Livia GreeneEvan HochhauserKen Okawa

Point of View

Augmenting the Advertising Industry

How augmented reality will redirect advertising

Creating new touch points with consumers.

ForewordAugmented Reality and Advertising Trends

Technological breakthroughs that change daily life have been growing at an alarming rate, and augmented reality is on this course to shift consumers’ lives

once again.

When the iPhone was unveiled 10 years ago, not only did it completely disrupt consumer electronics, it arguably sparked the current digital era. Advertising followed this, spurring a transition to digital media advertising. Since this innovation, there has been no comparable technological revolution. Augmented reality technology has the potential to be this next breakthrough. But will it happen? When will it begin? And if it does, will advertising trends shift again?

Augmented RealityAugmented reality is “the integration of digital information with the user's environment in real time.” AR technologies seek to disrupt the current standard of digital information. While smartphones and computers separate consumers from their environment, augmented reality will blend the two into one seamless experience.

Augmented reality and virtual reality are vastly different. While virtual reality places users in a completely immersive, virtual world with no connection to reality, augmented combines the two to create a heightened vision of the real world. As a result, the potential for each technology does not overlap. Virtual will likely be become a part of closed, home-based entertainment experiences, like gaming and 3D cinema. Augmented reality, however, looks to penetrate the everyday consumer market and could replace the smartphone with its more advanced capabilities.

"Advertising has grown where new media technology has emerged—going back to the first printing press, right through digital and mobile. Will AR be the next big thing for advertising? Given the history of ad and tech, it's probably a safe bet."

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— Kevin MannionChief Strategy Officer at Advertiser Perceptions

Advertising TrendsAdvertising is a powerful industry that has been prominent for decades, but new technologies have forced it to adapt quickly in order to keep effective contact with consumers. There are two key shifts that are shaping the future of the industry. First, desktop advertising has joined traditional print advertising on the downward slope. Although the industry experienced a revenue increase of 5% in desktop ads over 2015, it remained far behind mobile advertising. The second shift, therefore, is the increase of potential revenue from mobile advertising. Over 2015, it exploded with a 66% surge in revenue. This can be credited to two smaller trends.

First, the average consumer spends approximately one quarter of their time on their mobile device. Second, the boom in ad-blocking software suggests

that consumers are actively avoiding the aggressive marketing strategy supported by agencies such as Google and Facebook.

As a result, new customer touch points have to be created through mobile applications to focus on interactive advertising.If consumers are bombarded with ads of little personal value, then eliminating them from their “feed” can damage companies brand name and potential revenues.

Intrusive advertising is becoming increasingly unpopular, as is evident by the most popular ad-blocker, AdBlock Plus, reaching half a billion downloads in January. Advertising must become less interruptive and instead pivot to a permission-based model marked by high quality content tailored to individual consumers.

Mobile PC

Average time spent on mobile apps

So, marketing must become seamlessly integrated into the consumer’s reality. Already, companies are aware of this trend and have capitalized on it using in-app advertising. However with the release of Pokémon Go in June, a completely new market and new channel has been created to interact with consumers on a primary level.

Current augmented reality hardwareTo become this technological disruption that will replace the smartphone

and potentially mobile computer industries, the AR technologies have to

rapidly develop. Right now, there are countless different types and forms of

AR hardware and software.

1HandheldSmartphone applications are the entry point for commercial augmented reality. Using a phone’s camera and spatial software, it will integrate a virtual projection with the real world on the screen.

2Spatial Augmented Reality (SAR)Augments real world objects for groups of people without a physical device. It makes use of digital projectors to display graphical information onto physical objects, so it naturally scales up to numerous users.

3Head Mounted Display & Head Up DisplayHeadsets that use cameras and light projection to allow one person to see a blended world at all times. Current products in the pipeline include Microsoft HoloLens, Magic Leap and Meta headset.

4Contact LensesAlthough this technology has yet to take off, the goal of this is to put the technology above into contact lenses. Samsung has a patent and the U.S. military is currently working on developing this technology.

Market potential of augmented reality applicationsThe most profitable and most used form of augmented reality technology today is the smartphone.

