Mobile AR: Who’s Using it? When? And How? 

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Executive Summary

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 3000 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 the last few months’ ARtillery Intelligence Briefings, which examined social and commerce-based AR. Now, a deeper view into real consumer usage and attitudes validates those narratives while providing new dimension on mobile AR strategies and opportunity spotting.

As for the findings, mobile AR usage is up to 22 percent of the U.S. population. These users are mostly experiencing mobile AR through apps, such as those built on ARkit and ARCore. But we see trending towards lower-friction experiences such as “AR-as-a-feature” and web AR.

Mobile AR users also appear active and engaged across the board, with more than half reporting that they use mobile AR at least weekly. The top app category is gaming, which we attribute to Pokémon Go’s popularity. But other key categories, such as Social AR and visual search, are on the rise.

Mobile AR users also indicated high levels of satisfaction with the experience. 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 continues to underscore a key challenge for AR: 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 July (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 acclimation 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 align with consumers’ current standards. In the coming pages, we’ll examine those strategies and unpack the full set of survey results. This is meant to empower readers with a greater knowledge position.

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Introduction:  A Snapshot

The last few ARtillery Intelligence monthly reports have covered topics like social AR and commerce. This compelled us to follow up with additional dimension into AR strategies. And the best way to do that is to ask consumers how they feel. So we helped produce the latest AR consumer survey.

Working closely with our consumer data partner Thrive Analytics, ARtillry Intelligence wrote questions to present to a sample of more than 3000 U.S. adults. This represents the third wave of Thrive’s Virtual Reality Monitor. And now that the results are in, there are several implications and takeaways.

The survey results are a telling snapshot of mobile AR adoption, which we’ll detail in the coming pages. That will include charts and a narrative story arc that unpacks strategic takeaways, and our outlook for mobile AR. But before we take a deeper dive, here’s the highlight reel of survey findings.

— 22% of consumers have tried mobile AR.
— 78% of mobile AR users are either satisfied or very satisfied.
— *% have used ARCore apps, *% ARkit apps and *% have used web AR.
— *% of mobile AR users are active monthly, *% are active weekly.
— *% of mobile AR users have used games, *% have used social apps.
— *% of mobile AR users want more games, *% want education apps and *% want city guides.
— *% of mobile AR users would pay $1.00 or more for an app, *% would pay $5.00 or more.
— *% of non-mobile AR users are unwilling to pay any amount for mobile AR.
— *% of non-mobile AR users are unlikely or extremely unlikely to try mobile AR.
— *% of non-mobile AR users don’t know where to look for apps, or if their phone is compatible.

*Subscribe to see the full data set.

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Methodology

ARtillery Intelligence has partnered with Thrive Analytics by writing the questions for the Virtual Reality Monitor consumer survey. These questions were fielded to more than 3000 U.S. Adults. ARtillery Intelligence wrote this report, containing its insights and viewpoints on the survey results.

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

Thrive Analytics likewise follows best practices in consumer research, developed over its long tenure as a consumer research firm. More information and background on each firm can be seen in the preceding “about us,” sections, or through the website links included with those descriptions.

More details about the survey sample (demographics, etc.) can be seen in this report’s introduction and more on ARtillery Intelligence market-sizing research and methodologies can be read here.

Disclosure and Ethics Statement

ARtillry has no financial stake in the companies mentioned in this report, nor received payment for its production. With respect to market sizing, ARtillry 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.

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How is AR enhancing social interaction? Who’s doing What so far? 

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Executive Summary

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.

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Excerpt: Follow the Money

Another thing these gateway drugs have done is begin to validate business 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 with large-scale market adoption.

Along with that has come real dollars. Indeed, anyone pointing fingers at Snapchat Lenses or Pokémon Go as being lesser forms of AR should remember that they’re the few AR formats to produce any meaningful revenue so far. In emerging sectors like AR, it’s about following the money.

