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

ARtillry’s latest intelligence briefing examines original survey data. Preview the report, or subscribe.

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, ARtillry 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 ARtillry 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.

Table of Contents

Introduction:  A Snapshot

In last month’s ARtillry Intelligence Briefing, we examined mobile AR app strategies and business models. 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 fielded the latest AR consumer survey.

Working closely with our data partner Thrive Analytics, ARtillry Intelligence wrote questions to present to a sample of more than 2000 U.S. adults. This represents the second 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 are a few of the questions we’ll answer.

— 32% of consumers have tried mobile AR.
— 73% of mobile AR users are either satisfied or very satisfied.
— *% 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.

Video Companion

Methodology

ARtillry Intelligence has partnered with Thrive Analytics by writing the questions for the Virtual Reality Monitor consumer survey. These questions were fielded to 2,198 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.

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.

Mobile AR: How are app strategies, and business models developing? 

ARtillry’s latest intelligence briefing tackles these key questions. Preview the report, or subscribe to access it in full.

Executive Summary

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, ARtillry 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.

Table of Contents

Key Takeaways

Smart glasses will dominate enterprise AR in the near term, while smartphones dominate consumer AR.
— As popularized by rudimentary AR like Snapchat and Pokémon Go, this involves graphical overlays that interact with the world seen through your smartphone camera.
— Smartphone ubiquity and componentry – image processing, sensors, camera – position it well for AR.
ARkit and ARCore further democratize mobile AR through software that does the back-end heavy lifting.

There are 476 million AR-compatible smartphones today, growing to 3.8 billion by 2021.

Consumer AR revenue will grow from $975 million in 2016 to $14.02 billion in 2021.
— Most of this derives from mobile AR, until 2021 when consumer smart glasses begin to gain traction.
— Mobile AR revenue will be software dominant, including apps, in-app purchases and commerce.
— Mobile AR strategies and differentiation therefore reside mostly at the app level.

Despite positive signals, mobile AR is still challenged
— Mobile AR resembles iPhone apps ten years ago: underdeveloped capability, standards and demand.

Product strategies will evolve natively with AR, but also include fundamental/historical app tactics.
— Native thinking (“AR-first”) should dominate app design, rather than porting existing media into AR.
— Incubating AR features within established apps can be a stepping-stone to standalone native apps.
— Consider alternatives to industry terms like “AR” (historical example: Snapchat)
— Build AR experiences that happen in short bursts, due to arm fatigue and battery drain.
— Successful apps will address real consumer utility and demand, rather than “tech-first” engineering feats.
— “Solutions in search of problems” won’t succeed, such as apps that solve pain points that no one has.
— Apps built solely around novelty could succeed in download volume but languish in active/repeat use.
— Combining AR novelty with sticky behavior (e.g. social communication) is showing signs of success.

Business models will likewise follow a combination of native evolution and established principles.
— In-app purchases are proven in gaming and social apps, versus upfront purchases.
— Visualizing large items will enable commerce-based monetization such as car and home shopping.
— Commerce-based AR monetization success stories so far include BMW, IKEA, Amazon and Houzz.
— Google will pursue visual search (Google Lens), including cost-per-action local commerce.
— AR advertising could eventually drive revenue but doesn’t yet have meaningful reach and scale.
— Forthcoming models to watch include Niantic’s Harry Potter AR game and Snapchat’s AR Geofilters.

Platform choice is important: Align goals with respective scale and strengths of ARCore and ARkit.
— ARkit has an early advantage in platform reach, but ARCore will achieve greater long-term scale.
— ARkit has better software and hardware calibration, but ARCore could be more open and flexible.

Before any of the above, clearly defined ROI goals are a critical first step to AR product strategies.
— This will inform and dictate all other strategic directions, and make or break AR app outcomes.
— Doing AR for AR’s sake – or to check an item of a list – will set any AR product up to fail.

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.

XR in the enterprise: What are its dynamics, opportunities and encumbrances?

ARtillry’s latest intelligence briefing tackles these key questions. Preview the report, or subscribe to access it in full.

Executive Summary

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, ARtillry 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.

Table of Contents

Key Takeaways

XR has been heralded as the next major technological transformation. This will materialize, but later than expected.
— Similar to the early-2000’s e-commerce bubble, XR excitement and market sizing isn’t overblown… it’s just early.

Soft consumer hardware sales have shifted attention to near-term scale and opportunity, including mobile and enterprise.

ARtillry Intelligence projects enterprise XR to grow from $554 million in 2016 to $39 billion by 2021.
— Enterprise AR will grow from $314 million in 2016 to $35.2 billion in 2021, including a 2019 inflection point.
— Enterprise VR will grow from $240 million in 2016 to $3.8 billion in 2021.

