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© 2017 eMarketer Inc.

Virtual and Augmented Reality

StatPack

Current Forecasts and the State of the

Market

July 2017

Contributors: Christopher Bendtsen, Ricky Costa

Victoria Petrock


VR and AR: What’s the difference?

Virtual reality (VR): VR fully immerses a user inside a nonfixed visual environment, such as a virtual world or experience. Examples of VR include 360-degree videos, photos and product demos via any device (e.g., connected TVs, desktops/laptops, mobile devices and headsets that let users navigate through the experience), and games via head-mounted displays (HMDs). Examples of VR headsets include AuraVisor, Google Cardboard, Google Daydream View, HTC Vive, Oculus Rift, PlayStation VR and Samsung Gear VR.

Augmented reality (AR): AR enables a user to interact with virtual objects and other types of digital information that are overlaid over the real world. Examples of AR include filters for videos and photos (e.g., Snapchat Lenses); games (e.g., Pokémon Go); navigation (e.g., heads-up displays [HUDs]); interactions with objects (e.g, Blippar, HP Aurasma); and 3-D product demos and projections via headsets and smart glasses.

Source: VR headset: Hopkins; AR goggles: Felisberto Piazza; Icons via The Noun Project, licensed under CC by 3.0.

https://creativecommons.org/licenses/by/3.0/us/


eMarketer definitions

• Virtual reality (VR) users: Individuals of any age who experience VR content at least once per month via any device. This definition includes users who view 360-degree photos/videos and 3-D animations on any device, including desktops/laptops, mobile devices, game consoles or HMDs.

• 360-degree video: Video footage recorded using a collection of cameras, or an omnidirectional camera that enables the viewer to control the viewing direction. This format is also known as immersive video or spherical video.

• Head-mounted displays (HMDs): Devices used to experience VR and AR content that are held up to the eyes or worn on the head. HMDs are either stereoscope-style headset enclosures that can incorporate a smartphone, or dedicated HMDs that contain their own screens and are tethered to computers or game consoles. Examples include Oculus Rift, Google Daydream View and PlayStation VR. HMDs are also commonly referred to as “headsets.”

• VR headset users: Individuals of any age who experience VR content at least once per month via specialized HMDs.

• Augmented reality (AR) users: Individuals of any age who experience AR content at least once per month via any device.

• Smart glasses: Wearable computer glasses used in AR applications that display information that supplements what the wearer is seeing. Examples include Google Glass, Epson Moverio and VuzixBlade 3000.

• Heads-up displays (HUDs): Transparent displays that project information and imagery onto a surface (often a windshield) without requiring viewers to look down or away from what they are focusing on. They are most often used in AR applications, as with aircraft or automobiles.


Virtual Reality

© 2017 eMarketer Inc.Source: eMarketer, April 2017

42.9

millionpeople in the US will

be VR users by 2019

That’s

14.8% of the population


109.5%

63.7%

34.1%

0%

100%

2017 2018 2019

US Virtual Reality User Growth (% change)

The number of VR users in the US will more

than double in 2017

10.7

22.4

36.7

49.2

0

60

2016 2017 2018 2019

US Virtual Reality Users (millions)

Source: eMarketer, April 2017

eMarketer’s forecasts

include people who

consume 360-degree

photos/videos or 3-D

animated VR content at

least once a month on

any device.

The number of users will grow

109.5% in 2017. The increasing

popularity of 360-degree

photos/videos is driving growth.


Though VR penetration will remain relatively

low, it will continue to grow


By 2019, nearly 15%

of the US population

and 17.5% of internet

users will be VR

users.

4.0%

8.2%

13.2%

17.5%

3.3%

6.9%

11.1%

14.8%

0%

20%

2016 2017 2018 2019

% of internet users

% of population

US Virtual Reality User Penetration (% of internet users and % of population)


Most VR is consumed on computers and

mobile devices

• VR generally falls into two categories: 360-degree photo/video and 3-D animation. It can be consumed via desktop/laptop, mobile device, game console or HMD/headset.

