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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 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.

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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 importantly, 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 1,000 U.S. adults in 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 social, gaming and commerce-driven AR. Now, a deeper view into real consumer usage and attitudes validates those narratives while providing new dimension on mobile AR strategies and opportunity spotting.

So what did we find out? At a high level, mobile AR usage is up to 26 percent of U.S. adults. Many of these users experience mobile AR through apps, such as those built on ARkit and ARCore. But there’s faster growth for lower-friction experiences such as “AR-as-a-feature” and web AR.

Mobile AR users also appear active and engaged across the board, with just under half of users reporting that they engage 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 are growing faster. Mobile AR users also indicated high levels of satisfaction with the experience.

But beyond these and a few other positive signals, there are some 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 really get it. But there’s little drive for users to get that first taste without first seeing the benefits. 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 with traditional marketing such as ad copy or even video.

The same chicken & egg challenge was uncovered in our corresponding VR report last month . This makes it a common challenge with 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 consumers’ current standards. In the coming pages, we’ll examine those strategies and unpack the full set of survey results. This is meant to empower readers with a greater knowledge position.

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How do consumers feel about VR? Who’s using it? What devices and apps do they prefer? And what do they want to see next? Perhaps more important, what are non-users’ reasons for disinterest? And how can VR software developers and hardware players optimize product strategies accordingly?

These are key questions at VR’s early stages that we set out to answer. Working closely with Thrive Analytics, ARtillery Intelligence wrote questions to be presented to more than 1,000 U.S. adults in Thrive’s established consumer survey engine. And we’ve analyzed the results in a narrative report.

This follows similar reports we’ve completed over the last two years. Wave IV of the research now emboldens our perspective and brings new insights and trend data to light. All four waves represent a collective base of 9,079 U.S. adults for robust longitudinal analysis. This capability will continue to improve.

Meanwhile, what did we find out? At a high level, 19 percent of consumers surveyed have bought or used a VR headset, up from 16 percent in 2019. More importantly, VR users indicate high levels of satisfaction with the experience: 55 percent reported extreme or moderate satisfaction with VR.

As for price sensitivity, demand inflects at $400 and $200. These are interestingly the price points for Oculus headsets including Quest, Rift S and GO. This indicates Oculus’ competitive edge, aggressive price competition and accelerating market share, congruent with our separate projections.

Furthermore, standalone VR – embodied by Oculus Quest, Go and other emerging headsets – represents a key inflection point for VR this year. Though still early, standalone VR addresses many consumer objections to PC-based VR including cost and setup friction.

However, it’s not all good news: Non-VR users report relatively low interest in VR ownership – 27 percent, down from 31 percent in 2019 – and explicit lack of interest. This downward trend in interest is concerning for VR but isn’t surprising given the dip in excitement we’ve anecdotally observed.

Moreover, the disparity between current-user satisfaction and non-user disinterest underscores a key challenge for VR: you have to “see it to believe it.” In order to reach high satisfaction levels, VR has to first be tried. This presents marketing and logistical challenges for the industry to push that first taste.

But if anything is going to bring that accessibility and interest to mainstream markets, it’s the lowered pricing and compelling play of standalone VR headsets like Oculus Quest. The device continues to turn heads and break pricing barriers, given Oculus’ loss-leader pricing strategy to subsidize hardware in order to build a network effect.

These points join several other strategic implications that flow from the latest consumer VR sentiments. We’ll examine those takeaways in the coming pages, including the latest wave of findings, and our analysis for what it means. The goal is to empower you with a greater knowledge position.

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The consumer AR sector still lingers in early stages. Among other things, this means the playbook is being written mid-flight. There’s a great deal of experimentation underway as companies test and iterate rapidly to discover winning formulas and business models.

This goes for consumer AR product strategies. Though a common sentiment in 2016’s hype cycle was that AR applies to everything, it’s become clear that it’s not a silver bullet. It will have native and natural applicability to some aspects of our lives and work… but not all.

Beyond macro categories and use cases where AR should or shouldn’t be developed, there are more granular strategies around user experience (UX). What types of AR interactions resonate with consumers? And what best practices are being standardized for experience and interface design?

