Virtual and Augmented Reality for Businesses — Now Would be a Good Time to Invest

Virtual Reality: Anybody with a computer and access to WiFi has heard these two words thrown around for a long time now. Over the years, Virtual Reality (VR to casuals, enthusiasts and industry leaders alike) has been celebrated as tech sweetheart, welcomed by gamers as manna in the wilderness and reviled by skeptics as a glossy diversion, a gimmick marketing teams use to bolster brand recognition and short-term sales. ‘VR’ has also become a catch-all term for all sensory experiences, immersive or otherwise, that take users beyond the realm of their physical realities.

Caught in the midst of this tug-of-war, VR has been having an existential crisis, and the underwhelming response to the technology in 2016 hasn’t helped matters. VR headset manufacturers such as Sony, HTC, Google and Samsung have reported sales that haven’t lived up to market expectations. The general consensus among users has been that, while the immersive experiences are great, there isn’t enough content to sustain interest. Besides, VR doesn’t come cheap — good headsets can set you back anywhere between $300 and $700.

All of this notwithstanding, however, VR is going to grow, and massively at that. I’ll show you why I believe that, through the course of this post, with examples of success stories and market data. While predictions of VR’s success will not surprise any of you (it’s a contentious topic with vociferous supporters on both sides), here’s something that might. What will save VR from a watery grave isn’t the gaming industry, seedy pornographic studios or motion pictures.

If you’re looking for a tl;dr for this entire post, here it is:

Virtual and Augmented Reality are going to be adopted by institutions all over the world, by every sector from Retail to Government.

Before I plunge into the numbers to support this statement, I’d like to help ease (however slightly) the existential crisis that VR’s been subjected to, by clearing up a couple of things.

Virtual Reality is technology that simulates artificial environments you can see and walk around in, that are entirely removed from your actual environment. Think Jonny Quest; you slip on a headset that wraps itself completely around your eyes, and you’re transported to a different world.

Augmented Reality (AR) is technology that conjures up images which are superimposed over your actual environment. So if you were to slip on a pair of AR glasses, you might see a velociraptor on your kitchen table that isn’t really there. Remember Pokemon Go, that game that captivated the world for about one month, before going from mildly irksome to infuriating soon after? Augmented Reality.

Now on to the numbers defending my VR/AR adoption claim. According to a survey of organizations across a diverse range of sectors by Tech Pro Research, 55% of the respondents said that they use VR in their companies, either as part of their products, for simulation exercises, computer modeling or as part of the sales process.

70% of the respondents said that they used AR for similar purposes. Besides, 47% of the respondents not already using VR said that they were considering it for future use, and the number was 67% for AR.

While growth forecasts for the technology vary wildly, they are all optimistic. IDC (International Data Corporation) predicts that the VR/AR market will grow to $162 billion by 2020, from $5.2 billion in 2016. Digi-Capital has pegged the number at $150 billion. TrendForce says $70 billion. The lowest estimate has the market growing 1400% in 4 years.

If you’re unwilling to change your mind based on forecasts, look at the money that’s being invested in VR and AR by the likes of Google and Facebook. The former has invested $542 million in Magic Leap, a super-secretive AR startup from Florida. The latter acquired VR headset manufacturer Oculus Rift for $2 billion in 2014. HTC, along with a bunch of pro-VR venture capital firms, announced a $10 billion VR-centric venture capital syndicate in June 2016, after which the company went on to create a $1.5 billion VR investment fund and research center in Shenzen, China.

What do these numbers mean? At best, they mean that VR/AR are headed toward explosive growth and profits all around. At worst, the numbers imply a burgeoning curiosity among businesses; an openness to try VR and AR out.

I’m going to make my case for enterprise VR/AR in three parts — VR/AR success stories, the psychological pull of VR/AR, and the economics behind the technologies.

VR and AR have already begun weaving their magic in a few industries

While the bulk of businesses are still on the fence, a few have taken to VR/AR with gusto, and are already experiencing success with it.

Healthcare:

One of the first non-entertainment industries to benefit from VR/AR, this one is kind of a no-brainer. Hospitals are already using VR to train people in CPR, nasal gastric tube insertion, setting up intravenous systems and so forth.