Pokémon Go (which is not social AR) for example has brought in more than $2 billion in revenue to date. It did this through in-app purchases and brand-collaborations to drive local offline commerce. These are just a few potential business models that will develop and drive mobile AR revenues.

More to the social theme of this report, ARtillery Intelligence has projected $414 million in AR ad revenue in 2018, growing to 2.5 billion by 2022. Almost all of that was from branded AR Lenses. Early leader Snapchat has the lion’s share, but Facebook will catch up quickly given its larger global scale.

Proof Points

Beyond the dollars spent to reach AR users in social channels, how is that user behavior developing? For this question, we turn to the consumer AR survey that we co-produce with our data partner Thrive Analytics. Here, a large sample (n=2,198) is given the chance to report AR usage and sentiments.

Among all mobile users surveyed, 32 percent have used AR. And within that sub-segment, the largest share of users have used games. This is due to the prevalence and popularity of Pokémon Go. Indeed, it represents most people’s introduction to AR – the reason we call it AR’s “gateway drug.”

But second place in AR usage goes to Social apps (or social features within apps). This is due mostly to Snapchat selfie masks, which were named specifically in the survey question. High usage is also validated by Snapchat’s own figures, which report 70 million daily active users for AR Lenses. Continue reading.

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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.

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How is AR being used in consumer shopping? Who’s doing What so far? 

ARtillery Intelligence’s January 2019 report can be previewed below. Subscribe to access it and all ARtillery reports, or purchase a la carte. ARtillery PRO subscribers can access the full report directly here (login required).

Executive Summary

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.

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Excerpt: Augmented Shopping

Many questions surround the sometimes-overhyped augmented reality (AR) sector. The biggest is how it will make money. There are several answers to that question including enterprise productivity, AR advertising, gaming (e.g. in-app purchases) and others we’ve examined in past reports.

But the area of AR monetization that’s perhaps most logical – and already underway – is commerce. This is the segment of AR in which graphical overlays are presented to inform consumers during their shopping processes. It provides contextual product information to inform and incentivize purchases.

This will represent an increasingly impactful technology for consumer spending. ARtillery Intelligence projects that $6.1 billion in annual transaction value will flow through AR interfaces by 2022. This means AR will be used somewhere in the consumer shopping journey for that volume of transactions.

There are two main ways that this is materializing. The first is visual search, in which the smartphone camera (along with computer vision and machine learning) helps identify physical products. The second is visualization, in which items are virtually placed in one’s space to better understand them.

We’ll dive deep on each of these in the coming pages, starting with visual search.

Using AR to Search

Visual search is one way that AR commerce will materialize. Also known as “search what you see,” it employs the increasingly powerful smartphone camera (and someday, glasses) to contextualize physical-world items. This includes identifying information and, importantly, transactional functionality.

For example, Google Lens is a product we’ve examined in past reports (and deeper below) that lets users point their phones at items to retrieve information, or to buy them. Its use cases and product categories include everything from general interest search (dogs, flowers) to commercial (products).

ARtillery Intelligence’s consumer survey data with Thrive Analytics indicates visual search’s potential. (see below). One third of AR users see it as a valuable shopping utility. This is mostly in the context of in-store retail engagements, while visual search can also be used in remote e-commerce.

In fact, visual search is subdivided by these two categories – retail and e-commerce. The former happens within store aisles (through a retailer’s app) while the latter can happen anywhere (through apps like Google Lens or Amazon’s AR View). Retail is where the opportunity is developing first.

Retail AR: Best of Both Worlds

As we’ve examined in the past, e-commerce represents a small share of retail spending. Of the $3.7 trillion spent in the U.S., about $3.4 trillion is in physical stores. But to be fair, online and mobile media increasingly drive and influence that offline spending, to the tune of about $1.7 trillion.

That’s where AR and visual search will come in. They’re well-suited for qualifying products through informational overlays. Holding up your phone is more intuitive than typing words into Google or Amazon in a store aisle. And camera affinity is strong among buying-empowered millennials. Continue reading…

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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.

