In its second year on the consumer market, virtual reality has been challenged with getting out of the “trough of disillusionment”—a phase of disappointment that follows any heavily hyped technology trend—as it seeks acceptance and mass appeal.

Here’s a quick recap:

  • Hardware makers, content developers and tech giants like Facebook and Google remain committed to helping the industry grow, and this year alone saw Hollywood further embrace the technology to create memorable movie promotions, leading more celebrities to become involved with VR.
  • HTC and Oculus cut their hardware prices, with the latter launching a large-scale campaign over the summer to grow adoption while IMAX debuted its first VR arcades in the US.
  • Sony reported that over 2 million PlayStation VR headsets and 12.2 million VR games were sold worldwide, in addition to 70.6 million PlayStation 4 consoles.
  • Intel launched its VR esports initiative.
  • Both Apple and Google are bringing support to augmented reality.
  • Microsoft is partnering with hardware companies to make mixed reality headsets, while HTC and Oculus both announced wireless headsets for next year.

But people are still optimistic about the technology. While Stephanie Llamas, SuperData’s VP of research and strategy, says the industry isn’t growing as quickly as many expected, VR still grew 24 percent year-over-year—from $1.8B to $2.2B—as a result of steady headset sales and higher content demand.

While Tony Parisi, Unity Technologies’ global head of VR/AR strategy, agrees that hardware adoption has been slower than predicted, he said that there has been significant uptick in other areas of VR.

“Overall, we’re seeing increased VR adoption across the enterprise, with more organizations moving from proof-of-concept to real-world deployment,” he said. “We’re also seeing VR applications across medical, film and entertainment and creative, proving that the wide-scale opportunity for VR is real.”

Parisi also pointed out that VR investments jumped 79 percent in the second half of 2017, indicating that industries are doubling down on the technology. That’s in addition to how over a million headsets were shipped in Q3 due to price cuts and growing consumer awareness. “All in all, it’s been a bit of an up-and-down year for VR, but there are positive signs that VR is nearing the end of the ‘gap of disappointment,’” he said.

Frank Azor, VP and GM at Alienware, Gaming and XPS at Dell, thinks high expectations led to disappointment, but sees the sale of 3 million VR headsets this year as success. “[It would be] a monumental success for any one-to-three products to sell that many units, so I don’t get how that’s regarded as a failure,” he said. “[VR has done] better than the first or second year of the first Windows tablet, and [has been] more successful than the first notebooks and gaming consoles in their first and second years. Plus, there were 2 million sold last year, which means there were at least 5 million headsets sold.”

Azor isn’t alone in his optimism.

“Every major tech company has a VR strategy and their own headsets,” said Baobab Studios CEO Maureen Fan. “There are so many more opportunities for creators now. VR is also becoming more social. However, we still need a lot more high-quality content for VR to become mainstream. We also need more universally appealing content that draw new audiences into VR.”

Baobab and Hollywood studios have been focused on creating content that appeals to broad audiences through VR experiences such as Invasion!, Asteroids! and Rainbow Crow featuring musician John Legend. Invasion! won an Emmy in 2017, and Baobab announced that it is partnering with Roth Kirschenbaum Films (Maleficent; Alice in Wonderland) to adapt the VR short to traditional 2D screens.

“Distributors have released data that shows that VR experiences and films rival games in views,” Fan explained. “For example, Invasion! beat out games when it launched. We think they complement each other and rising tides lifts all boats. VR experiences and films bring in new audiences to VR and are crucial to increasing VR adoption.”

“The public puts a high premium on celebrity-endorsed goods and content,” Llamas added. “Having someone like John Legend doing Rainbow Crow or Obama in an Emmy-winning 360 video legitimizes the tech in the eyes of mainstream consumers. It’s hard for them to get access to headsets and make their own opinions about it, so trendsetters like celebrities help pique people’s curiosity and consumption.”

Parisi noted that quite a few high-profile Hollywood studios have become involved with VR, with the technology being an immersive extension to storytelling and film. As examples, he highlights CocoVR, Blade Runner 2049: Memory Lab, in addition to Unity’s partnership with Lionsgate this year to debut Virtual Room advertisement for Jigsaw—demonstrating the opportunities VR provides for brand marketing.

“What we found is VR ad experiences elicit greater emotional response, and massively higher engagement rates than any other platform,” Parisi said. “They show that people are more immersed with the brand. For example, the Jigsaw Virtual Room ad saw 6X the video completion rates of skippable video. We hope to see this type of brand marketing continue in 2018 and help push the widespread consumer adoption of VR.”

But even as VR content diversifies, Fan admits that she is often asked if Baobab is making games or films due to their interactivity. So, it should be of little surprise that video games are getting a tremendous amount of attention, with Bethesda launching VR adaptations of its hit games Skyrim, Fallout 4 and Doom, and CCP launching a virtual sport called Sparc while Oculus partnered with Intel and Alienware to bring VR to esports.

Azor said that VR and esports was a fascinating combination because it fully brings together the athleticism of traditional sports with the limitless potential of video game environments.

“To us, what VR and esports fuse the best of those two things and creates a new level of competition and athleticism that I don’t think we’ve ever seen before,” said Azor. “We think that’s a cool opportunity, even though we don’t know entirely where it goes. It’s something that we see bubbling up and emerging, and we’re trying to help feed it and kick it off. That’s why we created the Alienware VR Cup, partnering with Oculus and Nvidia.”

Although VR seems to be finding its stride, it’s hard to overlook how both Google and Apple are showing strong support for augmented reality. Devices such as the iPhone X appear to be driving enthusiasm, but Fan asserts that—while AR platforms are promising—they will probably experience the same cycle VR is going through.

“AR is an exciting new area for creators to engage with a new audience that have yet to try VR,” said Fan. “For both AR and VR platforms, it comes down to creating great content. AR through your phone is immediately accessible, just like 360 VR videos  are immediately accessible. However, it’s all about the quality of the content. AR goggles will still take time and will go through the natural tech cycle that VR and other tech goes through.”

“AR and VR offer different experiences for consumers,” Parisi added. “What we are seeing now with AR is that there is a real and tangible opportunity to reach more consumers. This is largely due to the fact that AR is no longer the future—it’s available today and it will be available on more than 1 billion devices in the marketplace by the end of 2018.”

Llamas agreed that VR and AR are fundamentally different technologies, with different use cases and experiences. She said that, “2018 will be about realigning expectations and helping consumers and the industry alike understand the important differences between the two so they understand they are not mutually exclusive, and we can be excited about both!”