Intelligence Briefings Archives - Page 8 of 9

January 7, 2019June 11, 2022

One of the biggest questions nagging the Augmented Reality (AR) sector is, what will be its killer app? And when will it arrive? The medium needs such an accelerant to legitimize and bring AR into mainstream acceptance – something it’s failed to do in the 18-months since Apple’s ARkit launch.

We’ve speculated in past Intelligence Briefings that killer apps will likely extend beyond the novel and “sexy” attributes that have thus far driven the industry’s speculation, imagination and design principles (e.g. games). It will rather be something more mundane that provides all-day utility, like visual search.

But another category will also vie for the position of AR killer app: social. Indeed, you could argue that a social AR killer app has already arrived and accelerated mass acceptance: social lenses. We see these as an important AR “gateway drug,” but only a glimpse into social AR’s true potential.

One thing missing from social AR lenses – though quite popular through Snapchat and Facebook – is meaningful social interaction. More “augmented media” than augmented reality, they’re created in isolation then shared with friends to be consumed asynchronously at a different time or place.

But true social AR will combine this time/place-shifted paradigm – which will still be valuable to achieve scale — with synchronous AR. This will rely on technically complex multi-player functionality, a key tenet of the AR cloud. But when it arrives, it will unlock new possibilities and use cases.

Moreover, the multi-player use case inherently accelerates usage and adoption through viral growth. It also has the potential to benefit from the fundamentals of network effect. With each node (user) added to shared AR experiences, the value and appeal of those experiences can grow exponentially.

Beyond the multiplayer angle, augmentation is generally a natural fit for social interaction. Extending from social lenses (face filters, etc.), next-generation graphical overlays will include real-time layers of information that people choose to share with others through live AR overlays as they walk around.

These shared titbits could be everything from mood to relationship status to stylistic accouterments. The latter opens the door for business models around the exchange of virtual style items. This builds on the concept of marketplaces for digital identity, manifesting today in communities like Fortnight.

Speaking of which, one construct for socially-oriented AR is – as Ubiquity 6 CEO Anjney Midha puts it – “an MMO for the real world.” This envisions layers of virtual worlds all around us which can be dynamically activated by users through AR interfaces, while managed and permissioned by creators.

But questions remain. Who will build this? What will the ecosystem consist of? Will there be open platforms for developers to create shared spatial experiences? We’ll tackle these questions in this three-part report (totaling 85 pages), including narrative analysis, original data, exclusive company interviews, and case studies.

AR Commerce: Monetization Comes Into View

December 10, 2018June 11, 2022

There are several forms of monetization that will develop for augmented reality (AR). In past reports, we’ve examined opportunities for its role in advertising (consumer-facing) and industrial productivity (enterprise-facing). The ROI case continues to strengthen in these and other AR applications.

One particularly promising area of AR will be its role in influencing and fulfilling consumer purchases. Extending from (but different than) AR advertising, AR commerce involves graphical overlays that inform consumers and demonstrate product attributes in physical retail or e-commerce contexts.

For example, AR-pioneering retailers like Walmart let consumers activate product details in store aisles by pointing their smartphones at those items. Employing computer vision and object recognition from product databases, this empowers shoppers and breeds customer loyalty.

Tech giants like Google and Amazon have done similar. By pointing your phone at items in the real world, informational overlays can be triggered to contextualize items. Moreover, transactional calls to action are included to capture consumers’ wallets during these high-intent “visual-searches.”

This makes AR commerce a key part of the future of these tech giants’ user experiences – mapping closely to their core businesses in areas like search and e-commerce. It therefore holds a great deal of priority and investment – both of which will accelerate this sub-sector of AR in the near term.

Beyond visual search (pointing your phone at items to contextualize or buy), AR commerce can work in the reverse manner. In other words, “product visualization” is a key AR commerce modality in which consumers can digitally place 3D product mockups in their surroundings to see how/if they fit.

As you can imagine, this use case maps particularly well to home goods, or large and bulky items that require a more informed purchase in terms of fit and style. For that reason, furniture players like Wayfair and IKEA have invested in such AR features, as have auto manufacturers like BMW.

