AR and VR in 2017: The Year Ahead – Part I

Augmented Reality (AR) and Virtual Reality (VR) made significant strides in 2016, with some surprises, fundamentally re-shaping how the market is likely to grow going forward. The lines between the digital and physical world continue to blur in 2017, creating fertile ground for new business models and digitally enabled ecosystems and creating new opportunities for brands and businesses.

 

Immersive experiences with AR and VR are reaching tipping points in terms of price and capability. We expect to see businesses over the next year embrace AR and VR technology in targeted applications across diverse sectors from retail, consumer products and packaging to healthcare and entertainment. We’ll also see more consumers ready to engage with AR and VR via their smartphone if it provides real value exchange and entertainment. In Part I of our projections for the year ahead, we examine two key category projections helping to drive these shifts in consumer and business behaviour – AR becoming the key differentiating feature in smartphones and a rush by brands and businesses to create branded VR content. In Part II we’ll take a closer look at the targeted applications that will see success in this evolving landscape.

AR Becomes The Killer App for Smartphones…

The surprise success last year of augmented reality (AR)-based game Pokémon Go has opened up brands to the potential of AR technology. Although certainly not exemplary, Pokémon Go is a preliminary view into the potential of mobile AR. The game’s success helped highlight that it’s mobile AR and not wearables, that is helping AR go mainstream.

In response to Pokémon Go, Apple’s Tim Cook said that Apple is “a big idea like the smartphone” and Apple has certainly been acquisitive of AR ecosystem players over the past couple of years, snapping up Metaio, FaceShift, Emotient and Flyby Media and poaching employees from Imagination Technologies (likely to develop graphics processing unit chips for its AR ambitions). There have been consistent rumours suggesting the next iPhone will incorporate AR capabilities.

 

 

Google’s Sundar Pichai, Facebook’s Zuckerberg and Microsoft’s Satya Nadella also claimed Pokémon Go as a major early win for AR. The first step to true mobile AR was taken when Google launched its Tango AR phone with Lenovo. Late last year Microsoft also announced it is making a big push into AR and VR with the Windows 10 Creator’s Update, expected in Spring 2017. The update will bring tools for AR/MR and VR creation natively to Windows 10 with greater integration with the HoloLens headset.

Additional hardware like a depth-sensing camera will be required to create smartphones that include true, hardware-based AR, but it’s a signpost of the direction the tech could take.  In the near future many manufacturers are likely to continue to integrate AR into handsets to revitalize innovation and growth in the slowing smartphone market. Expect to see AR as the next big feature that sells smartphones!

Brand VR Content Creation Gains Momentum

In an era of ever-increasing media fragmentation and surging ad blocking, impactful, emotional-driven storytelling will be vital for brands and businesses seeking cut-through. Virtual reality is all about immersive storytelling and 2017 will be a pivotal year in the development of VR content. We expect VR and VR content creation to continue to gain substantial momentum in 2017 with large scale investment evident across the board and market growth predicted at a CAGR of 128% from 2016 to 2020.

 

Facebook alone has invested over $250 million in the creation of VR content and last year we saw Google work on a VR version of Chrome and businesses like 21st Century Fox, WayFair and Walt Disney Company place big bets on VR with significant investments. In a similar way to how companies quickly met the demand for mobile with mobile app development and content, mainstream brands across all major sectors, will also speed up to meet the needs of a content-hungry world with VR.

Brands will need to think differently about how they create VR content. Those brands that succeed at connecting with consumers with VR will do so by assessing how they can give customers a great experience and move the business forward rather than trying to work VR into an existing campaign. Brands from retail, consumer products and automotive to healthcare and entertainment are already making moves to harness this emerging category with extensive examples in the branded VR entertainment space.

More Accessible and Easier Content Discovery

Finally, the proliferation of more affordable, accessible mobile VR viewing devices, will continue to occur (eg Google Cardboard, Homido, etc.) helping to drive regular, programmatic consumption of all this new VR content. Content discovery will also evolve and improve – from users needing to download several different apps within their VR gear to see virtual reality content to users accessing native VR content that appears as playlists within a publishing context. Social VR apps such as YouTube VR will be also be important for increasing VR’s awareness and reach.

 

But wait, there’s more! Stay tuned to read Part II of our conversation about AR and VR and the kinds of targeted applications we’re likely to see in the coming year.