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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.

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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.

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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

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.

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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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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.

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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.

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.

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We project global XR revenues to grow from $3.8 billion in 2017 to $56 billion in 2022. 

ARtillery Intelligence’s latest industry forecast quantifies XR revenue and that of its sub-sectors including AR, VR and the enterprise and consumer segments of each. What are the breakdowns and strategic takeaways? To access the 90-slide report, subscribe to ARtillery PRO, or purchase a la carte. 

Executive Summary

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.

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Excerpt: Key Takeaways

Takeaways and growth dynamics for XR and its sub-sectors.

Consumer AR will grow from $* million in 2017 to $* billion in 2022, a 105 percent compound annual growth rate (CAGR). Near-term revenues will be dominated by the mobile form factor. Revenues will also be software-centric during that time (mobile device sales aren’t counted in this forecast) and will include premium apps and in-app purchases. The latter will dominate software revenues in the near term, due to consumer hesitance to pay upfront for AR apps, as well as the in-app revenue model validated by Pokémon Go. Niantic will find success in its platform… see full report for the rest.

Enterprise AR will grow from $*million in 2017 to $*billion in 2022, a 120 percent compound annual growth rate (CAGR). This makes it the largest XR sub-sector in 2022. Scale will result from wide applicability across enterprise verticals; and a form factor that supports all-day use and clear ROI (e.g. manufacturing efficiencies). Adoption is currently dampened by typical organizational inertia, enterprise risk aversion and sales cycles. ARtillery Intelligence believes these factors will continue to stunt enterprise AR growth but will be outweighed eventually by the momentum … see full report for the rest. 

Consumer VR will grow from $*million in 2017 to $*billion in 2022, a 29 percent compound annual growth rate (CAGR). Like enterprise VR, it will be hardware-dominant in early years as its installed base is established. Over time, software (in this case, games and apps) will eclipse hardware revenues with a faster refresh cycle. A greater installed base of hardware will also incentivize VR content creators to invest in long-form content, resulting in more robust VR content libraries and greater software spending per user (ARPU). Premium apps will dominate software… see full report for the rest.

Enterprise VR will grow from $*billion in 2017 to $*billion in 2022, a 53 percent compound annual growth rate (CAGR). Though strong in its own right, it will hold the smallest share of XR revenues among the sub-sectors measured in this forecast. VR will be stronger as a consumer play (see previous slide), while AR is stronger in the enterprise. These VR shortcomings (relatively speaking) in the enterprise stem from the medium’s inherent isolation, which inhibits some job functions and share of time per working day. This is especially true in industrial functions where … see full report for the rest.

* See full report for detailed figures and breakdowns. 

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What’s Covered

Methodology

ARtillery Intelligence follows disciplined best practices in market sizing and forecasting, developed and reinforced through its principles’ 18 years in research and intelligence in the tech sector. This includes the past 2.5 years covering AR & VR as a main focus.

This report focuses on AR and VR revenue projections in various sub-sectors and product areas. ARtillery Intelligence has built financial models that are customized to the specific dynamics and unit economics of each. These include variables like unit sales, company revenues, pricing trends, market trajectory and several other micro and macro factors that ARtillery Intelligence tracks.

This approach primarily applies a bottom-up forecasting methodology, which is secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating revenues and projections in a disciplined way. For more information on what’s included and not included in the forecast, see the slide above.

More about ARtillery Intelligence methodology can be seen here, and market-sizing credentials can be seen here.

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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.

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How are Tech Giants building AR businesses? What’s driving them? What does it mean for AR’s future?

ARtillry’s latest intelligence briefing examines AR’s tech leaders including Google, Apple, Facebook and Amazon. Where do their respective approaches and directions signal AR opportunity? Preview the reports below, subscribe to access them in full, or purchase a la carte.