However, what is to me the most poignant victory for VR in healthcare is a surgery performed by Dr. Shafi Ahmed at the Royal London Hospital in April 2016. Dr. Ahmed removed a cancerous tumor from a patient’s bowel, with the entire procedure being streamed online in real time through two 360-degree cameras. Ahmed believes that this is a wonderful learning experience for students, who not only get to see what the surgeon is doing, but what the others around him are doing as well.

Efforts are also underway to simulate surgery room atmospheres so students can practice in realistic environments without having to risk the life of their patients. At St. Mary’s Hospital in London, there are simulation kiosks that patients can use, which will let them experience the atmosphere of an operation theater, as a way of reducing anxiety.

AR has been a big hit in the Healthcare industry as well. There are apps that help you locate AEDs (Automated External Defibrillators) in your vicinity for emergencies, and apps to visualize tumors or other inconsistencies in patients, in real-time. My personal favorite, however, is AccuVein, an AR app that helps doctors visualize veins for blood tests, IV and other purposes. They have purportedly improved the likelihood of a successful first stick by 3.5 times.

VR and AR are impacting Healthcare more than any other industry, save perhaps Entertainment.

Retail:

One VR story that has stuck with me from this segment is the curious case of Toms Shoes, a shoe retailer company from Playa Del Rey, California. Toms has a motto of “one for one”; each time a customer buys a pair of shoes, Toms donates a pair to a child in need.

While this has been happening since the company’s inception in 2006, it was really brought into the public eye in 2015, when Toms created a video of shoes being handed out to little kids in Peru. A touching experience, it helped customers really understand the impact of their purchase, and it also improved sales manifold.

“The VR experience is unlike any other and is the greatest technology I’ve seen to create empathy,” Blake Mycoskie, founder of Toms said in an interview with TechnoBuffalo. “To truly understand what someone goes through, it helps to walk in their shoes. If you can’t be there in person, VR is the perfect technology to share someone’s story.”

Topshop is a British fashion retailer with over 500 stores. In 2011, a Topshop store in Moscow created an AR-powered dressing room for visitors, using Microsoft’s Kinect motion sensor for Xbox. The store was designed by AR Door, a Russian AR agency. Women could “try on” different clothes without having to actually take off or put on any. Interestingly, Topshop furthered its affair with the technology when it introduced VR at the London Fashion Week in 2014.

Education:

I already mentioned VR being used to impart CPR training. This is actually happening at Nicklaus Children’s hospital, Miami. According to the CEO of the Miami Children’s Health System, trainees have been seen retaining over 80% of their training, a year after a VR session.

Immersive VR Education is a great initiative that leverages the staying power of VR-based storytelling, allowing children to experience historical events through beautifully crafted VR re-tellings. Immersive VR’s Kickstarter campaign raised €36,623 in pledges, and they won the Time Warner Future of Storytelling Award.

Star Walk is a lovely AR app that lets you gaze at the skies through your phone, follows your every movement and labels every star you set your eyes on.

Marketing:

Who said high-tech marketing was only for the newer players? One of the most interesting marketing campaigns I’ve seen was created by Mercedes Benz in 2016, for their GLS 2017 version. Mercedes took the help of an Instagram-famous wolfdog named Loki and his owner, Kelly Lund. Together, the two appeared in a two-minute 360-degree video where they explore the wild outdoors in the Merc SUV.

That one campaign helped Mercedes (Instagram handle MBUSA) grow their following by over 55,000. Their videos have over 6 million views in total, and over 150,000 social media engagements.

One instance of AR marketing that always makes me smile is a fun campaign that the United States Postal Service launched in December 2014. During the holiday season, anyone who downloaded the USPS app could scan one of their iconic blue mailboxes, and some animation would come to life: A snowman, flashing lights or other things Christmas-y. It still amuses me to think of the usually stoic USPS break character the way it did.

The Psychology Factor: VR ≠Gaming, even in consumers’ minds

This is more pertinent to VR than AR, for reasons I will go into below. Love it or hate it, VR has everybody’s curiosity piqued. While enterprises are falling over themselves to adopt so as not to be left behind, consumers are experimenting with the technology to see what it has to offer as well.

