At the Oculus Connect conference in October, Mark Zuckerberg revealed an ambitious goal– getting 1 billion people in Virtual Reality. The timing for that wasn’t announced, nor was the type of engagement of those users – did Mark mean 1 billion people trying out VR once, or becoming headset owners?
It didn’t matter. What was important is that for the first time, someone driving VR forward fixed an objective for its adoption.
At Advir (soon rebranding Admix) we are building a programmatic adtech platform for immersive technologies, so we are heavily relying on this adoption to build a successful business. After all, the more people use a headset, the more adverts can be seen.
In particular, the metrics important to us are:
- global VR/AR adoption (number of active users worldwide);
- daily engagement (time spent in VR/AR per user);
- CPM (cost per thousands impressions or whatever the business model is)
There is no precedent for this, and very little projections available, besides the obvious Digi-Capital and Superdata. Therefore, our approach has been to benchmark these parameters to the early days of mobile, which has been the latest big media disruption. We recognise the obvious difference and do not pretend that VR/AR are going to behave the exact same way than mobile did, but history has a tendency to repeat itself, so the analogy is useful to extra trends, and predict how things might develop.
In this post, I wanted to share some of these findings.
To understand the charts:
- ‘VR/AR‘ data shows projections for VR + AR + MR (since we focus on immersive technologies as a whole) from 2018 to 2028 (year 1 is 2018 etc)
- ‘mobile‘ data is actual data from the mobile advertising industry, from 2008 to 2018 (year 1 is 2008 etc). We start in 2008, when mobile advertising started – initially direct deals, then programmatic a few years after.
1. Global adoption
We believe that the early adoption of immersive tech will be driven by smartphone AR, which doesn’t require the purchase of a new device. That’s different from the early adoption of the smartphone, which did require the purchase of the device. But what matters to us is the number of people using the technology.
Starting 2022/2023, we can assume that all-in-one, 6 degree of freedom VR headsets will be the norm. Most of the friction from these early products will be gone, as it becomes more mass market. For AR, it will be the beginning of the commercial AR headsets (Apple rumoured to ship glasses by 2021?). While mobile growth is now flattening as it matures, VR/AR adoption will still be going strong a decade out – this is just the beginning.
For the next decade, we think that VR/AR will still remain a premium product, therefore could plateau around 1B users. As a side note, compare the first few years of our projections vs Digi-Capital, who forecasted a quicker growth than mobile. Comparing numbers, we believe they are 2 years too optimistic.
Bottomline: knowing that as of today VR has 7M monthly users, and 400M devices supporting AR (since ARCore launched out of beta this week), it is realistic to estimate an activation from 200M people by 2022. Out of these 200M, we estimate 160M AR and 40M VR.
2. Daily engagement
The smartphone era really started in 2007 with the iPhone, but limited functionalities and app ecosystem were limiting its use for under 1h per day. As this ecosystem improved, with 3G allowing users to consume rich content on the go, growth exploded in 2011/2012, and sustained up to today – we are spending an average of 3h per day on our smartphone.
We see the same today – VR is fun but has limited utility. This is even more true with AR. When better hardware and more content become available, more business adopting the technologies, we will see the daily time spent increase.
We believe we’ll need to wait for 2023/2024, when AR headsets are available on the market (Apple set to release one by 2021), to drive this up significantly. People will spend a lot more time in AR because they can multitask wearing the headset, which they can’t do in VR, or with smartphone AR. We believe this is the key to increase their daily use of the medium.
What the chart doesn’t show, are the hours spent on mobile from 2018 to 2028. We predict this will decline, just like TV consumption is in decline since 2010. That attention is now focussed online. Similarly, some of the 3h/day we are now spending on our smartphone will be spent in AR. And VR should push TV consumption further down.
I am aware of a study from HTC reporting that the average VR users spends 20h a month in VR alone. We believe that the subset interviewed was early adopters and that this rate of adoption per user can’t be sustained when it starts to hit mass market.
Bottomline: people will engage more and more with VR/AR as its utility increases. A decade from now, out of 80h per month in VR/AR, we estimate people spending >60h in AR and <20h in VR.
3. Ads prices (CPM – cost per thousands impressions)
Pre-programmatic (2004 to 2009), mobile advertising campaigns were experimental and mostly selling PR for the brands to try it out. As this PR effect wore off, and more supply volumes grows, the CPM decreased sharply, before slowly rising again as the ecosystem stabilised with more advertisers joining in.
This is similar to what we expect to happen to the ad prices for VR/AR.
However, we believe that the higher immersion and level engagement of VR/AR ads will sustain the CPM to much higher level than what happened on mobile. With AI automating a lot of the buying process, being able to reach customers at the right time in their AR headsetwill also be very valuable. We can imagine that computer vision will significantly improve displays, which will make placements more valuable and drive CPM prices up.
We also think that the advertising ecosystem in VR/AR will be skewed towards certains applications that can serve many ads (shopping apps, social apps) compared to others who can’t serve as much (education, movies), whereas the mobile landscape is more uniform.
Bottomline: while not able to discuss our existing prices, we predict that CPMs in VR/AR will initially start high, before decreasing and stabilising at premium level compared to mobile. CPM volatility will be lower than in the early days of mobile, because the programmatic ecosystem is already established.
If anyone wants access to the full analysis, I would be happy to provide. Comment below!
I am the founder of Advir.co (soon rebranding to Admix) the first monetisation platform for immersive technologies. Besides VR/AR/MR and adtech, I talk about behaviour changes, the metaverse, and building the future. To stay in touch with me, follow me on Twitter @samhuber or checkout my personal website samhuber.com.