Where We Are In An Increasingly Augmented Reality
The current landscape, notable brand opportunities, and the future of AR
The Current State of Augmented Reality
There is little doubt that augmented reality (AR) is one of the most talked-about innovation territories for marketers. Ever since the breakout global hit of Pokémon GO two summers ago, AR has been high on the list of innovation-minded brands. Apple and Google released their respective mobile AR developer platforms, ARKit and ARCore, in 2017, paving the technical foundation for mobile AR and making it accessible for millions of smartphone users worldwide.
eMarketer estimates (paywall) that In 2018, 51 million people in the US (36% of the population) used AR at least once a month. The penetration rate is growing at a healthy clip, and it’s expected to reach 67.5 million U.S. consumers by 2020. Globally, AR will see an installed base of more than 2.5 billion devices and revenues of $70 billion to $75 billion by 2023, according to a recent report by Digi-Capital. Most of these revenues will be in gaming and utility tools, but AR advertising has great potential too once it reaches mass audience. As part of its meteoric rise, AR has overtaken much-hyped Virtual Reality (VR) in both market attention and VC investment. With all the intensifying buzz around AR, however, it is important to note that this is but the first stage in the evolution of AR. Most of the in-market applications today concentrate on mobile AR, which benefits greatly from the massive built-in user base.
Beyond mobile, consumers can also activate AR experiences via a number of emerging hardware types, such as Head-Mounted Displays (HMD) like Microsoft’s HoloLens, and special stationary devices such as smart mirrors or point-of-sale kiosks. In some cases, they can even experience AR via their web browsers without needing to download a specific app or own a pricey piece of hardware. In the near future, we will also be able to experience AR via wearables such as smart glasses and contact lenses. At this point, these AR touchpoints pale in comparison to mobile AR in terms of scale, but they present the future of AR where the immersive experiences will no longer be tethered to a smartphone screen.
As of early 2019, AR is now a viable, mainstream technology in search of a killer use case — an everyday application that will give the late majority a reason to use AR in a meaningful way that goes beyond selfie filters and AR gaming, which remain two of the most common ways that mainstream consumers are interacting via AR technologies today. Major tech players all have their respective go-to-market strategies for AR, as we will explore later, but there is also plenty of space for brands to develop “stickier” AR use cases that are utility- and service-oriented to add value to the customer experience via informational content overlays, gamified content, product visualization, and shoppable AR.
AR is now a viable, mainstream technology in search of a killer use case.
Using AR to contextualize products at or near the point of purchase is a popular lower-funnel use case for brands. IKEA was one of the first movers to utilize mobile AR for 3D product preview when it launched the IKEA Place app in fall 2017, allowing furniture shoppers to see how over 2,000 IKEA items would fit in their rooms. And it is a popular tool that has been embraced by IKEA shoppers. As of March 2018, the app has been downloaded over 2 million times, and around 1 million people have used it repeatedly, according to IKEA. Other players in the market that have leveraged AR for virtual product preview include Wayfair, Houzz, Pottery Barn, Amazon, and Target. We are also seeing similar utility functions spreading to airlines like KLM and easyJet and travel booking sites like Kayak, which leverages AR to help flyers measure luggage sizes.
AR-enabled navigation is another utility use cases that many are starting to explore. Google Maps recently started to roll out AR-powered pedestrian navigation. All Google Maps users will soon be able to hold up their cameras and find clearly marked visual cues in the environment to help them figure out how to get to their destination. Although limited to navigation today, sooner or later this AR layer in Maps will no doubt expand to cover contextual messages and local discovery, thus spurring new brand opportunities to reach consumers on the go. In addition, Legoland Denmark is also developing an AR-powered wayfinding app to help visitors to navigate the theme park and check real-time information on waiting lines.
Visual search is also a unique extension of mobile AR, which leverages the camera to enable contextual discovery and sometimes present search results in an AR view. These two technologies are related, built on the same foundation of AI-powered object recognition, but they are not the same. Target has an ongoing partnership with Pinterest that integrates its visual search technology Pinterest Lens into Target’s apps, enabling shoppers to snap a photo of any product, and then find similar items available for purchase at Target. Pinterest has partnered with The Home Depot to expand its visual search feature, Shop the Look, with more than 100,000 new shoppable home décor products. In September 2018, Snapchat announced it was testing a visual search tool in partnership with Amazon, which will allow users to take a photo of a product or barcode and, if recognized, launch an Amazon product page to learn more and make a purchase.
