Augmented, Mixed and Virtual Reality Promise Dividends Down the Line

Augmented, mixed and virtual reality represent one of the bigger business opportunities of the coming decade, along with the Internet of Things and Artificial Intelligence.

People often use the three terms interchangeably, especially as the difference between augmented and mixed reality is very subtle, so let’s define the three up front. None of these concepts are new, and some have been in existence for many years, but here are the primary differences: 

• Augmented Reality (AR) is a live view of a physical, real-world environment whose elements are augmented (or supplemented) by computer-generated sensory input such as sound, video, graphics or GPS data 
• Mixed Reality (MR) is the merging of real and virtual worlds to produce new environments and visualizations, where physical and digital objects co-exist and interact in real time
• Virtual Reality (VR) uses software-generated realistic images, sounds and other sensations to replicate a real environment, or an imaginary setting, and simulates a user’s physical presence in such an environment to enable them to interact with the space. 

Revenue Predictions for Augmented and Virtual Reality

While all three offer business opportunities, as with most emerging technologies, they are surrounded by a great deal of hyperbole. 

Gartner’s Hype Cycle — as it relates to both augmented and virtual reality — can be helpful here. 

Both AR and VR are in the process of entering the Slope of Enlightenment, with virtual having a slight lead over augmented. Gartner isn’t yet acknowledging mixed reality, but I wouldn’t be surprised if that changes by next year. 

Goldman Sachs shares the same view (pdf) that VR is on the faster path to success, due to AR having the challenge of managing both the real and virtual world. That being said, Goldman sees AR as having more relevance within the enterprise, due to its ability to bridge the real and virtual worlds.  

Goldman Sachs (which also does not recognize mixed reality) estimates that augmented and virtual reality will be an $80 billion industry by 2025, with a predicted $45 billion in hardware and $35 billion in software. 

Goldman also offers two other scenarios, accelerated and delayed uptake. Its $80 billion prediction represents the most conservative forecast, as IDC is calling for worldwide industry revenues of $162 billion by 2020.

A Prime Business Opportunity

Even sticking with the more conservative base estimate from Goldman Sachs, this still represents a tremendous business opportunity. It puts AR and VR at almost the equivalent of 2015’s $83.5 billion global consumer PC industry, an industry that’s over 35 years old, whereas the AR and VR predictions are only 10 years away.

IDC’s and other industry forecasts epitomize runaway growth. While their high numbers are unlikely to come to pass, they merit mentioning given their track records. By anyone’s standards, the opportunity for augmented, mixed and virtual reality is significant. 

And to further highlight this, an AR mobile shopping application won the 2016 TechCrunch Disrupt SF Hackathon held earlier this month.

Most people are familiar with early applications such as video games and this summer’s sensation, Pokémon Go. In time, applications will be widespread across a variety of industries. At a recent data visualization conference, I viewed several demos including taking a walk on a very life-like surface of Mars (extremely cool), shopping for and test-driving a car, leveraging CAD software to design a product, remote coaching for wiring an electric socket and home life.  

This is just the tip of the iceberg. 

Deep Pockets and Long Term Thinking

Creative minds are busy defining use cases across many industries. The list of companies currently working in this area include Google (Google Cardboard), Mattel (View-Master VR & DLX), Samsung (Gear VR), Sony (PlayStation VR), Facebook (Oculus Rift), HTC (Vive) and Microsoft (HoloLens), among many others. 

Cost is currently a major challenge for reaching this potential. Developing the content and applications for these scenarios entails heavy costs, and without a wide customer base, there is no guarantee of a near term pay-off. This requires companies with deep pockets and a longer time horizon. 

Similarly, with limited content and applications currently available, adoption by consumers and businesses will likely slow. 

It’s a bit of the “chicken or the egg” scenario, but at some point these efforts will reach a critical mass and when they do, the proverbial hockey stick growth should occur.  

When that happens, the bigger challenge will be storing the content and integrating it with the existing content developed for the web, mobile, print, etc. While the AR, MR and VR industry presents an unquestionable promise, the more traditional industry in content/data creation and storage also stand to benefit from its emergence.

Title image Matthew Bedford