The Economics Of Augmented Reality

The Economics Of Augmented Reality
March 28, 2017

A few years ago, virtual reality (VR) was making headlines with the launch of Facebook’s Oculus Rift. But last summer augmented reality (AR) grabbed the spotlight from VR and started growing in both users and revenues.


The Pokémon Go phenomenon brought the technology to mainstream attention and captivated the interest of major tech firms, who were keen on exploring AR for revenue potential and on the reputational benefits of being at the leading edge of this new technology. While there’s already quite a few apps that people can use, companies are developing hardware and software to make the technology better, cheaper and more accessible, including Microsoft, which has rolled out a beta of its AR headset, HoloLens.

Improving Reality


Two Boeing engineers wrote a research paper where they described a concept of virtual reality goggles that used a technology which they described (for the first time) as “augmented reality”. The device ended up becoming Google Glass, and it opened up doors to other possibilities.


The basic feature of augmented reality is to add a layer of technology to the analogic world and what people see, smell and hear. It sets out to improve reality. Graphics that were only visible on televisions and computer screens are now being brought to life.


Augmented Reality mixes up the real world with the digital one, and all the user needs is a lens or screen which supports the technology. It may seem like science fiction to many, but there already several examples of this technology being applied in real life.

The Weather Channel in the US started using AR technology in their broadcasts to help illustrate visually the weather conditions for viewers – a new, unprecedented way of broadcast storytelling.


There are also rumours that Apple will bet big on Augmented Reality this year with the ten year anniversary of the iPhone. Chief Executive Tim Cook had nothing but compliments for the technology in an interview with The Independent, and the company has been collaborating with Lumentum, a company that specialises in 3D sensing technology.


A few Apple insiders have also revealed that Cupertino company is also secretly working with Carl Zeiss, a German optics firm, to create AR glasses.


Monster Fever


Pokémon Go can probably be singled out as a leading cause of AR’s increasingly worldwide adoption. The game forces players to go outside with their smartphones to catch the Pokémon creatures, rather than staying home like traditional video games. The players need to connect their GPS in order for their in-game avatar to move around the game universe.


The game has grossed a total $1bn since its release six months ago, according to SensorTower – the fastest that a mobile game has ever broken that threshold. It was also the most downloaded app in its first week of release ever and the fastest to get to 50m downloads on Google Play.


This shows that people from all demographics will have an appetite for more compelling AR games in the future. Niantic, Pokémon Go’s developer, is now sitting on top of more than 500m worldwide users without even having ever released the game in China.


A Better Reality


Augmented Reality might be years away from its true potential, but for a few years now there are already several available free mobile apps that intend to help users navigate the analogic world more easily.


Ink Hunter, for example, is an app that allows users to try out some already made designs on their skin, but also see how their own designs would fit.


Google have also moved into developing Augmented Reality in the last years. Besides having provided Niantic with the mapping technology that was necessary for Pokémon Go, its Google Translate app for smartphones is also using AR for real life translations. All the user needs to do is point the phone’s camera towards the text for it to be translated, as long as the wi-fi is on.


The Wikitude app brings encyclopaedias to the user’s surroundings. They can browse through their geographical surroundings wherever they travel and the app will provide information about the locations of more than 3500 different sources. It helps the user find useful information about landmarks or directions to places, as well as recommendations for places to eat and sleep.


Oxsight, a firm from Oxford, is now testing their AR glasses that are meant to help people with severe visual problems. The glasses are supposed to help the impaired travel without a cane or a service dog. The system uses the small amount of sight that they still possess to detect light, movement and amplifies it through the glasses.


VR or AR?


With Facebook’s acquisition of Oculus VR for a reported $2bn in 2014, the non-tech community started to notice the potential that VR and AR hold. According to a study by Goldman Sachs, the VR/AR market will be worth $80bn by 2025. The company predicts that the biggest portions of the market will remain video games and healthcare, and they also point to opportunities in engineering, live events, retail and even military use. Last year, Macquarie Bank compared the disruptive role of AR technology in computing to that of mobile phones and tablets.


One of the latest developments is Microsoft’s HoloLens, a visor which basically allows the user to transport what he does on the PC to the real world, including playing games or watching football matches. If the user moves around the room, he will see everything from another perspective.


The Mobile Future


The enormous abundance of smartphones in Western countries and the massive surge they’re seeing in emerging markets can be good news for the growth of VR technology. Snapchat’s use of AR technology with the camera filters are already an extension of reality that young people have adopted in their lives.


The technology might be compelling, but in order to be widely adopted by the general public, it needs something companies are already working on – better display, lighter sets and higher resolution. There are also ethical constraints companies have to consider. If AR pairs up with social media, it would be possible to see someone’s various online profiles just by pointing the phone towards them. Instantly, users would know a fair amount of information about strangers they had never spoken to before.


The tech revolution continues. The devices are getting slimmer and lighter, the software is becoming cheaper and more reliable, and the image quality seems to be improving at the speed of light. Still, the future of AR is uncertain. It will certain develop, but will it do so in the right direction? Will AR architects be able to drive the technology in the direction of people’s needs rather than what they think is fun? Will the world become dependent on Augmented Reality? The market behaviour in the next few years will likely make that clear.

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