Greenlight VR, popular VR market insights firm uncovered some interesting results from a survey of 1,200 people. Here are the top six categories that participants in the survey were interested in, ranked in descending order:

  1. Travel, Tourism or Adventure: 73.5%
  2. Movies and Recorded Videos: 67.3%
  3. Live Events: 67%
  4. Home Design: 65.9%
  5. Education: 63.9%
  6. Gaming: 61%

The survey also obtained data from a specific set of “high-tech spenders”, who were found to be very bullish on VR. Here again, are the categories the high-tech spenders were found to be interested in, ranked in descending order:

  1. Travel, Tourism or Adventure: 76.3%
  2. Movies and Recorded Videos: 71.4%
  3. Live Events (apart from sports): 71.2%
  4. Home Design, Remodeling or Decorating: 70.3%
  5. Education: 68.2%
  6. Gaming: 68.9%

Notice something about these lists? Gaming comes in last in both of them. Based on these rankings, I can think of at least eight industries — Interior Design, Education, Tourism, Adventure Sports, Airways and Railways, Hospitality (Live Events), Healthcare (Education, Live Events), Architecture (Education, Live Events, Home Design) — that can benefit massively from VR. And that’s just off the top of my head.

Looking beyond mere numbers, this is where I feel the ‘psychological pull of VR’ comes into play, as I mentioned earlier in this post. Aside from hardcore gamers, other VR users tend to tire of games sooner or later. And when they do, what I feel they’re looking for is to transcend physical barriers, and not just in a fantastical, Rule 34 kind of way. I feel they want to travel to worlds that exist.

Answer this question without thinking about it: If I told you that you could travel to any place at all, in a matter of seconds, where would you want to go? My guess is that a large majority of you are more likely to think of a real place, however obscure, than of Hogwarts, Middle-earth or the Death Star. And even if users were VR-teleported to a mythical place, they’d tire of it quickly, because exploring nonexistent worlds is essentially just another kind of game. Once they run out of places to explore, they’ll probably realize they’d much rather visit Holland’s Tulip Fields, Stonehenge or the Nazca Lines. Reality is stranger than fiction, you know. I feel this is evident in the survey results above: The two top-ranked categories are Travel/Tourism/Adventure, and Movies/Recorded Videos.

Another example to support this: Thomas Cook. In Spring and Autumn of 2015, Thomas Cook along with Samsung launched a campaign called ‘Try Before You Fly’ where the travel giant placed Samsung Gear VR headsets in select Thomas Cook stores across UK and Germany. Visitors could use the headsets to experience New York City.

In the first three months, this campaign spurred flight and hotel bookings worth £12,000 in UK and Germany, and has generated a 40% return on investment. There was also a 180% increase in NYC excursions.

If it worked for Travel/Tourism, it will most definitely work for the other categories as well. There are some phenomenal opportunities out there for enterprises to fuel the imaginations of millions of people — and make loads of cash doing it.

And my reasons for leaving AR out of this? AR’s psychological pull really needs no explanation; it’s been proven. You know what I’m talking about; don’t try to hide that Zapdos you caught a few months ago…

Virtual Reality; real, real money

The tech wizards of the world are always working to better their products, to see how far technology can be stretched to meet the fancies of imagination. It’s this will to constantly get better that has given us all that we enjoy (and take for granted) today, and it is that same desire to push the boundaries of technology that has brought VR alive. However, the greatest inventions cannot make it past the garage door unless they have that one factor down pat — pricing.

And this is where VR falters.

If you want to experience top-quality, crystal-clear, life-imitating VR, you’re going to have to pay quite a lot for it.

First, there is the headset itself. The two most expensive ones on the market are the Oculus Rift, and HTC’s Vive.

The Oculus Rift costs $599 (excluding taxes and shipping costs), and Vive costs $799. Of course, once you buy them, there’s the problem of having a fast enough computer to run the code that will power these headsets and provide a quality immersive experience.

According to the Oculus website, the following are the recommended specs on which Oculus can be run:

Graphics Card - NVIDIA GTX 1060/AMD Radeon RX 480: $250/$239 (8GB)

Alternative Graphics Card - NVIDIA GTX 970/AMD Radeon R9 290: $370 on Amazon/$229 (8GB)

CPU - Intel i5–4590 equivalent or greater: $219

Memory - 8 GB + RAM: $30–$100

Now, any assembly-line computer that you buy with these specs is going to set you back by $1,000, easy. Even if you decide to assemble your own PC, between that and the Rift itself, you’re still going to end up paying between $1,200 and $1,400 to have a comprehensive, quality Oculus rig.