AR’s share results from breadth of applicability for enterprise functions, and pass-through vision that enables versatility.
— AR will also be widely applicable across verticals including CPG, automotive and aerospace.
— Enterprises have less stylistic and budgetary restraints than consumers, given today’s bulky and costly smart glasses.

Enterprise XR includes live AR remote assistance (assembly, maintenance), pre-authored AR guidance (sorting, maintenance), and immersive VR collaboration (training, design), among other formats.

Adoption drivers include strong ROI and operational efficiencies (time and error reduction) in functions like manufacturing.
— Intel, Coca-Cola and others detailed in this report demonstrate 15-45 percent efficiency gains today.
— Additional cost savings result from remote support and collaboration, which lessen travel and machine downtime.

Beyond micro-economics, enterprise AR has potential to transform workforce management
— AR’s guided instructions or live remote assistance makes more people qualified for more jobs.
— This unlocks enterprise efficiencies and employees’ in-house mobility, task variety and morale.
— AR can enable experienced and valued veterans to work remotely, rather than retire or burn out from field work.

Enterprise XR benefits are counterbalanced by several challenges, most of them due to organizational inertia.
— Like many technologies, XR will face resistance at organizational and departmental levels.
— The first and only point of entry is often “innovation centers,” where XR is often well received but then languishes.

Tactics for overcoming hurdles include building on already-adopted systems (e.g. Android), and grassroots support.
— Greater chance of deployment can result from advocacy within the business units proposed to use XR. Bottom-to-top organizational buy-in can create powerful demand signals that lead to real XR deployments.
— Value propositions should go beyond bottom-line impact and be spun to address individual (and sometimes selfish) pain points of decision makers and influencers throughout the organization.

Despite challenges, there’s good news.
— After initial adoption, subsequent XR implementations are easier to achieve, as comfort levels are gained.
— There is evidence that sales cycles are reducing in length.
— Cultural familiarity with XR will inch forward and lessen enterprise resistance – a common process in tech revolutions.
— We’ll see step functions as companies make investments that fuel advancement, which in turn drives more investment.

Challenges will persist into 2018 but momentum and acclimation are leading towards a 2019 tipping point.
— Enterprise XR will follow a similar adoption pattern seen in smartphone enterprise integration over the last decade.

Video Companion

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.

What did we learn in 2017? What’s in store for 2018?

As we enter 2018, ARtillry’s latest intelligence briefing tackles these key questions. Preview the report, or subscribe to access it in full.

Executive Summary

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.

ARtillry 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.

Table of Contents

Preview: 2018 Predictions

1. Enterprise AR Pulls Ahead: Enterprise AR will pull ahead of Consumer VR as the leading XR sub-sector (consumer VR held that leading position in 2017), reaching revenue of $10 billion. The biggest adopters in 2018 will be manufacturing and assembly, which have the clearest ROI potential for enterprise AR. The biggest challenge will be organizational red tape and sales cycles. So the name of the game will be quantifying ROI, demonstrating bottom line impact and having domain knowledge in enterprise verticals (in addition to immersive tech competency). Those who can hit those marks will be most successful in tapping into enterprise AR’s $48 billion opportunity by 2021.

2. Mobile AR Rebounds: After surging in 2016 due to Pokémon Go, then dipping in 2017, mobile AR revenues will rebound in 2018, exceeding $1 billion. This will mostly come from app revenue, including Niantic’s Harry Potter game that inherits Pokémon Go’s architecture and game mechanics. The predominant mobile AR business model in 2018 will follow Pokémon Go’s established model of in-app purchases. We’ll also begin to see experimentation with ad support or sponsorship that are tied to location-based discovery and commerce (i.e. retail store visits, navigation, product info).

3. Mobile AR Standards Develop: After disappointing mobile AR app libraries in 2017 (in both quantity and quality), 2018 will continue to see many misfires and unsuccessful apps. A small minority will break out and begin to define the category and seed user demand. They will apply native thinking, “AR-first or “AR-Only” approaches, but these success stories will be very limited in quantity – likely fewer than ten. At least one of these apps will break out in 2018 as mobile AR’s first truly native and category-defining “killer app,” and will be location-based gaming, social, or commerce oriented.

4. Consumer VR Gets a Jolt: Oculus Go will launch in Q2 2018 and fuel consumer adoption more so than any other single headset to date. Its sales will exceed one million units in 2018, and begin to climb to a leading headset market share in later years. With a $199 price tag, and more room for discounting, this will jumpstart VR’s sluggish sales and adoption rates. It will also create a greater installed base to motivate developers and content creators to build content, thus attracting more users to VR in a sort of virtuous cycle. This process will take more than one year to play out, but will accelerate in 2018 to the tune of about 20 million total headsets sold (including cardboard and low-cost units throughout China); and a cumulative installed base of about 43 million headsets globally.