Executive Summary (Parts 1 & 2)

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?

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Excerpt: Follow the Leader

What are the leaders in today’s technological landscape doing in AR & VR (collectively, XR)? More importantly, what does this mosaic of investment and innovation tell us about the trajectory and velocity of immersive computing? There are patterns and strategic takeaways materializing.

One place to start such an analysis is with the simple yet multi-dimensional question of “Why?” In other words what are the motivating factors that drive deep-pocketed tech giants to chase XR ambitions? Answering that question can reveal insights about “where the puck is going.”

The answer to the question interestingly differs for most major tech companies. But on another level, the answers for each share a common thread. When looking at tech’s “four horsemen,” for example, each has XR motivations to protect or grow their core businesses and primary revenue streams.

For Google, it’s all about search. Its “version” of AR is visual search such as Google Lens and Visual Positioning Service (VPS), which boost search query volume, albeit visually instead of text-based. This positions the increasingly popular and millennial-favorite smartphone camera as a search input.

Consider Facebook’s core business: Its primary ad revenue correlates to the time we spend in its walled garden. So AR is a means to keep us in that environment longer through more compelling – and advertising-conducive – content to share with friends. Its “version” of AR is Camera Effects.

On to Apple, though it’s increasingly diversifying into software and services, its core business is selling hardware. So most moves it makes are to make iThings more attractive to consumers. AR is no exception, as more immersive and visually-compelling apps, via ARkit, make iPhones sexy again.

The fourth horsemen, Amazon, is likewise making big XR moves, though perhaps the most shrouded in mystery. Its AR product visualization features engender more informed shoppers who buy more and return less: big factors for the margin-obsessed giant. And its Sumerian platform looms large.

Meanwhile, Microsoft is making big moves in enterprise AR (HoloLens) and consumer VR (Windows Mixed Reality). Snapchat is an early mover in mobile AR, as is Niantic which is in the midst of an ambitious AR platform play. And Unity is increasingly expanding into an AR powerhouse.

Altogether, this landscape has discernable patterns when viewed at different focal ranges. Our goal in the following pages is to do just that. We’ll examine each of these players up close and by zooming out to examine macro-trends. The goal is a more informed perspective of the landscape.

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Parts 1 & 2 of this report are available by subscribing to ARtillry PRO, or purchasing a la carte. You can also purchase both reports, bundled together for $499. This includes a briefing with the report’s author to discuss takeaways and answer any questions you may have. They can also be purchased without a briefing for $299.

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Methodology

This report highlights ARtillry’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 ARtillry Intelligence original data, as well as that of third parties. Data sources are attributed in each case.

For market sizing and forecasting, ARtillry 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 ARtillry Intelligence methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure and Ethics Statement

ARtillry has no financial stake in the companies mentioned in this report, nor received payment for its production. With respect to market sizing, ARtillry 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.

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

Parts 1 & 2 of this report are available by subscribing to ARtillry PRO, or purchasing a la carte. You can also purchase both reports, bundled together for $499. This includes a briefing with the report’s author to discuss takeaways and answer any questions you may have. They can also be purchased without a briefing for $299.

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How is AR Advertising Developing? What are best practices? What’s the revenue outlook? 

ARtillry’s latest intelligence briefing examines AR Advertising, including campaign strategies, results, and where the sector is headed. Preview the report, subscribe to access it in full, or purchase a la carte.

Executive Summary

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 ARtillry 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.

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This report is available by subscribing to ARtillry PRO, or purchasing a la carte. The individual report price is $499. including 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.

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Excerpt: Signs of Opportunity

Whenever tech revolutions come along, they affect – and create opportunity within – several aspects of our lives and work. This was the case with the PC, commercial internet and mobile revolutions. One of the areas most transformed by these technology shifts has been media and advertising.

Advertising specifically has been completely transformed by the Internet, which was then further catapulted by the distribution, formats and strategies developed in the smartphone era. ARtillry Intelligence believes the next advertising inflection will happen with immersive media such as AR.