Add all of these factors together and AR commerce will be one of the most tangible and revenue-generating “flavors” of AR that develop in the near term. ARtillery Intelligence projects that $6.1 billion in annual transaction value (value of goods purchased) will flow through AR interfaces by 2022.

Beyond near-term benefits and monetization, mobile AR commerce developments will also serve a longer-term end: AR glasses. The tactics, business models and consumer acclimation that happen around smartphones will seed next decade’s glasses-based AR commerce – the real endgame.

XR 2018 Lessons, 2019 Outlook

November 12, 2018June 11, 2022

2018 was a reflective year for XR. After an exuberant 2016, followed by a corrective 2017, XR industries settled into a moderate pace. This includes reset expectations on the size and timing of AR & VR markets, as well as an overall acceptance that 2016’s aspirations will take longer to materialize.

But we saw deep-pocketed tech giants charge ahead with XR. With strong contention that XR represents the next computing shift, they’re investing in the future of their platforms by gaining early market share and technological edge. And they’re each attacking XR from different angles.

Apple is investing in AR to fertilize the ground for the future of its hardware business: AR glasses. Google is cultivating visual search, a close cousin of AR, as a future search modality. Amazon is embracing AR to boost e-commerce, and Facebook is spending billions to position a VR powerhouse.

Despite XR market softness, it was these moves from tech giants that provided confidence in 2018 for the eventual market arrival. Indeed, there’s no bigger vote of confidence in a technology and a market than billions of dollars in long-term bets. We believe this will continue into 2019.

One of those key investments will be Facebook’s continued subsidization of VR headsets, through aggressive price competition. It’s executing a classic loss-leader approach to gain early market share and build up the installed base of Oculus headsets. This is already accelerating consumer adoption.

We also learned important lessons in 2018 about AR adoption and behavior. Mobile AR, despite its potential scale, is gated by consumer AR interest and app quality. And these factors need more time in the oven. The half-baked quality of many ARkit apps hasn’t sold the masses on AR just yet.

But though the scale is relatively low, mobile AR users are showing strong engagement in terms of frequency of use and other behavior. In formats where engagement is measured heavily, such as AR ads (branded AR lenses), performance indicators and advertiser ROI are already quite strong.

Meanwhile, there were wild cards played in 2018. Magic Leap One finally launched, coupled with even more ambitious promises. Apple’s acquisition spree and patent filings point to its AR glasses in the 2021 timeframe. And the AR Cloud’s importance emerged into the collective consciousness.

So the question is, where are we now with these and other XR sub-sectors? And what can we expect in 2019? Drawing from ARtillery Intelligence’s deep XR coverage, we ventured to answer these questions. We’ll look back at 2018 to extract measurable lessons, and predict XR’s directions in 2019.

2018 XR Global Revenue Forecast, Fall Edition

September 4, 2018June 11, 2022

There’s been volatile interest and investment in AR & VR over the past 24 months. But how big are these sectors, and how big will they get? ARtillery Intelligence has quantified the revenue opportunity in several AR & VR product areas. The result is our latest XR revenue forecast.

Applying market sizing and forecast experience from 15 years of analyst work (see methodology section), ARtillery Intelligence has devised a disciplined and independent revenue forecast for XR, segmented into sectors like AR, VR and enterprise and consumer sub-divisions of each.

The following pages provide market revenue projections within each product category, and bulleted insights all along the way. This is meant to qualify the revenue drivers and rationale behind the numbers. And we’ll go deeper on specific data segments in future monthly reports.

Lastly, to characterize ARtillery Intelligence’s overall position on XR revenue growth, we maintain a cautiously optimistic view. Growth and scale will come but slower than previous industry excitement and rhetoric indicated, due partly to the pace of adoption and other signals we track.

AR Business Models: The Top of the Food Chain, Parts I & II

August 6, 2018June 11, 2022

One of the factors that gives us confidence in the future of AR and VR (collectively XR) is the amount of investment being made by influential tech giants. That includes most of the major platforms and more notably, tech’s “four horsemen.” This group consists of Apple, Google, Facebook and Amazon.