It’s pretty much the same story with Vive. Here are Vive’s recommended specs:

Processor - Intel Core i5–4590 or AMD FX 8350, equivalent or better

Graphics - NVIDIA GeForce GTX 1060 or AMD Radeon RX 480, equivalent or better.

Memory - 4 GB RAM or more

Almost identical to that of Oculus, maybe except that Vive seems to be okay with 4 GB RAM. A trivial difference, especially when you consider the fact that Vive costs $200 more than Oculus. This means that if you want a Vive headset and a computer that can run it, it’s going to cost you anywhere between $1,500 and $2,000.

It’s safe to assume that these prices are way beyond reach of the average user.

However, all of this is set to change. Here’s how.

  1. The best experiences might be out of reach, but the very good ones aren’t

First, Oculus and Vive are absolutely top-of-the-line headsets that require heavyweight computers. There are a few other options, admittedly not quite as good, but not too shabby either.

Though it doesn’t really belong in this part of the discussion, it wold be remiss of me to talk about VR and pricing without mentioning Google Cardboard, which has more or less democratized VR the world over. With prices starting at $7, Cardboard has truly helped take VR to people who may otherwise never have experienced it. Naturally, Cardboard doesn’t even begin to compete with the higher-end headsets, but it’s a great entry-level initiative.

With that said, there are a couple of options that aren’t bad at all. Google’s Daydream is a headset that can be paired with phones of a certain specification. As of this writing, the headset is retailing for $50 on Verizon. The least expensive Daydream-ready phone, the ZTE Axon 7, is retailing for $400. So you get the entire VR experience for $450, which is a damn sight better than anything in the $1,500 range.

Similarly, Samsung’s Gear VR headset, powered by Oculus, retails for $100. The least expensive phone compatible with Gear VR is the Samsung Galaxy Note 5, which retails for anywhere between $250 and $300 on contract. This brings the total price for a Samsung Gear VR experience to $350 to $400.

If you’re not feeling sold on these lower-price options, remember that the Toms ‘Virtual Giving Trip’ campaign was powered completely by Samsung Gear VR, and that worked out just fine for them. Also, Google has a lovely initiative called Expeditions, that lets kids explore several environments such as museums, natural parks, oceans and even outer space. Expeditions has enriched the lives of over a million children, and all using Cardboard. That’s two massive industries - Education and Retail - that use these lower-range headsets.

2. Computers will get cheaper

The tech world has a beautiful, Darwin-esque evolutionary process. Create, test, debug, eliminate, iterate. It’s this process that has brought us from the clunky, ridiculously expensive early VR headsets to $7 disposable goggles and compact phones with powerful processors. It’s this process that has brought us from the Apple Macintosh II that cost $5,500 in 1987 (about $11,600 in today’s money) to a much smaller, faster, better-looking, far more powerful beast for $1,300. And it is this process that will bring the cost of VR-ready computers down, and soon at that.

NVIDIA is always pushing the envelope, testing the limits of GPUs. It hasn’t lost its market dominance in years. VR-ready GPUs alone cost $250-$600 today. These costs will come down as NVIDIA pushes research to pack more in for less, as processor and GPU companies have been doing for years.

While computers are being designed to be Oculus-ready, this is still largely a boutique market, with OEMs charging a fat premium on the advanced specs. As VR adoption goes up - it’s estimated that over 200 million VR headsets will be sold by 2020 - manufacturers will cease to create near-custom solutions and start catering to average customers, and profits will become a volume game based on economy of scale.

3. Headsets will get cheaper, too

When Oculus announced its pre-order price of $600 for the rift, most of the VR world was in shock. It was far above industry forecasts, and actually exceeded even Oculus’ own estimates. However, a wonderful teardown of the product - including the cost of the headset, the sensor and remote as well as the Xbox One controller that they promised to deliver along with the Rift - shows that it cost a little over $200, after adding in the prices of all the components. While the teardown obviously fails to take into account opportunity costs, time value of money and R&D costs for such a massive undertaking, the number is revealing nonetheless, and it proves that there is much scope for optimization.

