Pro Details

Pro Login

Questions

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.

Pro Details

Pro Login

Questions

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?

Pro Details

Pro Login

Questions

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.

Pro Details

Pro Login

Questions

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.

Pro Details

Pro Login

Questions

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.

Pro Details

Pro Login

Questions

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.

Pro Details

Pro Login

Questions

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 2000 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 last month’s ARtillery Intelligence Briefing, which examined mobile AR app strategies and business models. Now, a deeper view into real consumer usage and attitudes validates those findings, while providing new dimension on mobile AR strategy development and opportunity spotting.

As for the findings, one third of consumers surveyed have used a mobile AR app. And those consumers appear active and engaged, with more than half reporting that they use mobile AR apps at least weekly. The top app category by far is gaming, which we attribute to Pokémon Go’s popularity.

Mobile AR users are also engaged, with 73 percent reporting satisfaction or high satisfaction. 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 soon, and an explicit lack of interest.

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

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 challenge was uncovered in our corresponding VR report last August (we’ll publish the second wave in Q3). This makes it a common challenge with immersive media like AR and VR. It will take time and cost reductions before they reach a more meaningful share of the consumer public.

Meanwhile, there are strategies to accelerate that process, and to build AR apps that are compelling to consumers’ current standards. In the coming pages, we’ll examine those strategies and unpack the rest of the survey findings. This is meant to empower readers with a greater knowledge position.

Pro Details

Pro Login

Questions

Augmented Reality (AR) comes in various forms, such as smartphones and smart glasses. Those are further segmented into consumer and enterprise uses. But the point along that spectrum that’s gained the most traction is consumer-geared mobile AR, utilizing the smartphones we all carry.

Apple’s ARkit and Google’s ARCore have democratized mobile AR with app-building tools, while Pokémon Go and Snapchat put it on the map with mainstream-friendly AR features. Though these apps aren’t “true AR,” it doesn’t matter: they’ve done AR a favor by supplying its gateway drug.

These early AR apps have also done the industry a favor by beginning to validate product and revenue models. What AR features do consumers want to use? And what will they pay for? Pokémon Go and Snapchat have already begun to answer these and other strategic questions.

Pokémon Go for example drove almost $1 billion in revenue in the second half of 2016 alone. It did this through in-app purchases and brand-collaborations to drive local offline commerce. These are a just a few of many potential business models that will develop and drive mobile AR revenues.

Meanwhile, giants like Amazon, IKEA and BMW are pursuing AR strategies and likewise teaching us important lessons. For example, should AR live within standalone apps or be incubated as a feature within already-established apps? And what should AR features be called to attract mainstream users?

In terms of market size, ARtillery Intelligence projects consumer AR revenues to grow from $975 million in 2016 to $14.02 billion in 2021. Until 2021, most of that revenue will come from mobile AR apps, as smart glasses aren’t yet viable for consumer markets due to cost and style.

But how will this revenue materialize and what product and revenue models will be best positioned? In addition to industry giants and early movers mentioned above, the ecosystem contains developers, startups, media companies and brands. How will they deliver content and build value with mobile AR?

The best way to answer these questions is to examine today’s best practices, historical lessons and market trajectory. This report sets out to do that by surveying the landscape, and uncovering product and revenue strategies for anyone interested in tapping the mobile AR opportunity.

Pro Details

Pro Login

Questions

The past year was volatile for XR. After an exuberant 2016, the sector’s temperature cooled when consumer hardware penetration – a key leading indicator of industry health – fell short of expectations. So attention shifted to areas of nearer-term scale: mobile and enterprise.

For enterprise (mobile is covered in a separate report) , its nearer-term opportunity is due to a greater addressable market. There are more receptive buyers in enterprise environments, due to measurable time and efficiency gains in AR-assisted job roles. This creates a clear ROI narrative.

To quantify, companies like Intel and Coca-Cola demonstrate 15-45 percent efficiency gains today. This includes time saved in assembly, sorting and maintenance functions. Given that enterprise process management generally strives for single-digit efficiency gains, this XR impact is notable.

And unlike consumer markets, where mobile devices are the near-term play, head-worn XR devices are already penetrating the enterprise. This is due to one big variable: style. AR glasses don’t yet pass consumer markets’ stylistic requirements, but that’s not an issue in the enterprise.

For all of these reasons, ARtillery Intelligence projects enterprise XR to grow from $554 million in 2016 to $39 billion by 2021, with an inflection point in 2019. Near-term revenue will be hardware- dominant as an installed base paves the way for recurring software revenue in later years.

Most of that revenue will be from AR versus VR. Though VR’s place in the enterprise will be valuable and transformative, AR’s market opportunity is larger. This is due to its breadth of applicability across enterprise functions, and pass-through vision that enables more versatility.

But despite all of these positive dynamics and fertile ground for enterprise XR, there will be challenges. As with any organizational technology adoption, there is red tape, inertia, sales cycles and the complications of system integration. As the saying goes, anything worthwhile isn’t easy.

So how will this all play out? What are enterprise XR’s benefits and proof points? What are enterprises saying and doing to indicate areas of opportunity? Who’s exhibiting best practices? And what are the biggest lessons so far? This report sets out to answer these burning questions.

Pro Details

Pro Login

Questions

2017 was quite a year for XR. As is often the case with emerging technology, XR’s early days have included a fair amount of exuberance. 2017 kicked off as such, continuing from 2016. But excitement levels began to recede mid-year as several market signals emerged.

Among those signals, we saw the beginnings of a funding crunch as several companies failed to secure follow-on investing rounds. We saw TechCrunch pronounce (falsely we believe) that VR is dead. Many of these activities stemmed from disappointing consumer VR adoption.

This realization caused the XR world in 2017 to shift attention from high-end VR to mobile AR, given its large installed base. Apple’s June ARkit unveiling amplified excitement levels, which then weakened as the platform’s September release was met with tepid consumer response.

So the question is: Where are we now with XR, and what can we expect in 2018? Drawing from ARtillry’s XR coverage and market sizing over the past two years, we have ventured to answer this question. In short, excitement levels haven’t been misplaced… but some have been mis-timed.

As a historical comparison, e-commerce was prematurely heralded in the early 2000’s dot-com bubble (which Artillry analysts lived through). The market sizing and exuberance at the time wasn’t overblown: In fact it underestimated eventual revenues. It was just early, by about five years.

ARtillery Intelligence believes that has parallels – though a different timeline – to where we now sit with XR. Massive opportunity exists but expectations should be adjusted about its timing. This realization can inform go-to-market strategies and operational execution for XR players.

But how and when will it all come together? What are the top factors and trends to examine? What are key drivers for interlocking pieces in the XR universe (AR, VR and enterprise and consumer segments of each)? And what does it all mean for where you sit?

We took a look back at 2017 to extract measurable lessons, and predict XR’s direction in 2018. It’s all about zeroing in on the pockets of greatest opportunity, and — as always — timing. Spoiler alert: there will be real revenue and value creation in 2018, but they’ll require strategic precision.