• Most of today’s VR is consumed via desktops, laptops and mobile devices in the form of 360-degree photo/video.

• Specific HMDs used to view VR are designed to tether to one or another of these devices. HMDs currently make up less than one-quarter of VR device sales.

• The majority of today’s VR content is related to gaming and entertainment, but there are also promising applications in other industries.

Source: SuperData Research and Unity Technologies, Feb 2017; eMarketer calculations

39.5% 37.8% 22.6%

Virtual Reality Device Sales Share Worldwide, by Type, 2016 (% of

total)

Desktop/laptop Mobile Console


The majority of 360-degree photos/videos

are consumed via YouTube and Facebook

Source: Facebook Newsroom; Google Blogs; Panorama graphic by mikicon from thenounproject.com


360-degree photos and videos are the most

widely viewed type of VR content

Source: Facebook Newsroom; Google Blogs

“More than 25 million 360-degree photos

and more than 1 million 360-degree

videos [have been] posted on Facebook to

date.”

—Brent Ayrey, Product Director, and Christopher

Wong, Software Engineer, Facebook, March 2017

“YouTube has hundreds of thousands

of 360-degree videos available.”

—Amit Singh, Vice President, Business

Operations, AR & VR, Google, February 2017


The number of US VR headset users is

expected to double this year


4.8

9.6

13.9

17.2

0

25

2016 2017 2018 2019

US Virtual Reality Headset Users (millions)

98.7%

45.3%

23.4%

2017 2018 2019

US Virtual Reality Headset User Growth (% change)

0%

100%


But VR headset users will still make up less

than half of total VR users


34.9%

37.9%

42.7%

45.0%

0% 100%

2016

US Virtual Reality User Share, Headset Users vs. Non-Users (% of total)

VR headset

users’ share of

overall US VR

users will decline

over time. The

sales and use of

cheaper

headsets will

decrease, and

more people will

watch 360-

degree photos

and videos on

other devices.

2018

2017

2019

VR headset users Headset non-users


A number of headsets are now on the market

Source: Google; Samsung; Oculus; Sony Interactive Entertainment; HTC

Samsung Gear VR

November 2015

Oculus Rift

May 2016

HTC Vive

June 2016

Google Daydream View

November 2016

PlayStation VR

October 2016

Google Cardboard

June 2014


So far, Samsung Gear VR and PlayStation VR

lead the pack

Source: Thrive Analytics, March 2017

14%

18%

22%

42%

60%

Google Cardboard

Google Daydream

Oculus Rift

PlayStation VR

Samsung Gear VR

Virtual Reality Headsets Used by US VR Headset Owners (% of respondents)

The Samsung device’s

popularity is likely a

function of its perceived

value at a relatively low

price.


BI Intelligence expects

global VR headset shipments

will increase from

12 million

in 2017 to more than

55 million

in 2022

That’s

359% growth over the next

six years

Source: BI Intelligence, Feb 2017


Citigroup expects worldwide VR headset sales

to quadruple between 2017 and 2025

Source: Citigroup Investment Research, Oct 2016

10

30

40

0

50

2017 2020 2025

Virtual Reality Headset Sales Worldwide (millions of units)

VR hardware is

expected to drive

industry growth in the

near term.


The US, Europe, China and Japan are among

the biggest markets for VR headsets

Source: UBS, Jan 2017

0%

100%

2016 2017 2018 2019 2020

Europe

US

Japan

China

Virtual Reality Device Sales in Select Countries/Regions

(millions/billions and % of total)

$2.1 billion by 2020

$384 million by 2020

$2.4 billion by 2020

$705 million by 2020 VR device

sales in these

countries and

regions are

forecast to

reach $5.6

billion by

2020.

$168 million in 2016





VR headset users generally have positive

things to say about them

Most consumers

who purchased

headsets reported

experiences that

met or exceeded

their expectations.