Equally important is the question of AR monetization and revenue models. Just as user experience is being refined, questions over what consumers will and won’t pay for are likewise being discovered. The same goes for brand spending in cases of sponsored AR experiences or ads.

These lingering questions compel acute attention to quantifiable AR market successes and best practices. Not only do the sector’s early stages mean that these questions are prevalent… but also that their answers are scarce. That includes evidence of successful execution, as well as transferrable lessons.

With that backdrop, ARtillery Intelligence ventures to find, aggregate and draw meaning from finite AR successes in today’s environment. When examining consumer AR engagement and revenue leaders, what product attributes and tactics are driving their performance?

This started in Part I of the report series with Snapchat. Its social lenses have the greatest consumer AR active usage, and it holds the leading share of AR ad revenue. Among other things, this is propelled by product-market fit, ease of use, distribution and fulfilling key goals for brand advertisers.

Also on the list is Pokémon Go, which we examined in Part II of the series. Though the tech press has moved on to other shiny things, 2019 marks its best revenue performance to date. This is attributed to innovation cycles that breed ongoing novelty and replayability, as well as its sparing use of AR as a game element.

After examining these proven leaders, we now turn attention in the third and final installment of this series to emerging players that show signs of potential. Though earlier and unproven, they show promise and adherence to best practices examined in parts I & II. And they show new best practices worth noting.

These upstarts include 8th Wall, Ubiquity6, and Tilt Five. They also include established brands entering AR, such as Houzz, Instagram and Pinterest. This seemingly random sample shows signs of product and business model traction, which we’ll examine in the coming pages. The goal, as always, is to triangulate best practices and extract tactics and takeaways for AR players today.

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The consumer AR sector still lingers in early stages. Among other things, this means the playbook is being written mid-flight. There’s a great deal of experimentation underway as companies test and iterate rapidly to discover winning formulas and business models.

This goes for consumer AR product strategies. Though a common sentiment in 2016’s hype cycle was that AR applies to everything, it’s become clear that it’s not a silver bullet. It will have native and natural applicability to some aspects of our lives and work… but not all.

Beyond macro-categories and use cases where AR should or shouldn’t be developed, there are more granular strategies around user experience (UX). What types of AR interactions resonate with consumers? And what best practices are being standardized for experience and interface design?

Equally important is the question of AR monetization and revenue models. Just as user experience is being refined, questions over what consumers will and won’t pay for are likewise being discovered. The same goes for brand spending behavior in cases of sponsored AR experiences or ads.

These lingering questions compel acute attention to quantifiable AR market successes and best practices. Not only does the sector’s early stages mean that these questions are prevalent… but also that their answers are scarce. That includes evidence of successful execution, as well as transferrable lessons.

With that backdrop, ARtillery Intelligence ventures to find, aggregate and draw meaning from finite AR successes in today’s environment. And by “success,” we mean large-scale consumer traction and revenue. When examining consumer AR engagement and revenue leaders, what product attributes and tactics are driving their performance?

This includes Snapchat. Its social lenses have the greatest consumer AR active usage, and it holds the leading share of AR ad revenue. Among other things, this is propelled by product-market fit, ease of use, distribution and fulfilling key goals for brand advertisers.

Also on the list is Pokémon Go. Though the tech press has moved on to other shiny things, 2019 marks its best revenue performance to date. This is attributed to innovation cycles that breed ongoing novelty and replayability, as well as its sparing use of AR as a game element.

Other consumer AR exemplars include Houzz and Instagram. Emerging AR players also show early signs of traction that’s worth examining, such as Tilt Five. Altogether, how do we triangulate best practices and extract tactics and takeaways for AR players today?

We’ll do just that in the coming pages, continuing from Part I in which we examined Snapchat. We now pick up the discussion with Niantic and its flagship, Pokémon Go. This draws from the rigor of market watching and analyst work. We’ll synthesize these findings, pursuant to the core mission of empowering you with a knowledge position.

