Virtual reality prototypes have been around for decades, going as far back as 1957. While each idea promised the “wow factor,” none of them took off and eventually went the way of the Nintendo Virtual Boy. Now, it seems VR is not only here to stay, but growing as it finds its place among different sectors.
Despite the hype, mass consumer adoption of VR has been slower than initially predicted but remains on a steady, upward trajectory in terms of revenue, headset shipments and investment.
Virtual Reality Revenues And Projections
Global VR revenues will reach $7.17 billion by the end of this year, according to Greenlight Insights—with more than 65 percent coming from headset sales. The analyst firm predicts that global VR revenues will come close to $75 billion by 2021, with $38 billion in the US alone.
Strapping on a VR headset doesn’t have to be a solitary experience—social VR is a rising trend that turns virtual reality into a destination. SuperData predicts that revenue from social VR such as AltSpaceVR or Facebook Venues will reach $3.1 billion by the year 2020, compared to $6.3 million earned in 2016.
VR Headset Shipments
IDC expects AR and VR shipments to total of 13.7 million units in 2017, reaching 81.2 million by 2021. VR will account for 90 percent of the overall market in 2019, according to the company, dropping to 70 percent by 2021 as AR headsets or glasses gradually appear on the market.
“Consumer-focused AR headsets are still some way off, as most people will first experience AR through the screen on their phone,” said Tom Mainelli, vice president of devices and AR/VR at IDC in a statement. “Now that Apple and Google are both focused on helping developers create AR experiences on their platforms—through ARKit for iOS and ARCore for Android—we can expect to see a flood of new AR apps appearing on smartphones later this year and into next. These developments should eventually lead to consumer-centric AR glasses, but that won’t happen in meaningful volume, at affordable price points, for some time.”
Since the beginning of 2010, investors have disbursed about $4.5 billion via 1,179 venture deals around the world to 707 different VR startups, according to Pitchbook. There is a notable leap in money invested in 2014, the year Facebook acquired Oculus—jumping from $111 million in 2013 to $957 million. Pitchbook notes that more than half of those funds were invested in Magic Leap, a company that has secured over $1 billion in funding to date.
But after tossing their money into the VR machine and waiting to make a fortune, many smaller investors started to get nervous.
“Because the market was so new, many didn’t really know what they were investing in and, therefore, how long it would take to see returns,” observed SuperData VP of research and strategy Stephanie Llamas. “After three years and less than $5 billion in revenue since 2014, this VR thing wasn’t looking so promising anymore.
“Big players have stayed heavily involved, with the likes of Google, HTC, Samsung and now Microsoft very heavily investing in a long-term commitment. The last time we saw this kind of push from so many heavy-hitters was with smart devices,” said Llamas. “Expect this to be the beginning of VR’s next wave of major funding—funding that could finally get us the shovel we need to dig VR out of this trough everyone has been dwelling on so much.”
The company found that very few marketers surveyed use VR or AR in their efforts. Out of the 300 marketing professionals surveyed, only eight percent said they currently use VR and seven percent use AR. In addition, 57 percent said that VR does not apply to their organization.
That’s not to say that brands aren’t finding success with the medium. Branded VR content is a growing trend, especially in the film and travel industries. Consumers seem to like it too. In a study testing the effectiveness of marketing in VR, brand recall was at least eight times more effective and resulted in double the intent to share.