Fewer than

15% of internet

users worldwide are

interested in purchasing

a VR headset...

while 59.6% are

not interested and

25.6% are

unsure

But many consumers remain lukewarm

Source: Gamer Network, Feb 2016


Lack of interest and cost are the biggest

obstacles to headset adoption

3%

12%

14%

43%

53%

Poor quality of content

Lack of content

May cause motion

sickness

Too expensive

Just not interested

Reasons that US Internet Users Are Not Interested in Owning a Virtual

Reality Headset (% of respondents)

Source: Thrive Analytics, March 2017

Younger people are

more concerned about

cost and more likely to

worry about a lack of

content for headsets.

Older people are

more likely to say

they aren’t

interested, but less

likely to be

concerned about

motion sickness.


Augmented Reality


The number of AR users in the US is also

steadily rising


30.7

40.0

48.1

54.4

0

60

2016 2017 2018 2019

US Augmented Reality Users (millions)

30.2%

20.1%

13.1%

0%

50%

2017 2018 2019

US Augmented Reality User Growth (% change)

eMarketer’s forecasts

include people who

consume AR content at

least once a month on

any device.


54.4

million

people in the US will

use AR by 2019

That’s

16.4% of the US population



That’s a compound

annual growth rate

(CAGR) of

81% between 2016 and 2024

The global AR market will

be worth more than

$165 billion

by 2024

Source: Global Market Insights, 2017


By 2019, nearly one-fifth of US internet users

will be AR users


11.5%

14.7%

17.3%

19.4%

9.5%

12.3%

14.6%

16.4%

0%

25%

2016 2017 2018 2019

% of internet users

% of population

US Augmented Reality User Penetration (% of internet users and % of population)


Right now, there are more US AR than VR users


3.3%

6.9%

11.1%

14.8%

9.5%

12.3%

14.6%16.4%

0%

25%

2016 2017 2018 2019

VR users

AR users

US Virtual Reality vs. Augmented Reality User Penetration (% of population)

... but VR

use is

growing

more quickly,

from a

smaller base.


AR content can be viewed with several

types of devices

Source: HUD: Hyundai Australia; Smart glasses: Epson; Handheld device: zedinteractive from Pixabay

HUDsHandheld devices

Smart glasses and

HMDs


Most of today’s AR experiences take place

on handheld devices

Source: Technavio, 2017

15.8% 35.8% 48.4%

0% 100%

Augmented Reality Device Revenue Share Worldwide, by Type, 2016 (% of total)

HMDsMobile devices

Smart

glasses


Apps and filters for mobile devices are

among the most popular AR uses right now

Source: Snap Inc.; Facebook; Darren Mark Domirez from Flickr

Facebook Messenger

filters, 3-D masks and

camera effects

Snapchat and Instagram

lenses, filters and

stickers

Pokémon Go


Shipments of dedicated VR hardware dwarf

shipments of AR hardware

VR hardware is

much further along

on the development

and adoption curve;

much of the AR

hardware remains

experimental.


But AR hardware is expected to generate

more revenues than VR hardware by 2021


$2$9 $10

$10$2

$9

$18

$120

$0

$120

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Axis Title

VR hardware

AR hardware

Augmented Reality vs. Virtual Reality Hardware Revenues Worldwide (billions)

AR devices have more

potential to begin

replacing smartphones,

and to become more

widely used as work tools.


Both VR and AR have use cases in many

industries

Source: Doctor: IYIKON; Car: Dinosoft Labs; House: ranjit kumar; Airplane: Gan Khoon Lay; Mortarboard: amymorgan; Shopping cart: Made; Movie camera: Storm; All icons from thenounproject.com

Video GamingTravel, Tourism &

Transportation HealthcareReal Estate

AutomotiveRetail &

MarketingEducation

Digital

Entertainment


Gaming and entertainment will continue to

drive revenues in the near term


$130 billion

$276 billion

$163 billion

0%

100%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Hardware

Software, service & content

Commerce

Augmented and Virtual Reality Revenues Worldwide, by Segment (billions and % of total)

$0

$4 billion

$4 billion

By 2025, AR and VR revenues worldwide are

expected to reach at least $569 billion


Although

software,

service and

content will

make up the

largest

portion of

AR/VR

revenues by

2025,

commerce

will grow

from $0 to

$163 billion.

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