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How do consumers feel about mobile AR? Who’s using it? How often? And what do they want to see next? Perhaps more important, what are non-users’ reasons for disinterest? And how can app developers and anyone else building mobile AR apps optimize product strategies accordingly?

These are the questions we set out to answer. Working closely with Thrive Analytics, ARtillery Intelligence wrote questions to be presented to more than 43,000 U.S. adults through Thrive’s established consumer survey engine. The results are in and we’ve analyzed the takeaways in a narrative report.

This follows several months of ARtillery Intelligence Briefings 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 29 percent of U.S. adults. Many of these users experience AR through dedicated 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 59 percent reporting that they use it at least weekly. The top app category is gaming, which we attribute to Pokémon Go’s popularity. But other categories such as social AR and visual search continue to make headway. Mobile AR users also indicated high levels of satisfaction with their experiences.

But beyond these and a few other positive signals, 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.

This disparity between current-user satisfaction and non-user disinterest continues to underscore a key challenge for AR: you have to experience it to “get it.” But there’s little drive for non-users to get that first taste. This boils down to 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 corresponding VR consumer research that we’ll produce in a report like this next 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.

Meanwhile, there are strategies to accelerate that process and to build AR apps that align with consumer affinities. In this report, we’ll examine such strategies and unpack the latest survey results. We’ll also examine the ways that Covid-19 impacted this year’s results. As always, the goal is to empower ARtillery Pro subscribers with a greater knowledge position.

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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 43,000 U.S. Adults. ARtillery Intelligence wrote this report, containing its insights and viewpoints on the survey results.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 15 years in tech sector research and intelligence. This includes the past 5 years covering AR & VR exclusively, as seen in research reports 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 and methodology can be read here.

Disclosure & Ethics Statement

ARtillery Intelligence has no financial stake in the companies mentioned in this report, nor received payment for its production. With respect to market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. Disclosure and ethics policy can be seen in full here.

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Though we spend ample time examining consumer-based AR endpoints, greater near-term impact is seen today in the enterprise.

This takes many forms including data visualization in corporate settings, or software to create customer-facing AR experiences for brands. But the greatest area of enterprise AR impact today is realized in industrial settings.

These industrial use cases include AR visualization to support assembly and maintenance in manufacturing facilities. The idea is that AR’s line-of-sight orientation can guide front-line workers. Compared to the “mental mapping” they must do with 2D instructions, line-of-sight 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 lead to preserving 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 of these advantages are valid, it’s challenging to get to the point of realizing them. Practical and logistical barriers stand in the way, such as organizational inertia, politics, change management and fear of new technology among stakeholders like front-line workers.

The biggest symptom of these stumbling blocks is the dreaded “pilot purgatory.” As its name suggests, and as you may have heard in AR industry narratives, this is when AR is adopted at the pilot stage, but never progresses to full deployment. It’s the biggest pain point in industrial AR today.

In the past, ARtillery Intelligence has identified the sources and solution areas for pilot purgatory as the “3 Ps.” Comprising people, product and process, they’re the top areas where effective AR implementation strategies should focus.

With that backdrop, we continue the narrative in this report with an update on the enterprise AR opportunity, 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 several case studies that demonstrate enterprise AR best practices and business cases.

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 variety of business verticals and use cases.

The goal in all of 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 optimally implemented? The name of the game is to set up enterprise AR to succeed by deploying it from a position of confidence and knowledge.

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Methodology

This report highlights ARtillery Intelligence’s viewpoints, gathered from its daily in-depth coverage of spatial computing. To support the narrative, data are cited throughout the report. These include ARtillery Intelligence’s original data, as well as that of third parties. Data sources are attributed in each case.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 15 years in tech sector research and intelligence. This includes the past 4 years covering AR & VR exclusively, as seen in research reports and daily reporting.