But an important question is “why?” What are their motivations? The answer is different for each of these players, but one theme persists: They’re each motivated to protect or grow core businesses. And they’re finding ways that XR – especially AR in the near term – accomplishes that goal.

For example, Google has a vested interest AR-based visual search to boost monetizable search query volume. Facebook wants to keep us in its walled garden through visually-immersive content sharing like AR camera effects. It also sees VR as a prominent future modality for social interaction.

Similarly, Apple wants to make iPhones — where it makes most of its money — more attractive through AR apps and features. And Amazon has AR features that let shoppers visualize products in-home to boost e-commerce and reduce returns. It’s all about more informed purchases through AR.

Why is all of this important? Answering the question of “why” can inform the “what” and “how,” which have implications for the rest of us. Knowing where these players are headed and what their motivations are can help XR startups and investors align their strategies and product road maps.

With those strategic implications in mind, we set out to analyze and unpack the XR moves of tech’s biggest players. In addition to those mentioned above, we’ll cover key influencers such as Snap, Niantic and Microsoft. The end goal is a clearer picture of the top of XR’s food chain.

In order to maintain focus, the scope of this report is primarily AR, and within consumer contexts. VR’s has a different place on the immersive computing spectrum and a longer-term horizon to consumer scale. Still, we’ll touch upon VR as it relates to tech giant investments and implications.

The following pages will examine these tech leaders’ XR ambitions and actions, one by one. For each, we’ll look at what they’ve done recently and where they’re pointing next. More importantly, what does it mean for you, and what clues does it provide for XR opportunity spotting?

The Camera is the New Search Box: Ads in AR

One of the many areas projected to be transformed by immersive computing is advertising. The visually-immersive nature of technologies like AR and VR can offer advertisers new ways to spotlight products, and to engage prospective customers in deeper ways than two-dimensional media.

For example, advertisers can create AR campaigns that let consumers visually infuse products in the world around them, as captured through their smartphone’s camera. Several brands like Nike, Home Depot and Michael Kors are already experimenting with – and learning from – such campaigns.

Beyond graphical AR overlays, advertisers will soon be able to participate in a related area: visual search. A close cousin of AR, this is represented by tools like Google Lens, which let users point their smartphone cameras at objects around them to contextualize (or purchase) those items.

Altogether, AR ad formats are beginning to map to existing 2D ad formats that advertisers have been using for years. For example, branded graphical AR overlays are analogous to display advertising, while visual search can carry similar dynamics and user intent as search advertising.

But the opportunity is to go much deeper than these legacy formats in both creative capacity and effectiveness. Indeed, brands that have experimented with AR-based promotion already see favorable engagement and conversion metrics, such as 11x increases in product purchases.

The opportunity is further fueled by vested interest of tech giants. Tech’s “four horsemen” – Google, Apple, Facebook and Amazon – are especially keen on AR. Those specifically built on ad revenue (Google and Facebook), will fight to ensure positioning in advertising’s next visually-immersive era.

Resulting competition will accelerate innovation, investment and market timing for AR advertising in general. Indeed, one point of confidence ARtillery Intelligence holds for AR’s overall revenue generation and opportunity is the level of motivation behind these tech giants to make it happen.

But it won’t be without challenges and question marks. Though all of the above stands to reason and quantitative analysis, one wild card is advertiser adoption. They’re a famously laggard constituency of the tech ecosystem, and the survey data we examine in this report indicates their AR uncertainty.

There are also practical hurdles. Though mobile AR’s addressable market is 762 million smartphones at the time of this writing, the actual market is a subset of that. Active AR users are relatively few, and session lengths are small, due to factors like arm strain, which diminish ad inventory.

All of these variables converge to drive $2.6 billion in AR ad revenues by 2022. But how will this materialize? What campaign tactics work? And what does it mean for developers, media companies and anyone vetting AR. This report answers such questions and dissects the AR ad opportunity.

July 9, 2018May 13, 2024

VR Usage and Consumer Attitudes, Wave 1

June 11, 2018June 11, 2022

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 1,900 U.S. adults in Thrive’s established consumer survey engine. And we’ve analyzed the results in a narrative report.

