AR/VR’s $80 billion-plus market might cut up earlier than it consolidates

Some within the AR/VR trade see it converging right into a singularity of spatial computing in a single magical gadget, however cell AR, smartglasses and VR might truly diverge within the medium-term (no less than commercially).
AR (cell AR, smartglasses) is forecast to high 2.5 billion put in base and $70 billion to $75 billion income by 2023 (notice: put in base is completely different to lively customers). VR (cell, standalone, console, PC) might hit over 30 million put in base and $10 billion to $15 billion income in the identical timeframe. This divergence is pushed by put in bases, type components, costs, use circumstances, enterprise fashions, and unit economics – so why are they so completely different?
Above: Digi-Capital AR-VR Income 2023
Sources: Digi-Capital AR/VR Analytics Platform and Augmented/Digital Actuality Report (notice: free chart doesn’t embrace numbers, axes and knowledge from subscriber model, with underlying knowledge sourced straight from firms and dependable secondary sources. Methodology is mentioned within the report.)
Cell AR is the mass client market
Cell AR seems just like the medium-term mass-market for AR/VR, with over 850 million put in base on the finish of final 12 months, and a Digi-Capital forecast over 2.5 billion by 2023 (ARKit, ARCore, Fb Spark AR, Snapchat Lens Studio, internet AR and so forth.). Being a free software program platform on ubiquitous smartphones has pure benefits. (Word: cell AR put in base is appropriate/configured gadgets, not lively customers — a decrease quantity.)
The problem for cell AR is vital use circumstances, to remodel consumer expertise in a method that customers care about and that couldn’t be executed every other method. Pokémon Go, messaging filters and Google Maps are a begin, however further vital use circumstances are wanted.
Ecommerce gross sales and adspend might turn out to be main long-term cell AR enterprise fashions, as they’ve in cell extra broadly. Cell AR/laptop imaginative and prescient in ecommerce/retail has already delivered for Houzz (11 instances gross sales uplift), Olay Pores and skin Advisor (5 million prospects, double conversion, 30% greater basket sizes, greatest product launch in 10 years with Olay Whips) and Walmart. For adspend, this 12 months’s F8 keynote showcased how Fb’s adspend funded messaging platforms are leveraging Spark AR — equally Snap, Tencent.
Cell AR app retailer income from each in-app purchases and premium apps might stay a significant driver long-term. Though dominated by video games like Pokémon Go right this moment, Digi-Capital forecasts non-games apps within the 20-plus different app classes taking up half of cell AR app retailer income by 2023. Enterprise cell AR software program/providers is also a part of the long-term combine.
Smartglasses a medium-term hardware/enterprise play
Smartglasses have largely been enterprise centered, with short-term put in bases within the tens of hundreds (e.g. Vuzix, Google Glass Enterprise Version) to a whole bunch of hundreds (Microsoft HoloLens 2 with its 100,000 unit US Military contract). Digi-Capital forecasts enterprise smartglasses scaling to thousands and thousands of customers by 2023, pushed by Microsoft, Google and a variety of startups. Magic Leap is creator/developer and enterprise centered right this moment, with its client play a medium-term prospect.
Digi-Capital first forecast Apple launching smartphone-tethered smartglasses in late 2020 over three years in the past, however solely Tim Cook dinner and his internal circle actually know if and when that might occur and what it’d appear like. In the event that they launch as a premium smartphone peripheral, not everyone seems to be completely satisfied to pay for or carry two gadgets, as with the Apple Watch). Apple might nonetheless promote a number of tens of thousands and thousands of models to early-adopter shoppers by 2023, which could additionally drive bring-your-own-device enterprise demand. Standalone smartglasses as a mass-consumer smartphone alternative appear like they’re additional out.
Mass-consumer income streams just like the app retailer, ecommerce gross sales, and adspend want a whole bunch of thousands and thousands to billions of customers to scale, which doesn’t appear like the smartglasses marketplace for now. So smartglasses’ main income drivers might stay hardware gross sales and enterprise software program/providers medium-term.
VR for early-adopter shoppers and enterprise
VR had lower than 20 million cell and console/PC-tethered VR put in base in 2018, with modest gross sales within the thousands and thousands and comparatively excessive attrition charges. Fb’s premium-standalone VR Oculus Quest might promote in the direction of 1 million gadgets this 12 months, primarily to early adopter players (Quest prices $100 to $200 greater than the competing Nintendo Swap video games console, and associates want two or extra headsets to play collectively in VR, in contrast to Swap in non-VR mode). The market’s inflection level would possibly want a second technology of premium-standalone VR round 2020/2021, with higher efficiency, higher content material and decrease costs to scale.
VR makes most of its cash from hardware gross sales and video games/leisure, with enterprise software program/providers a rising a part of the combination. Whereas VR remains to be exploring different use circumstances, after three years this might stay VR’s industrial path.
One platform to rule all of them
The long-term guarantees a grand, unified AR/VR platform, however for now we’ve received three fairly completely different ones (once more commercially). However divergence is an efficient factor in early-stage markets, because it leaves time for the following technology of tech-giants to emerge.
Tim Merel is Managing Director of Silicon Valley AR/VR adviser Digi-Capital, and can be presenting extra element in his keynote at AWE 2019 on Could 29th, in addition to highlights from AWE/Digi-Capital’s AR/VR International Business Survey – take part right here to get the survey report and win prizes.

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