Furthermore, devising these figures involves the “bottom-up” market-sizing methodology, which involves granular ad revenue dynamics such as campaign pricing and spending. More about ARtillery Intelligence methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure & Ethics Statement

ARtillery Intelligence has no financial stake in the companies mentioned in this report, nor received payment for its production. With respect to market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. Disclosure and ethics policy can be seen in full here.

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Executive Summary

Augmented reality’s traction over the past few years has occurred mostly through the smartphone camera. As we quantified in our recent mobile AR revenue forecast, this early AR modality has reached scale by piggy-backing on a ubiquitous device we all carry.

But that scale has a tradeoff. Mobile AR’s quantitative benefits come with qualitative detriments. In other words, though AR benefits from mobile’s sheer reach, smartphones aren’t the technology’s optimal vessel. There, AR is overshadowed by other established and primary smartphone activities.

Beyond taking a back seat to other mobile use cases, AR’s use on smartphones can be awkward and un-ergonomic. Arm fatigue sets in through the act of holding one’s phone up for long periods to experience line-of-sight graphical overlays. This keeps session lengths short.

Put another way, AR is a bolted-on technology for the smartphone, rather than a native one. A device that has an inherently downward-held orientation wasn’t made for a technology that integrates graphics with line-of-sight perspectives. The result: AR’s smartphone activations are relatively unnatural.

“Relatively” is the key word, as mobile AR has seen some success, such as Snapchat lenses. But to achieve “native” orientation, AR’s true home awaits in glasses form. AR’s potential and its consumer appeal won’t be fully unlocked until it can realistically be housed in wearable eyeglasses.

But that’s easier said than done. The underlying technology isn’t yet at the stage where graphically-robust experiences can be integrated with glasses that most average consumers will wear. Conversely, stylistically-viable smart glasses can’t have the graphical intensity for a worthwhile user experience.

This is a design tradeoff that AR glasses hopefuls continue to grapple with. At one end of the spectrum are AR headsets like Microsoft HoloLens 2 and Magic Leap One – graphically compelling but stylistically untenable. At the other end is hardware such as North Focals – sleek but underwhelming in graphical intensity.

Until the day when these factors can co-exist, tradeoffs will continue to be made, where individual use cases (think enterprise vs. consumer) determine the optimal target along that sliding scale. Meanwhile, the mutual exclusivity of these design endpoints keeps AR glasses in early-adopter phases.

What will it take to get over that hump and bring AR glasses to the mainstream? Will Apple’s rumored glasses accomplish this? And how many years will this evolutionary process take? We’ll answer these questions and others in this report through numbers and narratives.

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Methodology

This report highlights ARtillery Intelligence’s viewpoints, gathered from its daily in-depth coverage of spatial computing. To support the narrative, data are cited throughout the report. These include ARtillery Intelligence’s original data, as well as that of third parties. Data sources are attributed in each case.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 15 years in tech sector research and intelligence. This includes the past 4 years covering AR & VR exclusively, as seen in research reports and daily reporting.

Furthermore, devising these figures involves the “bottom-up” market-sizing methodology, which involves granular ad revenue dynamics such as campaign pricing and spending. More about ARtillery Intelligence methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure & Ethics Statement

ARtillery Intelligence has no financial stake in the companies mentioned in this report, nor received payment for its production. With respect to market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. Disclosure and ethics policy can be seen in full here.

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As we approach the turn of a new year, it’s once again time for our annual ritual of synthesizing the lessons from the past twelve months and formulating the outlook for the next twelve. Notably, when kicking off this thought exercise, we realized that several of the topics look similar to last year.

Though there are lots of developments and new insights to break down, the topical containers that house those insights are beginning to coalesce into standard buckets. We’re talking mobile AR engagement & monetization; AR cloud development; enterprise AR and the gradual march of VR.

This standardization is good news, in that it signals spatial computing’s exciting – yet insecure – early days have transitioned to an adolescent period of its lifecycle. We have a firmer grasp on what’s working and not working… versus 2017’s wild speculation on the technology’s world-shifting impendence.