Chinese OEMs are already hard at work building their own VR headsets. With innovative systems like the DeePoon E2 VR Display - essentially a headset with built-in smartphone capabilities retailing at about $300 - the market is going to adjust itself, soon. I think that in three years’ time, we should see an at least 20% reduction in headset costs. And of course, as costs go down and adoption goes up, the market will be flooded with content, and that’s when we’ll have the opportunity to witness the creation of an entire ecosystem - computers, laptops, headsets, content across industries, advertisers, marketeers, the works - as opposed to a smattering of firms and sporadic funding. My bet is on this ecosystem getting started by 2020.

Another point to note is that AR has a far lower economic threshold for adoption, and so it is far less cost-inhibitive than VR. A huge advantage for AR is that, unlike VR, that requires heavyweight computers, AR has a medium ready and waiting - the smartphone. It’s estimated that there will be 2.6 billion smartphones in the world by 2017. Hardly surprising, then, that Digi-Capital has forecasted that AR will grow to $120 billion by 2020, while VR will grow to $30 billion.

What’s the verdict?

If you belong to an enterprise-scale company, your organization has probably already invested in VR or AR, maybe even both. If you belong to an SME or a startup, it’s less likely that your organization has made any inroads into adopting VR/AR tech. Either way, you’re in good shape. If your enterprise has invested in VR, nothing like it; you can’t go too far wrong doubling down on it and waiting for the payoff. There’s no doubt about the fact that investing in VR is a long-game; Mark Zuckerberg believes it will take 10 years for VR to reach mass markets. Oculus founder Palmer Luckey seems to have an even longer view, stating it may take 15 or 20 years, but will certainly take at least 10.

Know this, however: When VR does reach mass markets, you don’t want to be on the side of the graph that’s rushing to make it past the upward curve and into the hallowed space of VR industry leaders. You want to be able to anticipate it, and enjoy the payoff when it comes, because come it will. Personally, I don’t believe it will take 10 years, for the reasons I’ve mentioned above. My guess is that it’s closer to 5 years. Either way, you can’t possibly go wrong investing now.

Branding in the time of VR

Which brings us to the important question of branding. While I believe that every enterprise needs to find its way to adopt VR/AR tech, I also believe that every enterprise needs to find its way to adopt VR/AR tech.

Look at Converse, for example. They created a Sampler, which is a simple AR-based app that can be used to “try on” different Converse shoe variants. You just select the customization options you like, point your phone at your feet and see how they look on you.

Now, Converse could have bet the house on VR. Instead, it chose to keep it simple, in keeping with its alternative roots. Converse found the perfect way to leverage technology while reaffirming its own values.

Companies like Topshop and Toms, similarly, came up with their own creative and unique ways to speak to customers, while maintaining and reaffirming the values they most believe in. It’s crucial to remember this before you invest, because it doesn’t come cheap. Toms spent $250,000 making that Peru video, and $1,000 per store to have the VR gear set up, not to mention the costs of training at least one personnel member at each of its stores to handle the equipment. Of course, it paid off for Toms because they didn’t compromise who they were as a company, in the quest for change.

In the same vein, make sure that you understand how VR/AR will best suit your company, given its specific purpose, values and vision.

More and more industries will start adopting VR, in the next two to three years. Market researcher Magid Advisors found that Among US consumers ages 8 to 64 years old, 42 percent said they were very or somewhat interested in virtual reality. Apple has been indicating an entry into VR/AR tech. The Coachella Music Festival 2016 handed out Google Cardboard headsets to all its attendees, and anyone who downloads the Coachella VR app can browse through past interviews, photos and take a tour of the festival grounds. VR roller coasters have now become a things at some theme parks. More and more corporations will start using VR to have meetings.

The millennials haven’t known a day without the internet. The generation to come after them - in ten, fifteen years from now - will probably not know a day without VR. It’s a supposition that offers several wonderful opportunities, many of them not even profit-based. Imagine if we could show children what the bed of a polluted river looks like, or how bad a war-ridden city can be, while also showing them the transformative powers of tech in enterprises. Wouldn’t we be raising a generation of empathetic, empowered, individuals? It’s a great time to be alive.

Hello, (virtual) world!