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The consumer AR sector still lingers in early stages. Among other things, this means the playbook is being written mid-flight. There’s a great deal of experimentation underway as companies test and iterate rapidly to discover winning formulas and business models.

This goes for consumer AR product strategies. Though a common sentiment in 2016’s hype cycle was that AR applies to everything, it’s become clear that it’s not a silver bullet. It will have native and natural applicability to some aspects of our lives and work… but not all.

Beyond macro categories and use cases where AR should or shouldn’t be developed, there are more granular strategies around user experience (UX). What types of AR interactions resonate with consumers? And what best practices are being standardized for experience design and interface?

Equally important is the question of AR monetization and revenue models. Just as user experience is being refined, questions over what consumers will and won’t pay for are likewise being discovered. The same goes for brand spending behavior in cases of sponsored AR experiences or ads.

These lingering questions compel acute attention to quantifiable AR market successes and best practices. Not only does the sector’s early stages mean that these questions are prevalent… but also that their answers are scarce. That includes evidence of successful execution and transferrable lessons.

With that backdrop, ARtillery Intelligence ventures to find, aggregate and draw meaning from finite AR successes in today’s environment. And by “success,” we mean large-scale consumer traction and revenue. When examining consumer AR engagement and revenue leaders, what product attributes and tactics are driving their performance?

This includes Snapchat. Its social lenses have the greatest consumer AR active usage, and it holds the leading share of AR ad revenue. Among other things, this is propelled by product-market fit, ease of use, distribution and fulfilling key goals for brand advertisers.

Also on the list is Pokémon Go. Though the tech press has moved on to other shiny things, 2019 marks its best revenue performance to date. This is attributed to innovation cycles that breed ongoing novelty and replayability, as well as its sparing use of AR as a game element.

Other consumer AR exemplars include Houzz and Instagram. Emerging AR players also show early signs of traction that’s worth examining, such as Tilt Five. Altogether, how do we triangulate best practices and extract tactics and takeaways for AR players today?

We’ll do just that in the coming pages, starting with Snapchat. This draws from the rigor of market watching and analyst work – including daily editorial coverage of our sister publication, AR Insider. We’ll synthesize all of these things, pursuant to the core mission of empowering you with a knowledge position.

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They say that patience is a virtue. This applies to the current state of the spatial computing industry. After passing through the boom and bust cycle of 2016 and 2017, the last two years were more about measured optimism in the face of industry shakeout.

At the precipice of 2020, that leaves the question of where we are now? Optimism is still present but AR and VR players continue to be tested as high-flying prospects like ODG, Meta and Daqri dissolve. These events are resetting expectations on revenue outcomes.

But more than the ‘how much?” is a question of “when?” Market timing is quickly becoming a prominent factor to determine success of spatial computing players. This is a common factor in tech cycles historically. Spatial computing will be no different.

Speaking of history, spatial computing follows a pattern similar to the early 2000’s eCommerce bubble. Exuberance is followed by market correction, followed by slow progression that eventually meets and exceeds early projections… but not until years later.

The good news is that this slow uphill progression has already started, and we believe the worst is behind us. Though the broader tech and media worlds have shrugged off AR and VR as fads that died in 2017, Industry subsectors are signaling growth by quietly gaining traction and revenue.

This includes AR-based advertising. ARtillery Intelligence projects it to grow from $453 million last year to $8.8 billion by 2023. This outlook follows the momentum of advertiser adoption, as well as the continued investment of tech leaders like Facebook and Snap.

There’s also a robust support industry germinating, including “building blocks” which are endemic to this period of any tech sector. Represented by tools such as Unity, Adobe Aero, and 8th Wall, AR-as-a-Service (ARaas) will be a major AR revenue category.

AR’s health also hinges on the outcome of Apple’s rumored AR glasses. Apple has a track record of mainstreaming emerging tech, and the AR industry is hoping for that halo effect. But based on signals we track, this will come a few years past the rumored 2020 launch.

Meanwhile, adjacent sectors will accelerate AR adoption and development. The broader wearables segment is growing rapidly, and will benefit AR by acclimating consumers to wearing tech on their bodies. 5G, self-driving cars and other areas will likewise feed into AR.

