This document discusses the emerging fields of virtual reality (VR) and augmented reality (AR). It notes that VR completely immerses users in virtual worlds, while AR overlays virtual objects on the real world. Major tech companies are investing heavily in VR and AR, with over $2.5 billion invested in related startups. While estimates of the market size of VR and AR vary widely, mobile VR is expected to significantly outpace desktop VR over the next few years. Major challenges include creating complex and realistic content while controlling costs, as well as defining effective ways to leverage immersive technologies for marketing.

1. © 2016 eMarketer Inc.
Made possible by
Immersive Media:
A New Frontier Powered by Virtual
and Augmented Reality
Bryan Yeager
Senior Analyst
July 14, 2016

2. © 2016 eMarketer Inc.
Defining Immersive Media

3. © 2016 eMarketer Inc.
Virtual Reality (VR) vs. Augmented Reality (AR)
Image credit: Nan Palmero, Flickr
VR: completely immerses a user inside
a virtual world or experience
Image credit: Ikea, YouTube
AR: overlays virtual objects, other digital
information over the real world

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What about Mixed Reality (MR)?
MR: real-time commingling of virtual and physical objects.
Sometimes used interchangeably with AR
Image credit: Microsoft Sweden, Flickr Image credit: Magic Leap, YouTube

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Immersive media not covered in today’s webinar:
Facebook Canvas Ads Snapchat Snap Ads
Image Credit: Facebook Image Credit: Snapchat

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Consumer-level VR and AR hardware landscape
Mobile VR Desktop VR AR/MR Devices
Samsung Gear VR Google Cardboard
Google Daydream
(Fall 2016)
Oculus Rift HTC Vive
Sony PlayStation VR
(Fall 2016)
Microsoft HoloLens
(Dev kit available)
Magic Leap
(Details thin)
Google Tango
(Lenovo Phab 2 Pro,
Fall 2016)
Common
Smartphones &
Tablets
Image credits: Respective companies

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Analyzing the Hype Around
Immersive Media

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VR and AR tech have been around for decades
Image credits: Minecraftpsyco/Wikipedia, VRS.org.uk, National Center for Supercomputing Applications

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Large tech firms making big bets on VR and AR
 Acquired Oculus in March 2014 for $2B
 Added 360-degree video support in Nov. 2015
 Launched Oculus Rift in March 2016 for $599
 AR glasses part of 10-year roadmap
 Low-cost Cardboard has brought VR to millions
 YouTube 360-degree video support added March 2015
 Launching Daydream mobile VR platform in Fall 2016
 Major investments in MR startup Magic Leap
 Acquired several AR companies in past two years
 Continues to file numerous AR and VR patents
 Hired Doug Bowman, 3-D/VR interface expert
 No Apple-branded VR or AR products … yet

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More than $2.5 billion invested in VR, AR
companies across more than 200 deals
$76
$17
$56
$626
$117 $131
$165
$238
$1,077
15
8
14 13
25
16
33
44
42
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
Amount invested (millions)
Number of deals
Source: CB Insights, June 2016
Magic Leap
Funding Rounds

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Tech has finally improved enough to enable
mainstream consumer applications
Faster computer
and graphics
processing
Powerful
smartphones with
array of sensors
More vibrant and
detailed mobile
displays
+
Improved optics
for capture and
viewing
Easier to use and
more accessible
creative tools
VR: Presence AR: Seamlessness
Image credits: Creative Stall, Hysen Drogu, Jennifer Cozzette, The Noun Project

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Confidence that immersive technologies and
media are here to stay
“For the first time in my professional career, I feel
pretty confident that this is not a hype cycle that
we’re in. This is the beginning of an evolution in
the VR space that will continue. There may be
some booms and busts in that evolution, but it is
not something that’s going to fizzle and
fade away only to reemerge five or six years
later. The train has left the station.”
—Adrian Slobin, Global Innovation Lead, SapientNitro

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The Audience for Immersive
Media Experiences

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VR and AR estimates are all over the map,
underscoring the nascent state of the market
By 2020, the
worldwide VR
market will reach:
$10BSource: UBS, Dec. 2015
$30BSource: Digi-Capital, Jan. 2016
$70BSource: TrendForce, Dec. 2015

