Advertisers today are starting to look towards technologies such as virtual and augmented reality (VR and AR) as a way of getting closer to their customers and delivering those all-important immersive experiences.
Buoyed by investments that the likes of Google, Facebook and Apple are making in both hardware and software, there is some degree of excitement that spatial computing, often known as extended reality (XR), encompassing both AR and VR, can offer something unique and experiential to brands’ engagement with consumers.
Already 400m smartphones support AR today through Apple’s ARKit and Google ARCore, with around 1.6bn devices predicted to be on board by 2021. When it comes to VR, the market is predicted to grow from $7.9 billion in 2018 to $44.7 billion by 2024, at a CAGR of 33.47% during the forecast period (MarketsandMarkets). CCS Insight predicts a further 52million VR devices will be sold this year alone.
Advertisers have long been experimenting with spatial computing. Think of IKEA’s Place app, launched in late 2017, that allows customers to see exactly how furniture would look – and fit – in their homes (and has recently been developed to include ecommerce). Or British Airways bringing the USA to Europe with Oculus Rift.
In fact, according to YouVisit, 75% of Forbes World’s Most Valuable Brands have invested in some form of AR/VR experience, while Touchstone Research says 80% of consumers feel positively towards experiencing branded VR tactics.
Super Ventures, an early stage augmented reality fund, suggests that by 2029 some 95% of millennial and Gen Z consumers will access XR content daily.
Yet the reality (pun intended) is that spatial computing, encompassing XR and more, is a far bigger game-changer than we yet imagine. It will touch everyone and every industry as we contextualise computing.
“AR is big and profound,” Apple chief executive Tim Cook told investors two years ago. “And this is one of those huge things that we’ll look back at and marvel at the start of it.”
Adoption and growth were once limited to expensive and unwieldy equipment that needed to be tethered to the home or office in some way, or on mobile devices via networks not powerful enough to deliver its true potential.
Portable headsets such as Facebook’s new Oculus Quest and the rumoured forthcoming Apple hardware change that. The superfast fifth generation of mobile internet, 5G, with its faster data download and upload speeds, wider coverage, lower latency and more consistency changes that still further.
Yet if XR is to be the next computing platform it must have a sustainable business model to fuel it. I believe that that model will be based on advertising as it has been over the last two centuries – from the printing press to the internet and everything in between. Take a look at the evolution of mobile. In 2008, according to Pyramid Research, four out of five apps were paid for, a decade later, that figure was less than 6% according to a report from 42matters: the further we move from the early adopters, the less people are prepared to pay for content upfront.
But brands, the content creators and, crucially, the end consumers, need a platform that delivers a value exchange fit for purpose.
While the first layer of infrastructure for VR is in place (Oculus, Unity, ARKit), enabling creators to easily build 3D content for VR/AR, the next layer of infrastructure, the tools needed for acquisition, monetization and analytics are missing. This is not something that the large players are focussing on right now, as the audience is still growing. This leaves an opportunity for startups like Admix (the company I founded) to build the right technology and capture a large market share of developers, empowering creators to build killer apps.
In order to monetise and scale this growing audience, creators should look first to advertising, followed by in-app purchases or the sale of virtual goods. For brands this new advertising real estate will prove invaluable as we transition from 2D to 3D and thischanges the nature of interactions.
Through advertising, content creators and developers open up valuable revenue streams and advertisers gain access to this most immersive of spaces in the most natural way possible. Such spatial computing ‘adverts’ will be a mix of experiential marketing, 3D products and ecommerce.
We see this as both the future of advertising and the consumer future of the platform. It’s growing fast. Our supply side platform alone is serving 300 million monthly ad requests in VR and AR – up from just two million when we launched programmatically in September last year. This is the inventory across all the VR/AR publishers we work with. Publishers who want to monetize their content use the Admix SDK to create inventory within their content. We sell this inventory, which is standard display and video, through our buying partners. The inventory runs across 50+ apps – currently the largest source of XR inventory in the world.
We’ll hit a billion monthly requests by the end of this year across verticals such as gaming, social, enterprise and entertainment. Already we reach 15 million monthly active VR users including mobile – a number we’ll see more than double in the next year as more user-friendly headsets come to market and more apps go live.
Until now we were supporting only standard formats (display and video) to create liquidity with advertisers. So, advertisers are able to use the same creatives out of the box. But this month at Admix we announced programmatic 3D ads – our own format – to take the advertising experience to the next level. Users are able to interact with the model and even buy it – directly from the ad unit.
Advertising is already changing from attention grabbing to experiential. We imagine the future of 3D content (whether it’s XR, games, e-sport) where product placements and ecommerce become one, fully integrated with the story. This benefits users (better experience), publishers (more money), and advertisers (better results).
Advertisers are seeing tangible benefits. Yahoo reported that interaction with AR ads in its mail app led to a 25x improvement over traditional banners, an example of how it is implemented is shown below.
Another study by 19 Crimes Wine Maker shows that its AR app helped the brand grow 60% in volume sales. These are not isolated examples – according to Emarketer, spend for AR ads will triple from $420M in 2018 to $1.2B in 2020.
Uber included VR in its biggest advertising campaign to date in November, in its Doors Are Always Opening campaign, a $500m push to give the brand a fresh outlook after a year of difficult publicity. It was looking for innovative ways to reach its US audience in an untapped media – but one that could gather new data to quantify engagement to the brand message. Uber reached users immersed in relevant VR apps across a four-week period, with the audience spending a total of more than 19 hours looking directly at its brand.
As XR establishes itself as a new platform, it will become a dedicated entry on media plans, in exactly the same evolution we saw with mobile and online before it.
This is just the beginning, Year Zero if you will. A decade after AdWeek predicted ‘The Year of Augmented Reality’, we have the technology and the will to deliver on the promise of spatial computing. It’s time to create and finesse the infrastructure that empowers creators to build the ‘killer’ apps that will change the way we work, live, consume and communicate.
Consider that this is not a new medium, but an entire new platform – one that bridges the virtual and the tangible. Spatial computing will be to the next decade what mobile was to the last and the internet to the one before that, with advertising set to play an equally critical role in funding its development.