There are also lots of positive signals for market growth in VR. Facebook/Oculus continues to invest in hardware subsidies and loss-leader pricing to jumpstart a network effect. The result of this investment is high quality and consumer-friendly price points for Oculus Go and Quest.

What do all of these signals collectively tell us? And where do they point for 2020 outcomes? We’ll unpack the full list of market factors and 2019 lessons in this report, pursuant to illuminating likely paths for spatial computing in 2020. A robust ecosystem is (slowly) building.

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The virtual reality sector continues to show early-stage characteristics, including erratic levels of interest and investment. But how big is it, and how big will it get? ARtillery Intelligence has quantified the sector’s revenue position and outlook, resulting in our latest forecast. This is the fourth wave of ARtillery Intelligence’s VR revenue forecast.

Built from daily market coverage, insider interviews and market-sizing experience from 15 years of analyst work (see methodology section), ARtillery Intelligence has constructed disciplined and independent market-sizing models. The analysis is segmented into revenue categories such as consumer, enterprise and sub-divisions of each.

So what did we find out? At a high level, ARtillery Intelligence’s position on VR revenue growth is best characterized as cautiously optimistic. Growth and scale will come, but likely slower than many industry proponents believe, due partly to the pace of adoption and other signals that ARtillery Intelligence tracks.

In fact, you may notice that VR revenue projections in outer years are lower than other firms’ figures. They’re also notably lower than our past estimates, as we adjust to market signals. This is common in market forecasting, as proficient market watchers perpetually course-correct based on dynamic market conditions and variables.

The following pages quantify and project figures within several revenue categories, as well as hardware unit growth. Bulleted insights are included throughout to qualify the revenue drivers and rationale behind the numbers. And further narrative insights can be found in ARtillery Intelligence’s monthly reports, which can be accessed in the PRO library.

The goal, as always, is to empower you with a knowledge position.

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AR’s early stages are defined by lots of experimentation to see what works natively in this new medium. That goes for product design as well as business models. What do consumers want and how much are they willing to pay for it? These questions continue to be a moving target.

Questions are also being answered by AR pioneers like Snap and Niantic, who are operating at scale. And by “scale” we mean occasionally Superbowl-sized audiences, and revenue to go with it. But the key word is occasional, as these AR exemplars are the exception rather than the rule.

But there are still valuable lessons to gain from these leading indicators. Though the AR sector will twist around and take shape over the next few years (as historically seen in tech), there are early lessons to learn in what product and business models are working so far.

Some of these signals are already evident in ARtillery Intelligence’s consumer survey with Thrive Analytics. There, we see lots of explicit sentiments from consumers about how they’re using AR, how that’s changing (over three waves of existing research) and what they want to see next.

Takeaways from that survey include the continued popularity of AR gaming (Pokémon Go) and social experiences (AR lenses). But there’s also growing interest in emerging forms of AR such as visual search (Google Lens), navigation (Google Live View) and in-store retail commerce.

But what are the business models that are developing around this evolving consumer behavior? Though varied, we’ve begun to segment these models into three main categories (and several sub-categories). They include AR advertising, in-app purchases and AR-as-a-service.

The first two are fairly well known, though they’re developing in nuanced ways examined in this report. But the third category is a less-discussed revenue category where brands, retailers and app developers pay for tools to build AR experiences for their customers.

This carves out a new category we’re calling B2B2C, which includes software such as Unity, Amazon Sumerian, Adobe Aero and other tools to create AR experiences. Though enterprises are buying and deploying the technology, the AR experiences end up in consumers’ hands.

Adding up all three categories mentioned above and examined in this report, it’s a $1.44 billion market, growing to $20.3 billion by 2023. The common thread is AR technologies where the end users are consumers on mobile devices as opposed to industrial enterprises and/or headworn AR experiences.

The following pages examine each of these revenue categories and how they’re evolving. What are their business models, best practices and strategic takeaways? The goal, as always with ARtillery Intelligence Briefings, is to empower you with a knowledge position.