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Mobile VR users expected to outpace desktop
VR users worldwide
18
53
81
110
135
4.5
8.5
12.3
16.2
19.5
2016 2017 2018 2019 2020
Mobile VR Users
Desktop VR Users
Source: Deutsche Bank, March 2016
“We think the VR ecosystem
is in its ‘2007 smartphone’
moment in terms of the
adoption cycle. It took 4 to
5 years for smartphones to
reach 100 million users in the
US; we expect a slower
adoption curve for VR, but
still strong enough for
an enormous market.”
—Deutsche Bank

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As more VR
devices have
come to market,
appetite for
paying the high
prices typical of
desktop systems
has decreased

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AR market could be even bigger than VR, but the
few estimates that exist are disparate
 Venture capital firm Digi-Capital states that worldwide AR
revenues will reach $90 billion by 2020. (January 2016)
 CCS Insight expects total worldwide market value for AR
smart glasses will reach $1.2 billion by 2017. (June 2015)
 Tractica anticipates worldwide shipments of smart glasses
will reach 5.4 million units per year by 2020. (May 2015)
 ABI Research forecasts 21 million smart glasses units to ship
worldwide by 2020. (November 2015)
 IDC expects worldwide AR hardware shipments to exceed
45 million by 2020. (April 2016)

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VR and AR still in the experimental phase for
many companies
25%Marketing executives worldwide that
believe VR and AR will have the
biggest impact on marketing companies
by 2020. (Mobile ranked as top impact,
cited by 59% of respondents.)
(Source: Economist Intelligence Unit/Marketo, Feb. 2016)
Primary tech and content being
developed for VR and AR by
companies worldwide:
1. Education and gaming (20.0%)
2. AR tools for mobile (14.3%)
3. 3-D simulation, imaging,
recognition (11.6%)
(Source: Knight Foundation, Oct. 2015)

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Leveraging Immersive Media for
Marketing and Advertising

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Two broad types of VR content:
Spherical Capture (“360-degree”) Rendered Environments
Image Credit: The North Face, Daily Mail Image Credit: Sixense, YouTube

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Costs for immersive content vary, with
in-demand specialists pushing up prices
“Costs are all over
the map. We’re seeing
projects that range from
$10,000 in the low end
to up into the hundreds
of thousands, and
potentially more, on the
higher end.”
—Ben Nunez, CEO, Littlstar
“You have the same titles as you do in
the film industry, but everyone has
to be a specialist in VR. That
carries a higher cost than traditional
filmmaking, because you’re having to
get these people who are in
extremely high demand at the
moment.”
—Henry Stuart, Co-Founder and CEO,
Visualise

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Immersion vs. complexity, cost with VR content
Complexity and Cost
LevelofImmersion
Rotational
Tracking
Rotational
and
Positional
Tracking
Roomscale
Experiences
Haptic
Feedback

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Majority of US
internet users
still in curiosity
phase related
to VR
experiences
Opportunity
for brands:
feed that
curiosity

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Live events or in-store placements
Image Credits: Framestore, YouTube Image Credits: Beam Suntory, Abigail Kelly, Fortune.com

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Defining goals and measuring success with
immersive digital marketing experiences
“From a quantitative perspective, we had goals for
how many consumers we wanted to touch, how
many events we were going to execute and how
many samples we were going to pass out. From a
qualitative perspective, we wanted our consumers
to walk away not only talking about the experience,
but also talking about the brand, so we tracked
the social conversation, including
comments and photos from events.”
—Rachel Harris, Director, National Brand Activation, Beam
Suntory

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Major VR content platforms:
Organic/Original VR Video Paid VR Ads
Video and Interactive VR

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Internet video
providers a
natural fit for
accessing VR
content …
But social
networks not a
top pick (yet)

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VR experience coupled with branded headsets
Image Credits: AKQA, The Drum
Image Credits: DODOcase, Vimeo

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How The North Face approached distribution for
its initial foray into VR content:
“We had a distribution setup with Outside Magazine in
November 2015, which I think is a good example
of us investing in distribution of that
content. Some 75,000 subscribers of Outside
Magazine received a branded Google Cardboard
viewer polybagged into their delivery and were
encouraged to download the app to check out the
experience, and then learn more about the story at
the magazine online.”
—Eric Oliver, Director, Digital Marketing, The North Face