Besides these emerging utility features, AR developers are working hard to develop a killer use case that will push AR from a cool novelty to a must-have technology for everyday use, thus significantly expanding the audience base for AR content. According to a 2018 ARtillry report, U.S. mobile AR users skew young, female, and affluent. More than one-third are millennials, and nearly five in ten make more than $75,000 annually. And they use AR quite frequently — among those who’ve tried AR apps, over half are using them at least once a week, with over one-third using them several times a week.
U.S. mobile AR users skew young, female, and affluent.
An AR-enabled shopping experience is a key feature many AR users say they want. According to an Adtaxi survey via eMarketer, about 45% of US internet users would be interested in trying out an AR app or feature that lets them view furniture in their homes or try on apparel. A report from Retail Perceptions shows that 61% of shoppers prefer retailers that offer AR experiences, 71% would return more often and 40% would pay more for a product if they could experience it in AR. Given strong consumer interest, it is no surprise that retailers like Zara and Timberland are exploring AR-enabled installations in stores to enhance shopping experiences.
Those who consume AR frequently today also tend to use their smartphone cameras as an interface rather than just a photo-taking tool. They use their cameras continually and communicate via images and video as much as they do through text and voice. They are avid users of AR selfie filters and visual search and are familiarized with ways they can interact with contextual cues via the camera. This type of visual-first user behavior common among AR users opens up a new opportunity for brands to engage with consumers with a more interactive approach.
Best Practices of AR Marketing
In terms of the big picture, most existing AR applications today are focused on entertaining people, and while there is certainly value for brands to leverage AR to entertain people to drive engagement, consumers are craving more functional value that AR could bring, AR features that serve a practical purpose may give brands a competitive advantage to better serve their customers by placing information and digital assets in the right real-world contexts to maximize engagement.
Brands that want AR experiences to “stick” are starting to pivot from today’s novelty-driven executions to develop more useful tools that are more integral and seamlessly integrated into their user experience. For example, LEGO debuted new AR-enabled toy sets called Hidden Side last month. Paired with an iPhone companion app, Hidden Side leverages AR to bridge the gap between physical and digital play, adding a new layer of interactivity to the physical LEGO blocks. Similarly, Kellogg’s developed an AR-enhanced cereal packaging to inspire and educate kids while Angry Orchard created a mobile AR experience to help customers find the best food to pair with hard cider when they scan the bottle with a special app. All these use cases illustrate that understanding your audience’s behavior and integrating AR to enhance consumer journey is the right way to explore brand-specific AR use cases.
Brands that want AR experiences to “stick” are starting to pivot from today’s novelty-driven executions to develop more useful tools.
For brands developing their own AR experiences, it also helps to keep things simple at this stage of AR adoption. Consumers want to quickly and easily understand how an AR solution works since for some consumers, AR experiences can be confusing to begin with. Proper promotional efforts are needed to raise awareness for the branded AR tools. App store or advertising content that incorporates video tutorials or examples of the product in action are much more likely to showcase their utility value and trigger a trial use.
A good way to start testing AR is through mobile AR-enhanced advertising, which is rather concentrated on a handful of social media and apps at the moment. Given that platform owners like Facebook, Snapchat, and Unity have all started testing their respective AR ad products, brands may also consider experimenting with AR ads on those mass-reach platforms to engage and delight consumers. Last summer, L’Oreal leveraged Facebook’s Spark AR platform (formerly known as Camera Effects Platform at its launch in April 2017) to test AR experiences the offer users virtual try-on experiences powered by assets it acquired from ModiFace.
A good way to start testing AR is through mobile AR-enhanced advertising.
As with any relatively new ad platform, marketers are still working to solve problems related to technical compatibility, scale, cost and measurement, and privacy. This is where Facebook and Google may have advantages over the other AR players thanks to their expertise in digital advertising and the scale of their audience. However, due to drastically different nature of brand-consumer interaction that AR enables, which is far more context-driven and experience-driven compared to conventional mass marketing that focuses on delivering brand messages on a one-to-many basis, brands will have to develop new ROI metrics to measure the effectiveness of their AR campaigns.