5. Unifying Technologies Emerge: Beyond slower-than-expected consumer VR adoption, the sector has further suffered from fragmentation. The already small user base is divided into smaller subsets when you consider the different platforms and walled gardens (HTC, Oculus, Daydream, etc.). This makes it harder for developers to justify ROI in investing in content because an already-small addressable market gets smaller. Alleviating this challenge will be a major industry priority in 2018, including interoperability across platforms, more low-barrier and cross-platform development tools like Google Blocks and Poly; and unifying technologies such as WebVR and WebAR. Google will take the lead on – and benefit most from – web-based delivery of AR and VR experiences. The AR cloud will develop and gain importance as a repository of geo-tagged data and content to enable and populate AR apps and games. It will be a critical component, given AR’s understated need to access mapping and positional data to overlay graphics properly.

Video Companion

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.

Global AR & VR revenues to grow from $4.1 billion in 2016 to $79.4 billion in 2021.

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Introduction

AR and VR stakeholders claim that their market sizes will be massive. And we believe they’re right. But how big are they and how big will they realistically get? ARtillry Intelligence ventured to quantify these sectors in more precise terms. The result is our latest industry revenue forecast.

Applying market sizing and forecast experience from 15 years of analyst work (see methodology), ARtillry Intelligence has devised a disciplined and non-biased revenue forecast for AR & VR, segmented into their product areas.

The forecast provides overall market revenue projections, subdivisions of each product category, and narrative insights all along the way. This is meant to qualify the revenue drivers and rationale behind the numbers.

Lastly, to characterize ARtillry Intelligence’s overall position on AR & VR revenue growth, we maintain a cautiously-optimistic view. Growth and scale will come but slower than most analyst firms project, due partly to the pace of consumer adoption and other signals ARtillry tracks.

Key Takeaways

Global AR & VR revenues will grow from $4.1 billion in 2016 to $79 billion by 2021.

Enterprise AR will grow from $829 million in 2016 to $47.7 billion in 2021. It’s the fastest growing segment of AR & VR revenues and the largest revenue segment in 2021. Steep growth results from the category’s current small base, as well as software-dominant revenues in outer years that benefit from Saas dynamics (scalability and recurring revenue). Scale will also result from wide applicability across enterprise verticals; and a form factor that supports all-day use and clear ROI (e.g. manufacturing efficiencies). Near-term revenues will be hardware-dominant as it’s usually the first step in enterprise tech adoption. Hardware growth creates an installed base for software which, again, will dominate enterprise AR in outer years. Enterprise hardware adoption will also mature as it’s established in the enterprise, with replacement cycles outpaced by software refresh rates.

Consumer AR will grow from $975 million in 2016 to $15.8 billion in 2021. Until the 2020 introduction of Apple’s smart glasses, it will be dominated by the mobile form factor. Revenues will be software-dominant during that time (mobile devices aren’t counted in this forecast), and include app revenues such as in-app purchases. Much of this will evolve from the business model validated by Pokémon Go which drove most 2016 consumer AR revenues. Niantic will also find success in its follow-up game to Pokémon Go, with architecture and game mechanics re-skinned to a Harry Potter theme. Consumer AR will hit an inflection point – and shift share towards hardware revenue – starting in 2020 as consumer-gear smart glasses finally arrive. Meanwhile, the development work put into mobile AR apps will be a training ground for an eventual glasses-dominant era.

Enterprise VR will grow from $665 million in 2016 to $4.4 billion in 2021. Though strong in its own right (46% CAGR), it will hold the smallest share of AR & VR revenues among the sub-sectors measured in this forecast. VR will be stronger as a consumer play (see below), while AR is stronger in the enterprise (see above). The latter dynamic stems from VR’s inherent isolation, which inhibits some job functions and share of time per working day. Like AR, VR’s near term enterprise revenue will be hardware-dominant as it’s the first step to tech adoption. That installed base will pave the way for enterprise VR software revenues to grow and overtake enterprise VR hardware revenues by 2019.

Consumer VR will grow from $1.6 billion in 2016 to $11.5 billion in 2021. 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). Price competition among VR headset manufacturers (e.g. Oculus, Sony, Samsung) will also be a big consumer adoption driver. Oculus Go, at a $199 price point, will hit a sweet spot for quality and affordability, and will drive mainstream VR adoption and education starting in 2018. Oculus – with the advantage of Facebook-backing – has the flexibility to apply loss-leader pricing in order to trade margins for market share. That will give it a strong competitive position versus players that are dependent on hardware revenue (i.e. HTC, Samsung).

Video Companion

Methodology

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.

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. This includes variables like unit sales, pricing trends,  individual company performances, broader market trajectory and several other micro and macro factors that ARtillry Intelligence tracks. It all comes together in a forecast model with several spreadsheet tabs and thousands of active cells.

This approach combines the top-down and bottom-up forecasting methodologies. Together, confidence is achieved through triangulating revenues and projections in a disciplined way.

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.