For example, AR’s near-term viability is supported by smartphone scale – estimated at 3.04 billion AR-ready devices and 598 million active devices. This has attracted reach-driven brand advertisers that are interested in immersive marketing. AR ad spending has reached an estimated $1.4 billion.

Elsewhere in mobile AR, Pokémon Go is experiencing the most successful stage in its lifetime, recently passing an estimated $1 billion in year-to-date revenue, and $4 billion cumulatively. Speaking of Niantic, it joins the list of tech giants investing heavily in planet-scale spatial mapping that’s hoped to power the next generation of AR experiences.

The list of companies assembling “AR clouds” otherwise includes Google, which continues to apply its vast knowledge graph as a visual database that can localize AR devices. It also includes Facebook, whose Project Aria is a step towards its Live Maps AR cloud ambitions. Meanwhile, Amazon’s IoT data could represent an AR cloud sleeper.

All of the above mobile AR happenings will pave the runway and create a softer landing for consumer AR’s fully-actualized head-worn era. Meanwhile, a different technology is working towards the same end: wearables. The device class will acclimate consumers to wearing sensors on their bodies – starting with Apple.

Speaking of Apple, its rumored AR glasses in the 2022 timeframe could determine the fate of the AR industry, given the company’s proven “halo effect” on emerging technologies. This year, we learned many clues that signal the approach Apple may take, including elegant and ambient ways to enhance human vision.

But the story doesn’t end there. What about enterprise AR? What about VR, given the sector’s acceleration at the hands of Oculus Quest 2? Finally, what impact will an ongoing global pandemic have on spatial computing (spoiler alert: there will be mixed results)? We’ll tackle these questions and more in this report through numbers & narratives.

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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 here).

In covering spatial computing exclusively for five years, our sector knowledge base and perspective continue to improve. That occurs on several levels, including insight and access to insider information, all of which informs our forecast models and inputs. Further reinforcing that knowledge position, the daily rigors of editorial production at our sister publication AR Insider emboldens our market access and insights.

Beyond knowledge-position and market-sizing process, the focus of these forecasts likewise continues to evolve. Our first market forecast four years ago examined AR, VR and their revenue subsegments. Last year, we began to produce separate forecasts for AR and VR. Though they share technological underpinnings, their nuanced market dynamics deserve deeper and focused treatment.

This year, we continue that focused approach. After publishing forecasts in July on mobile AR, and September on head-worn AR, we now turn attention in this report to VR. This includes a revenue outlook for key revenue categories like VR hardware, software, consumer and enterprise spending. Other subdivisions include revenue categories like location-based entertainment.

So what did we find out? Our outlook continues to be best characterized as cautiously optimistic, especially when compared to several large research firms that turn attention to AR & VR occasionally to publish eye-popping revenue estimates in the hundreds of billions of dollars. We’re still comfortably and confidently in the low single-digit billions, with outer-year projections in the low tens of billions (sample above).

The question is how VR is materializing today: How are revenues trending? Which subsectors are most opportune? How will Facebook’s ongoing investment accelerate the sector? And how will a global pandemic continue to impact VR? We tackle these questions through numbers & narratives.

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A common AR industry sentiment is that the smartphone is the device that will pave the way for smart glasses. The thought is that before AR glasses achieve consumer-friendly specs and price points, AR’s delivery system is the device we all have in our pockets. There, it can seed user demand for AR and get developers to start thinking spatially.

This thinking holds up, but a less-discussed product class could have a greater impact in priming consumer markets for AR glasses: wearables. As we examined in last year’s “audio AR” report 2 , AR glasses’ cultural barriers could be lessened by conditioning consumers to wearing sensors on their bodies.

Meanwhile, tech giants are motivated toward wearables in varied ways. Like in our ongoing “follow the money” exercise, they’re each building wearables strategies that support or future-proof their core businesses, where tens of billions in annual revenues are at stake.