AR’s visual orientation and interactivity align with advertising’s core goals. It can enhance “upper funnel” (e.g. awareness) ads by letting consumers playfully interact with products. And “lower funnel” actions (e.g. conversions) are achieved by contextualizing products at or near the point of purchase.

Further boosting these qualitative attributes are quantitative measures. The advertising opportunity piggybacks on AR’s scale: ARtillry Intelligence pegs mobile AR’s installed base at 762 million smartphones at the time of this writing. This is key, given that brand advertisers are reach driven.

Beyond high level or theoretical advantages, we’re seeing proof points that these factors translate to real results. Among several key performance indicators (KPIs) detailed later in this report, AR can boost consumer purchase intent by 11x and time spent with media by 2.7x, according Houzz.

Influential tech giants are also investing heavily in AR advertising, providing further confidence in its opportunity. Ad-dominant business models at Facebook and Google have motivated significant resources to ensure positioning in advertising’s next era, thereby accelerating the AR industry overall.

But it’s not all positive signals. Advertisers will be slow to adopt (as they often are), and already indicate some uncertainty. And mobile AR presents challenges such as diminished ad inventory through short session lengths, which can result from arm fatigue and other form-factor realities.

Further jeopardizing available ad inventory are questions of reach. Though the installed base of compatible AR smartphones is sizeable, as noted, a more relevant figure is active AR users. That figure stands at about 158 million users today, which is fragmented between different AR apps.

So where do all of the advantages and potential drawbacks come together and indicate the path forward? We’ll examine all the factors in the following pages, including bull and bear perspectives, and our ultimate revenue outlook. But first let’s examine the types of mobile AR ads developing today.

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This report is available by subscribing to ARtillry PRO, or purchasing a la carte. The individual report price is $499. including 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.

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Methodology

This report highlights ARtillry’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 ARtillry Intelligence original data, as well as that of third parties. Data sources are attributed in each case.

For market sizing and forecasting, ARtillry 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.

AR advertising figures specifically include money spent on paid AR campaigns, such as the examples cited early in this report. Figures do not include general “marketing” spend, such as brands that develop their own AR apps. The latter is measured in our forecast under enterprise AR software.

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 ARtillry Intelligence methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure and Ethics Statement

ARtillry has no financial stake in the companies mentioned in this report, nor received payment for its production. With respect to market sizing, ARtillry 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.

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

This report is available by subscribing to ARtillry PRO, or purchasing a la carte. The individual report price is $499. including 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.

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VR: Who’s Using it? When? And How? 

ARtillry’s latest intelligence briefing examines original survey data. Preview the report, subscribe to access it in full, or purchase a la carte.

Executive Summary

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, ARtillry 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 ARtillry 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.

Introduction:  A Snapshot

In VR’s early stages it’s important to understand consumer behavior and desires in order to optimize product strategies. We kicked off this process last Summer with a first wave of VR survey research. Now, a second wave of data buttresses our knowledge position, and brings new trend data to light.

Working closely with our data partner Thrive Analytics, ARtillry Intelligence wrote questions to present to a sample of more than 1,900 U.S. adult consumers. This represents the second wave of Thrive’s Virtual Reality Monitor. Now that the results are in, we’ll dive into the implications and takeaways.

These survey results are a telling snapshot of VR adoption, which we’ll detail in the coming pages. That will include charts and a narrative story arc that unpacks strategic takeaways, and our outlook for consumer VR. But before we take that deeper dive, here’s a highlight reel of survey findings.

