What did we learn in 2018? What’s the XR outlook for 2019?

ARtillery Intelligence’s latest intelligence briefing looks back on a volatile and corrective year for XR. Moreover, what does that mean for opportunity spotting in 2019? Preview the report below, subscribe to access it in full, or purchase a la carte.


Executive Summary

XR 2018 Lessons, 2019 Outlook

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.



Price: $499 (w/ analyst briefing) $299 (w/o briefing)

This report is available by subscribing to ARtillery PRO, or purchasing a la carte. You can also purchase it for $499. This includes a briefing with the report’s author to discuss takeaways and answer any questions you may have. It can also be purchased without a briefing for $299.

 


Excerpt: Boiling it Down, 2018 Lessons & 2019 Predictions

1. Mobile AR Promising, But Slow

Mobile AR continues to hold the promise of scale, due to almost one billion ARkit and ARCore-compatible (and several more webAR-compatible) smartphones globally. But the more relevant figure is active users, which is much less: 129 million. The medium needs more time to develop, including underlying technology, developers’ native footing, and user acclimation – all of which go together. Native development is particularly important to build AR apps that are novel, but novelty… See full report for the rest. 

2. AR Cloud is the Lynchpin.

The AR cloud came into the collective consciousness in 2018, after it was apparent that AR apps don’t work the way most people expected. The need for multi-player support, persistence and other functions invoked lots of discussion around the AR cloud as the missing puzzle piece. These functions require a cloud data repository to feed AR devices with spatial mapping data, object recognition blueprints and other AR-enabling resources. Several AR Cloud startups launched… See full report for the rest. 

3: AR Ads Already Working

Among the XR revenue categories projected over the coming years, one that’s already bearing fruit is AR advertising. According to ARtillery Intelligence’s latest forecast, the sector made $418 million in revenue in 2018. This has manifested mostly through branded AR lenses from social apps like Snapchat and Facebook. Building from the social use case of sharing AR selfie masks and lenses, these have been monetized as ways to visualize products in one’s space or on their… See full report for the rest. 

4. Enterprise AR: The Sleeping Giant

Enterprise AR holds tremendous potential, given its proven bottom-line impact. In fact, it’s the largest XR sub-sector in the outer years of ARtillery Intelligence’s global revenue forecast, reaching $28.5 billion. That will mostly be driven by demonstrable ROI in areas like industrial productivity. But despite that continually-validated ROI story, there’s still meaningful enterprise inertia and risk aversion. Though business leaders and innovation centers within organizations are… See full report for the rest. 

5. Consumer VR Softens

Though it leads all XR sub-sectors in revenue today – driven by gaming – VR revenues have flattened while other sectors are trending upward. This is mostly due to revenue from early adopters who themselves plateaued in volume. With that realization, price competition took over the sector in 2018 in order to penetrate further into mainstream consumer segments. ARtillery Intelligence consumer survey data with Thrive Analytics (n=1959) indicate that demand… See full report for the rest.


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Price: $499 (w/ analyst briefing) $299 (w/o briefing)

This report is available by subscribing to ARtillery PRO, or purchasing a la carte. You can also purchase it for $499. This includes a briefing with the report’s author to discuss takeaways and answer any questions you may have. It can also be purchased without a briefing for $299.

 


Methodology

This report highlights ARtillery’s Intelligence viewpoints, gathered from its daily in-depth coverage of the XR sector. To support the narrative, data are cited throughout the report. These include ARtillery Intelligence original data, as well as that of third parties. Data sources are attributed in each case.

For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 15 years in tech sector research and intelligence. This includes the past 2.5 years covering AR & VR exclusively, as seen in research reports and daily reporting.

Furthermore, devising these figures involves the “bottom-up” market-sizing methodology, which involves granular ad revenue dynamics such as campaign pricing and spending. More about ARtillery Intelligence methodology can be seen here, and market-sizing credentials can be seen here.

    


Disclosure and Ethics Statement

ARtillery Intelligence has no financial stake in the companies mentioned in this report, nor received payment for its production. With respect to market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers. It doesn’t perform paid services or consulting for such companies, thus mitigating bias — real or perceived — in market sizing and industry revenue projections. Disclosure and ethics policy can be seen in full here.


Subscribe to access report, or purchase a la carte.

XR 2018 Lessons, 2019 Outlook

Price: $499 (w/ analyst briefing) $299 (w/o briefing)

This report is available by subscribing to ARtillery PRO, or purchasing a la carte. You can also purchase it for $499. This includes a briefing with the report’s author to discuss takeaways and answer any questions you may have. It can also be purchased without a briefing for $299.