The Future of AR
With most AR experiences being activated on mobile right now, Apple and Google are the two platform leaders in the AR space today given their stronghold in mobile OS. Over the next 3 to 5 years, AR experiences will likely shift towards wearable AR devices such as Head-Mounted Displays (HMD) like Microsoft’s HoloLens and AR wearables such as AR-enabled glasses and contact lenses. As AR devices mature and diversify, many believe that AR wearables have a real shot at disrupting the mobile-dominant personal computing market and usher in a new paradigm of digital user interface. The impending arrival of 5G connectivity will further enrich AR experiences on mobile and wearable devices by enabling blazing-fast downloading and rendering of 3D assets.
The latest supply chain rumors suggest that Apple is planning to start manufacturing AR headsets in late 2019 and aiming for a 2020 release, which is a lot earlier than most industry insiders were expecting. Granted, the first few editions of Apple’s AR glasses will likely rely on iPhone for rendering and connectivity, but just like the Apple Watch, it will eventually become a standalone personal device. From iPod to iPad to Apple Watch, Apple has demonstrated time and time again that it could produce and market a budding hardware product to the mass market, and their reported commitment to AR makes them a likely candidate to own a sizeable chunk of the AR market down the road.
Today, most consumer-facing AR use cases are primarily about enhancing mobile games and entertainment content, with an emerging trend of brands exploring AR for utility and discovery use cases. Over time, AR will develop to meet more consumers’ needs for contextual information and education. Last month, Microsoft unveiled the long-anticipated HoloLens 2 at the Mobile World Congress. For now, Microsoft is clearly positioning the HoloLens 2 for business and industrial users, with all of the demonstrations focused on enterprise use cases. But given how invested Microsoft is in gaming and consumer electronics, a HoloLens headset for Xbox or one that syncs with PC gaming seems possible.
Over time, AR will develop to meet more consumers’ needs for contextual information and education.
Today’s AR experiences are mostly solo experiences, which will also likely to evolve into more of a shared group experience over the next few years. The updated ARKit from Apple supports group AR, enabling AR developers to create more multi-person AR content and games. HoloLens also supports multi-person AR experiences to primarily facilitate group collaborations in enterprise use cases. In addition, companies like Disney and SeaWorld are already testing AR experiences at theme parks to add to the fun.
It will also be interesting to see if our definition of AR will evolve over the next few years. At the moment, AR is all about visuals — overlaying digital information and 3D objects in a real-world environment, but some AR players are also starting to explore audio-based AR features and devices. Last May, Snapchat tested its first sound-triggered AR lens, thus allowing brands to incorporate their audio branding into their sponsored Lenses. Snapchat said it plans to roll out more audio-based AR in the future, and we expect more branded Lenses to incorporate sound to bring a new dimension to their AR efforts. Similarly, Bose is developing a pair of smart glasses that uses sound instead of sight to deliver location-based, contextual information.
As AR experiences spread beyond mobile devices and diversify in use cases, AR advertising will no doubt also grow along with its user base. According to ARtillery’s forecast, AR advertising revenue could hit $2.6 billion by 2022, fueled by a combination of AR display ads and visual search. Facebook and Google may be well positioned to leverage their current lead on digital advertising into AR ads, but don’t count out smaller players like Snapchat and Pinterest just yet. Plus, it is possible that new players could come up in the mobile-to-AR paradigm shift that will build out a whole new ad platform native to AR. In addition, AR can also be employed to enhance print and OOH campaigns with contextual information and interactivity, for which some pioneers are already paving the way.
Once they become widely adopted via wearable devices, AR could radically transform the way we see and interact with our surroundings, and even impact the way we interact with other people and how we present ourselves to the world. When everything you need to know about what’s around you is just one camera scan away (or one glance away, in the case of AR glasses) and rendered in realistic 3D, the purchase funnel will collapse and shopper journey will become far more trackable. AR promises to bring a true convergence of our physical world with the digital world, creating a “Metaverse” of sorts that exists on top of our reality, and smart brands have already started working today to establish a presence in that augmented world without intruding on consumer’s personal space, which will be a tricky balance for brands to learn over the next few years.
AR promises to bring a true convergence of our physical world with the digital world.