— 11% of respondents own or have tried VR, up from 8% last year.
— *% of users own or use Samsung Gear VR, followed by PSVR (*%) and Oculus Rift (*%).
— *% of users are extremely satisfied with VR, *% are moderately satisfied.
— *% of users are extremely dissatisfied with VR, *% are moderately dissatisfied.
— *% of Vive users show strong satisfaction, *% for Rift and *% for PSVR.
— *% of users want more content, *% want better content and *% want better functionality.
— *% of non-VR users are interested in owning or trying VR, down from *% last year.
— *% of disinterested non-VR users cited “just not interested” as the reason.
— *% of all respondents wouldn’t pay more than $200 for a VR headset.

*Subscribe to see the full data set

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Methodology

ARtillry Intelligence has partnered with Thrive Analytics by writing the questions for the Virtual Reality Monitor consumer survey. These questions were fielded to 1,959 U.S. Adults. Additionally, ARtillry Intelligence wrote this report, which contains its own insights and viewpoints on the survey results.

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

Thrive Analytics likewise follows best practices in consumer research, developed over its long tenure as a consumer research firm. More information and background on each firm can be seen at the above links and ARtillry’s disclosure and ethics statement is below.

Price: $599 (w/ analyst briefing) $399 (w/o briefing)

This 80-slide report is available by subscribing to ARtillry PRO, or purchasing a la carte. The individual report price is $599. including 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 $399.

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Disclosure and Ethics Statement

ARtillry has no financial stake in the companies mentioned in this report, nor received payment for its production. With respect to market sizing, ARtillry 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.

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Global XR Revenues will grow from $4.2 billion in 2017 to $61 billion in 2022. 

ARtillry’s latest industry forecast quantifies XR revenue and that of its sub-sectors including AR, VR and the enterprise and consumer segments of each. What are the breakdowns and strategic takeaways? Preview the 80-slide report, subscribe to ARtillry PRO.

Executive Summary

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? ARtillry 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), ARtillry 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 ARtillry 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.

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Excerpt: Key Takeaways

Takeaways and growth dynamics for XR and its sub-sectors.

Enterprise AR will grow from $* million in 2017 to $* billion in 2022, a 113 percent compound annual growth rate (CAGR). This makes it the largest XR sub-sector in 2022. Scale will result from wide applicability across enterprise verticals; and a form factor that supports all-day use and clear ROI (e.g. manufacturing efficiencies). Adoption is currently dampened by typical organizational inertia, enterprise risk aversion and sales cycles. ARtillry Intelligence believes these factors will continue to stunt enterprise AR growth but will be outweighed eventually by the … see full report for the rest.

Consumer AR will grow from $*million in 2017 to $*billion in 2022, a 110 percent compound annual growth rate (CAGR). Near term revenues will be dominated by the mobile form factor. Revenues will also be software-centric during that time (mobile device sales aren’t counted in this forecast) and will include premium apps and in-app purchases. The latter will dominate software revenues in the near term, due to consumer hesitance to pay upfront for AR apps, as well as the in-app revenue model validated by Pokémon Go. Niantic will find success in its follow- … see full report for the rest. 

Enterprise VR will grow from $*million in 2017 to $*billion in 2022, a 55 percent compound annual growth rate (CAGR). Though strong in its own right, it will hold the smallest share of XR revenues among the sub-sectors measured in this forecast. VR will be stronger as a consumer play (see next slide), while AR is stronger in the enterprise. These VR shortcomings (relatively speaking) in the enterprise stem from the medium’s inherent isolation, which inhibits some job functions and share of time per working day. This is especially true in industrial functions where … see full report for the rest.

Consumer VR will grow from $*billion in 2017 to $*billion in 2022, a 28 percent compound annual growth rate (CAGR). Like enterprise VR, it will be hardware-dominant in early years as its installed base is established. Over time, software (in this case, games and apps) will eclipse hardware revenues with a faster refresh cycle. A greater installed base of hardware will also incentivize VR content creators to invest in long-form content, resulting in more robust VR content libraries and greater software spending per user (ARPU). Premium apps will dominate … see full report for the rest.

* See full report for detailed figures and breakdowns. 

