Business Model - The virtual and augmented reality market

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Steven L. Kent
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Summary

  • What will be the different parts of this business model
    • The Hardware
    • E-commerce
    • Advertising
    • Bandwidth
    • Applications
    • B2B
  • Great prospects for the AR / VR business model

AR and VR are currently in an embryonic stage. But the revolutionary nature of this technology and the investment of large companies show that this market will develop in the years to come. Different business models are foreseeable: hardware, e-commerce, advertising, bandwidth, applications or even B2B.



The arrival this year of virtual and augmented reality on the market is just the start of a whole new business. The advent of innovative technology like this is always changing the way different settings operate. Whether it is the arrival of computers in the world of work, cell phones, the internet or smartphones, each of these changes has created a new market. Companies have made their fortunes by offering goods and services for these machines. Virtual and augmented reality are no exception. Although the AR / VR industry is very young, the observer can clearly see the beginnings of an innovative technology that will have the same development as smartphones..

Large movements of funds have been made since the announcement of the Oculus Rift in 2012. Start-ups like Magic Leap have arrived with groundbreaking concepts promising big changes. Applications have been programmed, large groups have bought out or invested in these concepts. When multinationals invest hundreds of millions in technology, you can expect something big to come out of it. Even if virtual reality still drags the reputation of the somewhat ridiculous gadget of the 90s with the general public, today it can only be taken seriously. The Oculus Rift and the HTC Vive are there to prove it. The real question is how will the expansion and conquest of this market unfold? What will be the most lucrative sectors of this industry?



What will be the different parts of this business model

The Hardware

The first sector that AR / VR companies will conquer is the hardware sector. It is also a strategic choice. Apple when smartphones entered the market acquired the majority of the market, propelling the value of Steve Jobs' company to the top. Once AR and VR are firmly established in consumer habits, companies will refocus around programs and applications, but today hardware sales will define consumption patterns and market masters. This legitimizes the 2 billion investment made by Facebook in the Oculus Rift and the 1,4 billion by Google in Magic Leap. It is therefore interesting to observe the choices made by the various companies in the area.

Microsoft with its augmented reality headset Hololens wants to introduce virtual reality into homes, the applications seen in its communication show the use of this headset in everyday life. But during its development, the Hololens has found its place more in the entrepreneurial world than with the general public. The reasons are varied, in the first place, augmented reality adapts perfectly to companies. As virtual reality makes its debut in the entertainment industry, AR makes it easier for engineers to model in three dimensions, salespeople to show a more concrete product, and salespeople to close sales more easily. Microsoft has therefore oriented its product towards an entrepreneurial audience, and it works. The development kit has barely been released, but several large companies have already started to communicate about products using this technology.


E-commerce

E-commerce is probably one of the areas that will benefit the most from these technologies. In particular, augmented reality, which will be able to offer a wide range of services for online sales. 3D Viewable Products is the first AR application that comes to mind. Investing in it is therefore an anticipation of a massive change in consumption patterns on the web.. But the AR / VR revolution seems to be on the way, so the investments of industry giants like Alibaba in Magic Leap can be explained by a long-term strategy. The latter is justified all the more since augmented reality can be used in other circumstances. A person seeing a product they like analyzes it with an e-commerce application. She can then see all the other products close to that one and choose the item that suits her the best or the cheapest. Investing in AR is therefore a bet on the development of this technology and its integration into everyday life.


Advertising

Advertising will be one of the most profitable areas of AR and VR. From a creative perspective, they can be used in many ways. This ranges from product integration into virtual reality experiences, banners in forums, AR popups on the street… You just have to rack your brains to come up with actionable ideas. Without counting on the investments of the companies in the creation of content. In addition, if there will be free advertising applications because paying, many others will be free, continuing the economic landscape of the Internet. These free applications will therefore be financed in part via advertisements.. We can already imagine a social application with free spaces but covered with pubs. The impact of advertising is also stronger, its extent remains to be discovered but a virtual reality product will have much more impact than a banner on a site.


Bandwidth

Virtual reality is fixed by nature. On the other hand, augmented reality must be mobile, its objective being to superimpose information on reality. Who says mobile device says internet connection and AR devices will need it: a 360 ° video on Youtube takes five times the bandwidth of a normal video. In addition, without the ability to acquire information on the net and make calls, AR loses its interest. Telecommunications companies will therefore be able to increase their revenues in this market.. However, this consumption will probably reduce the use of telephone lines. It is therefore not a whole new market that will emerge, but one that will take the place of old ones.

Applications

The business model of virtual reality applications today mainly concerns gamers and technology enthusiasts. This type of consumer does not generally hesitate to invest in hardware, games and paid applications. The majority of programs available on HTC Vive and Oculus Rift are. A market for paid apps will always exist, as the gamer audience demand will remain strong for quality products. If the Google Cardboard has been effective in providing access to the general public to virtual reality, the goal is to have large sections of consumers equipped with more immersive technology. For this we need cheaper helmets, which will arrive on the market within a few years. Once this technology is widespread, the business model will adapt to that of the Internet: free. Applications, social networks, media… Consumers will want to use applications for free, so companies will have to resort to traditional methods to find income. In addition to advertising and selling data, additional content may be offered. Whether it is accessories in video games, premium access to social platforms, downloadable content will certainly have its place in virtual reality business models.


B2B

The business model aimed at companies mainly concerns augmented reality. A product like Hololens can replace computers and laptops while offering unique functions. They should prevail in the creative, engineering and military circles. This market should also be exploited by graphics engines. Paid like Epic's Unreal Engine, or free like Lumberyard, these engines will be the tools to develop applications and games.

Great prospects for the AR / VR business model

These different axes are provisional. Some of these business models have already started their deployments and others are expected to follow. The real question is how long this economic model will take to reach its full potential. It took more than two decades for personal computers to reach every home. Only a few years for smartphones to be present in almost all of consumers' pockets. AR / VR will probably take less time. Some markets remain unknown and will be discovered with the popularization of this technology. While waiting for these opportunities, you have to keep a mind and an open eye on your development.

Source : TechCrunch



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