30. © 2016 eMarketer Inc.
A new medium with new rules that are still being
written
“The biggest challenge of creating virtual
reality content is it undoes all the rules
that have been created for
traditional filmmaking … the passage of
time, the way you cut and even the lack of
having different ways that you tell an actual
story with close-ups or mid shots—you don’t
have that in VR because it’s a full
capture of the world.”
—Gevorg Karensky, Founder, Bipolar ID

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Pondering marketing within virtual environments
where people spend hours, not minutes
“As we talk to our clients, the big thing
they’re thinking about is how to move
beyond the ‘big splash’ event and
actually create content that
would drive a consumer back to
the virtual world they’ve built.”
—Adrian Slobin, Global Innovation Lead,
SapientNitro

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In-world placement of virtual ads, products
Image Credits: MediaSpike, TechCrunch
Image Credit: KZero

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What about VR commerce?
One-third of US internet users said they would be
more likely to shop at a retailer if it offered a VR
experience. (Walker Sands, Feb. 2016)
Clothing and apparel, consumer electronics, home
decor and furniture were top categories that excite
US internet users for VR shopping. (SUMO Heavy, April 2016)
Seeing items in real size and form while shopping
online was the top VR activity smartphone users
worldwide were interested in using. (Ericsson ConsumerLab, Oct. 2015)

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Barriers to virtually replicating some categories
of physical goods, especially in fashion
“When you pick up a matching jacket or
you want to buy some other type of
fabric-type material [in a virtual
environment], it’s extremely
challenging to make it look real.
It’s demanding to make a 3-D model of
these soft goods that can run on mobile
devices or even on PCs in real time,
especially when it’s moving.”
—Amir Rubin, Co-Founder and CEO, Sixense

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VR experiences are mostly
top-funnel …
AR experiences are mostly
middle- and bottom-funnel

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Two broad types of AR content:
Marker Activated Context Aware
Image Credits: ARGroup, YouTube Image Credits: Microsoft, Sweet Rose Studios

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Markers and Cues
Elements that enable AR experiences:
Content Overlays
Calls to Action
Distribution
Integrate with existing
mobile app or create new
standalone app
Access via consumer apps
offered by AR companies:
Codes Graphics
Faces Surfaces
Locations and Other Signals
3-D Models Video/Audio
Interfaces Social Shares
Directions Incentives
Image Credit: Mara Julieta G/Noun Project

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Bringing engaging digital content and analytics
to physical media
Magazine Ads Direct Mail
PackagingCatalogs
Bills and Statements
Signage
Merchandise
BrochuresCirculars
Image Credits: Marxent,
YouTube
Image Credits: Aurasma, YouTube
Books

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Hyundai Virtual Guide utilizes AR to assist car
owners with a variety of functions
 Announced at 2015 LA
Auto Show and
launched in Jan. 2016
 Built based on customer
insight about need to
better educate owners
about car features
 Measure of success:
improved customer
satisfaction scores
Image Credit: Hyundai Motor America

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Advice for supporting an AR project:
“You have to understand all of the use cases
up front. There are always going to be a few
unplanned implementation roadblocks, and
you have to stop and re-evaluate exactly how
the app is going to work in a real-world use
case. Allow yourself enough time to
test the app in real-world situations.”
—Miles Johnson, Connected Care Communications
Manager, Hyundai Motor America

41. © 2016 eMarketer Inc.
Sephora Virtual Artist uses AR to enable mobile
‘try-before-you-buy’ lipstick experience
 Launched in February 2016
 Integrated with its Sephora
to Go app and powered by
ModiFace
 Feature generated
1.6 million visits and
45 million “try-ons” in
8 weeks after its launch
 Powerful tool to improve
mobile conversion
Image Credits:
Sephora,
Yahoo Finance,
Multivu

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Lowes experiments with Google’s Project Tango
tech for greater AR precision
 Device uses special
depth motion sensors
to capture more data
for info, object display
 Helps ensure before
purchasing that large
items like fridges and
stoves will fit in
designated space
Image Credits: VentureBeat, Sydney Morning Herald

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Snapchat sponsored lenses mix facial
recognition with AR for engaging experiences
Image Credit: SosyalMedya.co Image Credit: Adweek

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Pokémon GO mobile AR game is breakout
success shortly after early July 2016 launch
 Gamers can catch
Pokémon in real-world
scenarios
 Rapid adoption among
iOS, Android users
 Average use: >43
minutes per day—
almost double that of
average time spent
with Snapchat
Image Credit: Polygon

