout the year and synthesizes them into hard numbers for the current and future spatial computing industry (methodology details below).

Our latest forecasting endeavor covers the spatial spectrum, otherwise known as XR. Spanning AR (mobile & headworn) and VR, this forecast takes a holistic view of hardware, software, and supporting tech, including consumer and enterprise deployments. A departure from the deep-dive individual forecasts in these XR subsectors, this annual forecasting exercise combines them for a more holistic view of the market opportunity for spatial computing.

So what did the forecast uncover? Starting at the top, the high-level revenue comparison between AR (headworn and mobile) and VR reveals their respective penetration levels and lifecycle stages. Mobile AR leads the pack with $13.5 billion in revenue this year, followed by VR ($11.9 billion) and headworn AR ($3.8 billion). Here, mobile AR’s lead is owed to piggybacking on an installed base of 3 billion+ smartphones.

But that installed base doesn’t always translate to revenue. For example, consumer spending in mobile AR is relatively low. Most of that spending is for digital goods, such as in-app purchases in Pokémon Go. Though the game is still going strong, it’s a bit of an outlier as most consumers aren’t paying for AR experiences. Those that do mostly execute in-app purchases – an established and comfort-advantaged behavior thanks to the wide world of mobile gaming. Bottom line: consumers largely aren’t buying AR apps.

So if not consumers, where is money being made in mobile AR. The short answer is B2B2C. This involves brand spending to create AR experiences for their customers or marketing targets. It includes AR marketing, commerce and experience creation. Put another way, most mobile AR usage and activity is brand sponsored. And that B2B2B principle transcends mobile AR. We see the same in VR and headworn AR, including developer tools and other enabling tech.

Speaking of VR, it’s a segment where most revenue comes from consumers. The big story there continues to be Meta’s loss-leader investments to gain early market share and build a network effect for their vision of the future connected web. Though we won’t spend much time in this report invoking the m-word, the metaverse should be mentioned here as Meta’s motivation for all this investment. See our State of Spatial Computing report for more depth on that topic.

As for headworn AR, most spending today is from enterprises, as AR glasses aren’t consumer-ready. That statement applies on both technological and cultural levels. But we’re gradually getting there through the work of tech giants like Google, Meta; and enablers like Qualcomm and Niantic. But the main story in AR glasses is continued speculation around what Apple may do. All eyes are on the Cupertino market maker due to its track record in mainstreaming emerging tech through its signature halo effect. It could make or break AR.

So how do all these principles translate to revenue? That’s what we’ll quantify and qualify throughout this report.

Price: $1999

The fastest and most cost-efficient way to get access to this report is by subscribing to ARtillery PRO (Startup tier or greater for forecast access). You can also purchase it a la carte.

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What’s Covered

Methodology

ARtillery Intelligence follows disciplined best practices in market sizing and forecasting, developed and reinforced through its principles’ 17 years in research and intelligence in tech sectors. This includes the past 7 years covering AR & VR as a primary focus.

This report focuses on XR revenue projections in various sub-sectors and product areas. ARtillery Intelligence has built financial models that are customized to the specific dynamics and unit economics of each. These include variables like unit sales, company revenues, pricing trends, market trajectory and several other micro and macro factors that ARtillery Intelligence tracks.

This approach primarily applies a bottom-up forecasting methodology, which is secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating revenues and projections in a disciplined way. For more information on what’s included and not included in the forecast (a key consideration when evaluating the findings) see the next slide.

More about ARtillery Intelligence’s market-sizing methodology can be seen here and more on its credentials can be seen here.

Disclosure & Ethics Statement

Unless specified in its stock ownership disclosures, ARtillery Intelligence has no financial stake in the companies mentioned in its reports. The production of this report likewise wasn’t commissioned. With all market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. ARtillery Intelligence’s disclosures, stock ownership and ethics policy can be seen in full here.

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