No one embodies this principle more than Apple. The company continues to double down on Watch and AirPods as they offset iPhone revenue deceleration in the near term; and future-proof the company’s hardware-heavy profit machine in the long term.

In fact, Watch and AirPods could eventually converge with glasses in a holistic suite that augments reality from several angles. This could replace (or augment) the current suite of iThings. This outlook fits the profile for Apple’s signature multi-device ecosystem approach.

The story is similar with Google in that its wearables ambitions are to create an additional touchpoint for Google-delivered content (and ads). This likewise “fits the profile” as the same rationale drove Google to invest in the Android operating system many years ago.

And the list goes on: Amazon launched its Echo Frames and other wearables to create a more direct touchpoint to shoppers… and thus stimulate more frequent and bigger shopping baskets. Microsoft meanwhile has launched Office-centric earbuds to further its mission to enable enterprise productivity.

And of course, there’s Snap, with its famous Spectacles. Though the headlines have been more about the device’s commercial performance, the more important story is the device’s true mission to feel out cultural and social sensitivities for face-worn sensors. Facebook will do similar with its Project Aria, announced last month at Facebook Connect 7.

Though there are strong motivations in all of the above moves, wearables and “hearables” aren’t for everyone. The much-vaunted Bose AR platform – delivered through the flagship Bose Frames – retracted from the market (for now). What signals or warning signs should we take from this retreat?

While we’re asking questions, will wearables fulfill the above-stated goal to acclimate the world to face-worn sensors? And if so, will this pave the way for AR glasses? In this report, we embark on a data-driven narrative to answer these questions and others. The goal as always is to empower you with a spatially-smart position.

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Questions

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 here).

In covering spatial computing for five years, our sector knowledge base and perspective continue to improve. That occurs on several levels, including insight and access to insider information, all of which informs our forecast models and inputs. Further reinforcing that knowledge position, the daily rigors of editorial production at our sister publication AR Insider emboldens our market access and insights.

Beyond knowledge position and market-sizing process, the focus of these forecasts likewise continues to evolve. Our first market forecast four years ago examined AR, VR and all their revenue subsegments. Last year, we began to produce separate forecasts for AR and VR. Though they share technical underpinnings, their nuanced market dynamics deserve deeper and focused treatment.

This year, we’re doubling down on that principle once again and subdividing the focal range within AR. After publishing a forecast in July on mobile AR*, we now turn attention to Headworn AR. This includes AR glasses hardware, software, consumer spending and enterprise spending. We’ve also built market sizing and analysis around audio AR, stemming from the expanding base of in-market hearables.

So what did we find out? Our outlook continues to be best characterized as cautiously optimistic, especially when compared to several large research firms that turn attention to AR occasionally to publish eye-popping revenue estimates in the hundreds of billions of dollars. We’re still comfortably and confidently in the low single-digit billions, with outer-year projections in the low tens of billions.

The question is how it’s materializing today: How are AR revenues trending? Which subsectors are most opportune? How will Apple’s market entrance impact industry revenue. And how will a global pandemic affect AR? We tackle these questions through numbers & narratives.

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Augmented reality 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 (a.k.a. camera commerce). 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 products in their space.

In fact, immersive ad placement is a primary AR marketing subsegment, on pace to reach $2.9 billion this year according to ARtillery Intelligence’s mobile AR forecast. This puts it on pace for an estimated $6.7 billion by 2025. These figures measure spending on amplified AR lens placement in paid distribution channels such as Instagram and Snapchat.

As we’ve examined in past reports, the factors propelling this revenue growth include brand 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 high-level appeal among creative professionals, there’s a real business case. AR marketing campaigns continue to show strong performance metrics. This was the case in “normal” times and has accelerated during the Covid era when retail lockdowns compelled AR’s ability to visualize products remotely.

Proof points can be seen in the numbers, such as campaign performance metrics analyzed in past campaign summaries that we’ve published. We’re now doubling down on those narratives with a fresh round of case studies.

