Mobile AR will drive growth as VR forecasts are scaled back

A new report is claiming 2019 will finally be the year for virtual reality to shine, but SuperData Research forecasts that augmented reality AR will take the crown come 2021 – driven by the rise of mobile AR software, and has scaled back its estimates for VR revenues between now and 2019.

SuperData Research, which was acquired by Nielsen in September, reckons VR will achieve $3.3bn in consumer revenue this year, up from $2.8bn last year, and go on to hit $6.9bn in 2019. In fact, this forecast has been slashed from the firm’s previously projected totals of $4.5bn for this year and $9.6bn in 2019.

By comparison, mobile AR will double next year, according to the forecast, reaching $2bn by the end of this year. Earlier this year, SuperData reported AR and MR revenue would reach just $3.2bn by the end of 2018, going on to more than double next year to $7.2bn. The following year it showed a rise to $12.5bn and further to $20.3bn by 2021, by which time AR and MR will be worth more as a market than VR.

This week, however, it has split the AR sector in two – breaking out Mobile AR separately from AR and MR headsets. Mobile AR will make up the majority of consumer revenue by 2021, accounting for $17.4bn, compared to $5.6bn in AR/MR headset revenue. This shows a dramatic rise from just $0.1m in AR/MR headset revenue and $1.9bn in Mobile AR revenue in 2018.

Once users are untethered from home-based VR equipment and headsets, AR has far greater potential in the mobile world because of its reduced need for specialist headgear. VR, in the consumer world, is largely driven by gaming and shopping, plus some industrial applications are emerging, but most of these can be consumed while stationary. All that suggests that VR will remain a high end market, while AR will have the greater appeal to the mainstream, partly because it is better suited to mobility.

A combination of accessible smartphone software and high-end devices like Magic Leap and Microsoft HoloLens will drive AR and MR revenues, according to the report.

SuperData has tipped Oculus Quest to be a defining moment for the VR industry – projecting 1.7m shipments 12 months after the third generation VR headset launches in spring 2019. Facebook-owned Oculus is pricing Quest at $399, about $50 more than the Oculus Rift now retails for (after the recent price drop) and $200 more than the Oculus Go.

In comparison, Oculus shipped only 494,000 devices 12 months after release. Combined, SuperData projects Oculus will ship 2.5m Rift and Go headsets worldwide in 2019.

Additional SuperData insights show a balance shift in the market which makes for interesting reading. Hardware sales are projected to account for around 75% of total VR revenue this year, but this will drop to somewhere closer to 60% by 2021, caused by declining headset prices and the emergence of more monetization opportunities in the VR software space.

In fact, SuperData Research has established two entirely contrasting routes to market, showing that today the lion’s share of consumer AR and MR revenue is made in software. But by 2020, hardware and software will be neck and neck, until eventually hardware usurps software for the majority of AR and MR revenues by 2021.

These findings suggest strategic investments in VR software are required in order to drive the market and prevent further casualties in the industry. Conversely, it implies companies getting into the AR hardware game could be set to cash in fairly quickly.

It does note that AR has the potential to be fully integrated into everyday life thanks to ARKit being made available on iPhones, while it says Android is aiming to unleash its ARCore platform on 100m devices. This we don’t quite understand, as Google first said in January 2018 it had turned 100m Android smartphones into AR devices using ARCore, after first launching the SDK in Fall 2017 to replace Tango. Although ARCore in its early days garnered a reputation of being quite glitchy, so its reach may have since been revised.

There was in fact one significant exit from the VR industry this week, as Oculus co-founder and CEO Brendan Iribe handed in his resignation to Facebook, reportedly following a bust-up over the cancellation of the Rift 2 headset. Oculus CTO John Carmack has since tweeted he intends to stay at Facebook past the launch of Oculus Quest.