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What’s Covered

Methodology

ARtillry Intelligence follows disciplined best practices in market sizing and forecasting, developed and reinforced through its principles’ 18 years in research and intelligence in the tech sector. This includes the past 2.5 years covering AR & VR as a main focus.

This report focuses on AR and VR revenue projections in various sub-sectors and product areas. ARtillry Intelligence has built financial models that are customized to the specific dynamics and unit economics of each. These include variables like unit sales, company revenues, pricing trends, market trajectory and several other micro and macro factors that ARtillry Intelligence tracks.

This approach primarily applies a bottom-up forecasting methodology, which is secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating revenues and projections in a disciplined way. For more information on what’s included and not included in the forecast, see the slide above.

More about ARtillry Intelligence methodology can be seen here, and market-sizing credentials can be seen here.

Price: $699 (w/ analyst briefing) $499 (w/o briefing)

This 80-slide report is available by subscribing to ARtillry PRO, or purchasing a la carte. The individual report price is $699. including 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 $499.

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Disclosure and Ethics Statement

ARtillry has no financial stake in the companies mentioned in this report, nor received payment for its production. With respect to market sizing, ARtillry 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.

Preview the report, subscribe to ARtillry PRO.

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What’s the AR Cloud? Why is it important? How will it unlock AR’s next era? 

ARtillry’s latest intelligence briefing examines the AR Cloud, the ‘Internet of Places’ and AR’s opportunity in location-targeted retail commerce. Preview the report, or subscribe.

Executive Summary

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.

Excerpt: Enter the AR Cloud

The AR Cloud is like dark matter. Still theoretical, it’s a missing puzzle piece whose adjacent pieces provide evidence of its existence and possible shape. Replace the puzzle metaphor with theoretical physics equations and that’s dark matter. We know it has to be there if the equation is to balance.

The AR cloud is similarly something we know needs to happen for AR’s fully intended vision to materialize. It’s the critical, yet still non-existent, piece of nearly every glowing and futuristic AR vision that you may have heard in conference presentations, generalist op-eds or YouTube clips.

So what is it exactly? Though its still-theoretical status dictates that it will take shape in unknown ways, it’s generally a cloud data repository that enables AR devices to perform wherever they are. That includes sending geo-relevant data and object-recognition blueprints.

Stepping back, AR mapping and scene awareness happen when smartphones scan their surroundings. This applies a combination of computer vision, object recognition and GPS data. But the issue is that all that data can’t be stored locally on your phone.

ARCore and ARkit perform well in individual AR sessions including mapping a given space using surface detection, localization and inertial odometry. But to map large (outdoor) areas, or come back to previously mapped areas requires more computational muscle than smartphones offer.

That’s where the AR cloud helps devices to “recognize” scenes, rather than exhaust computational muscle (and battery life) mapping already-chartered territory. It will register devices’ location, then serve mapping and object recognition data tagged to that location.

Why is this important? It advances the industry by giving app developers the capability of a Google – a la Google Lens and VPS. Instead of having to build or worry about those extensive and enabling data sets, developers can focus on UX and business models.

To that end, the AR cloud will enable the consumer AR industry to reach ARtillry Intelligence’s revenue projection of $14 billion in 2021. But several questions still remain. How will it all come together? Who will build the AR cloud? Who will own it? And where are opportunity gaps?

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Methodology

This report highlights ARtillry’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 ARtillry Intelligence original data, as well as that of third parties. Data sources are attributed in each case.

For any market sizing, ARtillry Intelligence follows disciplined best practices in market sizing and forecasting, developed and reinforced through its principles’ 15 years in research and intelligence in the tech sector. This includes the past two years covering AR & VR as a main focus.

More about ARtillry Intelligence methodology can be seen here, and market-sizing credentials can be seen here.

Disclosure and Ethics Statement

ARtillry has no financial stake in the companies mentioned in this report, nor received payment for its production. With respect to market sizing, ARtillry 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.

Preview the report, or subscribe to access it in full.