This follows last August’s ARtillery Intelligence Briefing, which examined the same survey questions. Wave II of the research now emboldens our understanding and brings new insights and trend data to light. There are also notable parallels in these results to our sister report on AR, published in April.

So what did we find out? At a high level, eleven percent of consumers surveyed have bought or used a VR headset, up from eight percent in 2017. More importantly, VR users indicate high levels of satisfaction with the experience: 65 percent of respondents report moderate or extreme satisfaction.

However, it’s not all good news: Non-VR users report relatively low likelihood of VR adoption – 31 percent, down from 41 percent in 2017 – 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.

Put another way, VR’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 challenge was evident in our corresponding AR report, but mobile AR’s barriers to adoption are lower. This is nonetheless a common challenge for immersive technologies. It will take time, acclimation and price reductions before they reach a more meaningful share of the consumer public.

Meanwhile, there are strategies to accelerate that process, and to market VR more effectively. We’ll examine those strategies in the coming pages, through the lens of consumers’ explicit sentiments, actions and desires. This is meant to empower readers with a greater knowledge position.

2018 XR Global Revenue Forecast, Spring Edition

Many AR and VR (a.k.a. XR) stakeholders claim that their market sizes will be massive. But how big are they, and how big will they realistically get? ARtillery Intelligence has quantified these sectors and all their moving parts in precise terms. The result is our latest XR revenue forecast.

Applying market sizing and forecast experience from 15 years of analyst work (see methodology section), ARtillery Intelligence has devised a disciplined and independent revenue forecast for AR & VR, segmented into their product areas. That includes sub-sectors like enterprise AR & VR.

The following pages provide market revenue projections, subdivisions of each product category, and bulleted insights all along the way. This is meant to qualify the revenue drivers and rationale behind the numbers. And we’ll go deeper on specific data segments in future monthly reports.

Lastly, to characterize ARtillery Intelligence’s overall position on XR revenue growth, we maintain a cautiously-optimistic view. Growth and scale will come but likely slower than some industry proponents believe, due partly to the pace of adoption and other signals ARtillry tracks.

May 1, 2018June 11, 2022

AR Cloud and the ‘Internet of Places’

April 5, 2018May 13, 2024

Among several areas where AR will apply, one of the most exciting and potentially lucrative is local commerce. This includes consumer spending that’s consummated offline, and usually in proximity to one’s home. AR will join the tools that help us discover products and qualify buying decisions.

As background, it’s often overlooked that most consumer spending happens offline in the physical world. Despite the attention to e-commerce over the past decade, it only accounts for eight percent of consumer spending. The remainder – about $3.7 trillion in U.S. spending – is brick & mortar.

But that’s not to downplay digital technologies. Online media – including desktop and mobile – have a big influence on that offline spending, to the tune of about $1.7 trillion in U.S. consumer spending. This is known in the search and advertising worlds as “online-to-offline (O2O) commerce.”

This is where AR could have an impact. Just think: is there any better technology to accelerate O2O commerce than one that literally melds physical and digital worlds? Indeed, AR can shorten gaps in time and space that currently separate digital interactions (e.g. search) from physical-world outcomes.

This will play out in several ways, including informational overlays that add context and commerce to items you point your phone at. It’s everything from restaurants, to shoes you see worn on the street. Not only does it offer consumer utility but it taps into high buying intent, which leads to monetization.

But before we get too utopian and carried away in blue-sky visions – as is often done in XR industry rhetoric, trade shows and YouTube clips – it’s important to acknowledge realistic challenges. There are several interlocking pieces required, including hardware, software and the AR Cloud.

Coined by Super Ventures’ Ori Inbar, the AR cloud underpins the AR future many of us discuss. In short, it’s a cloud repository of geo-relevant data and object blueprints that will empower far-flung AR devices with contextual and situational awareness. It’s the active ingredient in an “internet of places.”

But how will the AR cloud be built? Who will own it? How will information be indexed and accessed? And how will AR devices translate that data into AR magic on the front end? These are key questions that will define the next era of mobile AR. And they’re the questions we begin to tackle in this report.

Mobile AR Usage and Consumer Attitudes, Wave 1