45. © 2016 eMarketer Inc.
Key Takeaways:
 It seems that 2016 is the year VR and AR enter the mainstream
conscience of consumers, but we’re still at least a few years
from widespread immersive tech adoption.
 Smart mobile devices will be key enablers for early widespread
adoption of VR and AR, with the potential for longer-term take
up of smart glasses and head-mounted displays.
 Though not always the case, VR marketing experiences tend to
be used to drive awareness, while AR marketing experiences
are utilized for conversion and engagement.
 With either format, experimenting, measuring and iterating will
be critical to delivering truly engaging and valuable
experiences to target audiences.

46. Aurasmaischangingtheway
weinteractwiththeworld.
Wehelpmarketersand
organizationsuseaugmented
realitytounite thephysical and
digitalin anewworldof
immersive experiencesthat
driveengagement,innovation,
andconversions

47. © Copyright2014 Hewlett-Packard DevelopmentCompany, L.P. Theinformation containedherein issubject to changewithoutnotice.
The Next Marketing Channel
AR blends traditional and digital channels
Traditional Channels
Print, packaging, direct
mail, tradeshows
Static
Not
measurable
Digital Channels
Display Ads, Mobile Ads,
Email, Social Campaigns,
Mobile Apps
Crowded
landscape
Augmented Reality
A new, immersive
marketing channel that
leverages benefits of print,
digital, and mobile.
Tangible
experience
Targeted
Measurable
Interactive
Mobile
High touch

48. © Copyright2014 Hewlett-Packard DevelopmentCompany, L.P. Theinformation containedherein issubject to changewithoutnotice.
How to Use AR
Start with traditional channels and add digital content
=
Measurability
Targeting
Interactivity
Engagement
Traditional
Marketing Channels
DIRECT MAIL
CATALOG
PRINT ADVERTISING
Augmented Reality
+
COUPONS
TAP TO PURCHASE
VIRTUAL TRY-ON

49. © Copyright2014 Hewlett-Packard DevelopmentCompany, L.P. Theinformation containedherein issubject to changewithoutnotice.
Bridging the physical and digital
Enhance traditional marketing channels with digital and mobile
Direct Mail Catalogs Statements Products Advertisements
Merchandise Events Packaging In-Store Signage Business Cards
Consumers unlock
augmented reality
experiences with
their mobile
devices, bringing
printed materials
and product
packaging to life.

50. © Copyright2014 Hewlett-Packard DevelopmentCompany, L.P. Theinformation containedherein issubject to changewithoutnotice.
Bridging the physical and digital
A new channel to enhance traditional marketing and communication channels with digital and mobile
Tap to Purchase
Increase Sales
Virtual Try On
Increase Revenue
Schedule Meeting
Higher Conversions
On-Line Help
Reduce Call Center
Set-Up & Support
Customer Sat
Surveys & Social
Engagement
Contest & Games
Engagement
Contact
Brand Awareness
Increase Revenue
Grow Sales
Higher Conversions
Mobile Coupon
Increase Sales
Exclusive Content
Increase Value
Lower Cost
Improve Customer
Satisfaction
Better Engagement
Grow Brand Awareness

51. © Copyright2014 Hewlett-Packard DevelopmentCompany, L.P. Theinformation containedherein issubject to changewithoutnotice.
Aurasma Cloud
Create, Manage, Track
Augmented reality experiences
Brand content
Videos
Graphics
Photographs
Audio
3D models
HP Aurasma
Create AR and share with everyone
Aurasma App
Your App +
SDK
Skinned App
Social
Collateral
Ads
Direct Mail
Catalogues
AudienceCampaign Inputs
Print
Marketer

52. © Copyright2014 Hewlett-Packard DevelopmentCompany, L.P. Theinformation containedherein issubject to changewithoutnotice.
200,000 HP Aurasma Customers Worldwide

53. © Copyright2014 Hewlett-Packard DevelopmentCompany, L.P. Theinformation containedherein issubject to changewithoutnotice.
ThankYou
Wendy Tai
Product Marketing Manager, Aurasma
@Aurasma

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Bryan Yeager
Immersive Media:
A New Frontier Powered by
Virtual and Augmented Reality
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