The goal is to explore not only the what and why of AR marketing – which is a well-worn topic by now – but the how. This takes shape in AR campaign breakdowns. What’s working and not working in these early stages while the AR advertising 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 metrics being used to track effectiveness? This will continue to be a moving target.

As a bonus, ARtillery Intelligence has created a repository of AR ad campaigns. Known as Campaign Tracker, it lives on ARtillery Pro, available for all subscribers. It includes AR ad campaigns at-a-glance and in-depth. It’s meant to supplement this report series with ongoing education around AR ad best practices. As always, the goal is to empower you with a knowledge position.

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Questions

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 in deep 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 here).

In covering spatial computing for five years, our sector knowledge base and perspective continue to improve. That occurs on several levels, including insight and access to insider information, all of which informs our forecast models and inputs. Further reinforcing that knowledge position, the daily rigors of editorial production at our sister publication AR Insider emboldens our market insights.

Beyond knowledge position and market-sizing process, the focus of these forecasts likewise continues to evolve. Our first market forecast four years ago examined AR, VR and all their revenue subsegments. Last year, we began to produce separate forecasts for AR and VR. Though they share technical underpinnings, their nuanced market dynamics deserve deeper and focused treatment.

In this forecast, we’re doubling down on that principle once again and sub-dividing the focal range. Given its leading revenue position among AR segments, and its hardware installed base, we’re zeroing in on mobile AR. This allows us to go deeper on key revenue sources like consumer, corporate & industrial, advertising and commerce. We’ll do the same later this year for head-worn AR.

So what did we find out? Our outlook continues to be best characterized as cautiously optimistic, especially when compared to several large research firms that turn attention to AR occasionally to publish eyepopping revenue estimates in the hundreds of billions of dollars. We’re still comfortably and confidently in the low tens-of-billions range for aggregate AR spend (less in many revenue sub-categories).

The burning questions: How is mobile AR pacing? Which subsectors are most opportune? And how will a global pandemic impact revenue? We answer these questions through numbers & narrative in this slide-based report. The goal, as always, is to empower you with a knowledge position.

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

Those segments include things like industrial AR, social, gaming, and shopping. But existing alongside all of them – and overlapping in a classic Venn diagram – is AR advertising. This includes immersive animations that let consumers visualize products in their space through the smartphone camera.

AR advertising is actually one of the most lucrative AR subsectors, on pace to reach $1.41 billion this year according to ARtillery Intelligence estimates, and $8.02 billion by 2024. These figures measure the money spent on sponsored AR experiences with paid distribution on networks like Facebook and Snapchat.

As we’ve examined within past reports, the factors propelling this revenue growth include brand 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 high-level appeal for creative constituents, there’s a real business case. AR is proving to have the rare ability to span the purchase funnel – from upper funnel brand awareness to lower funnel conversions and transactions. And it’s demonstrating favorable performance at all funnel stages.

Proof points for the above claims can be seen in the numbers, such as campaign performance metrics analyzed in this report. We’ll double down on that in Part II of this series with a procession of case studies and actionable takeaways for AR advertising.

But before we get to that point, who are the players? What does the value chain look like? And what are the comparative platforms for ad creation and distribution? Competitive intelligence like this is required to fully understand the AR advertising landscape and its players. We’ll do that in the coming pages.

Throughout this process, we intend to maintain a strategic angle. There’s lots of flowery language out there about AR’s potential (which we’ve admittedly done in the preceding paragraphs). But it often falls short of actionable takeaways for AR startups, ad tech players or advertisers themselves.

Put another way, we’ll methodically examine the what, why and – most importantly – how of AR advertising. All three will be examined in this first installment, while following reports will go deeper into the how. What’s working and not working in these early stages while the AR advertising playbook is still being written?

As a bonus, ARtillery Intelligence will create a dynamic tracking index for AR ad campaigns, available to PRO subscribers. This will be an at-a-glance chart that shows hundreds of AR ad campaigns, including results and other key attributes and source links. As always, the goal is to empower you with a knowledge position.