There is good news and bad news for the immersive reality industry, which consists of businesses that provide augmented reality (AR), mixed reality (MR), and virtual reality (VR) products. First the good news:
- According to analytics firm Digi-Capital, start-ups in the augmented reality and virtual reality space raised a record $3 billion in 2017, with more than $1.5 billion coming in the fourth quarter.
- These investments occurred across 28 categories ranging from education to music, suggesting how wide-ranging immersive reality is.
Now the bad news:
- More than half the investment came from just four major players: Improbable, Magic Leap, Niantic, and Unity. As Lucas Mateny of Tech Crunch noted, the actual deal flow for smaller immersive reality start-ups is getting smaller.
The largest category of investment was gaming, partly because of the $200 million received by Niantic, creator of AR sensation Pokémon GO the forthcoming Harry Potter AR game. The popularity of gaming apps underscores how immersive reality continues to be perceived as an entertainment phenomenon on the consumer side. But gaming accounted for only one tenth of the total investment into immersive reality for 2017, with hardware devices (such as smart glasses) and applications across many other fields accounting for the lion’s share.
So what do the figures mean? I don’t find the concentration of money into the hands of a few to necessarily signal harder times for immersive reality startups. The major players in the immersive reality ecosystem, such as Magic Leap, are asserting themselves. The market will only accommodate a limited number of headsets and associated hardware, and a consolidation among a few bigger players is inevitable.
Augmented reality will continue to be the more promising story on the consumer side in 2018. We’ve barely begun to realize the impact of Apple’s ARKit, which sparked the development of nearly 2,000 of AR-enabled apps in 2017 according to Apple. True, many of those apps were criticized for being substandard. But the apps will get better, and I believe we’ll see the emergence of more useful apps that assist in everyday functions such as learning. Meanwhile, it’s quite possible that investors are watching to see which uses of AR emerge from the 2018 Consumer Electronics Show, where AR companies are taking up 10,900 net square feet (a 10 percent increase over the 2017 show).
Although CES will continue to be an important barometer, the real news in immersive reality will continue to come from the enterprise side, where businesses such as Audi and Walmart are using augmented reality, mixed reality, and virtual reality to support functions ranging from sales and employee training. While head set maker Magic Leap gets the headlines and major investments, I believe that businesses such as STRIVR, which uses immersive reality for corporate training, are the companies to watch – and closely.