Head Mounted Displays (HMDs) are in early developmental stages, and until the technology and price is right, the smartphone looks to be the most common platform for AR software. This usage is on path to grow exponentially.

The most noteworthy AR smartphone application, and the first real breakthrough for this technology for daily usage is the Pokémon Go application, which blends the Pokémon game with reality.

The app has already become the biggest mobile game in history, garnering over 26 million daily users in the U.S. alone in six days (Candy Crush had 20 million at its peak, which took 15 months to accomplish).

Not only that, but the average iPhone user spends 33 minutes and 22 seconds a day on the app, more than Facebook, Twitter, Snapchat, and Instagram, while earning $1.6 million a day in revenue.

The trend does not show any signs of slowing down.

In other words, the biggest augmented reality breakthrough yet is also one of the most successful app launches in history. That momentum indicates the application-based AR market is about to explode, as other developers are going to try and replicate the success of Pokémon Go.

The key take away from these projections is that the potential implications of AR technologies indicate that it will become a huge consumer electronic disruption,

perhaps enough to become the “next smartphone”. While projections are skewed as to exactly when it will accomplish this, it still appears inevitable. This will continue progressing through smartphones-based AR, which already has access to 2.08 billion

people.

It will not be necessary to look

at the world through a phone; instead, a non-intrusive headwear device that completely alters the world as

you see it.

Projections show that the AR market

has the potential to become nearly a

$120 billion industry as soon as

2020, which mostly depends on the

development of the technologies

themselves. Further, while VR seems

to be getting the most press, the

everyday long run applications of AR

in comparison suggest that its

market potential is over 4 times

larger than VR. All of this is based on

a projection that somewhere

between 2020 and 2024 augmented

reality technology likely HMDs—will

become mainstream.

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50

100

150

200

2016 2017 2018 2019 2020

Augmented / Virtual Reality Revenue Forecast ($B)

AugmentedReality VirtualReality

The true potential for this market lies with this technology. The augmented reality

market has the potential to become nearly a $120 billion industry as soon as 2020.

“

While the smartphone projections are

currently more favorable, further insight

and the pace at which these technologies

are being created suggest that in the

future, there will be a trend towards

adopting these headwear technologies

to replace smartphones.

MarketPotentialofARHeadMountedDevices

Intersectionofaugmentedrealityandadvertising

Right now, about 2.08 billion people worldwide use smartphones. With the recent breakthrough in smartphone-based AR, it is only logical that this will intersect with advertising. Referring back to Pokémon Go, it has 26 million daily users in the U.S. alone, and these players average 33+ daily minutes in the game. This equates to more daily users than Twitter, and more total time in the app than any of the largest social networks in the world. Therefore, finding a way to advertise in this thriving augmented world will be on the same pedestal as reaching customers through these massive social networks.

The transition to the HMD devices will indicate a transition away from smartphones. As AR technologies become the most used daily devices, companies wishing to advertise successfully will have no choice but to follow. As shown before, in the 9+ years since the iPhone was first released, advertising has adapted to reach customers primarily through these devices. In other words, if AR becomes the everyday technology experts project it to become, companies will have almost no choice but to refocus their advertising the same way they did when smartphones disrupted the world.

As advertising continues to find more success on mobile, digital platforms, it is further going to follow the specific mobile platforms that have the greatest access to consumers.

Advertising in Augmented Reality has a Viable Path

ExhibitionsIn the past, advertising in augmented reality has been restricted to exhibition-based advertising. The 125th

anniversary of National Geographic was celebrated with an AR exhibition at Rotterdam Centraal that allowed visitors to see themselves stepping into a variety of scenes, from playing with dinosaurs to walking on a spacewalk with astronauts.

2013

2016

Beyond

GamingPokémon Go’s gameplay encourages players to walk around to find Pokémon, and this offers the opportunity for businesses to advertise their locations in the game. Businesses can pay to be key locations in Pokémon, and consequently attract Pokémon players to their business. McDonalds Japan has gone down this route, and partnered with Pokémon Go to designate all 3000+ Japanese McDonalds locations as Pokémon Gyms.

BrowserWidespread adoption of AR is currently limited to mobile devices, but improvements in wearable technology will produce Head Mounted Displays. Blank billboards can display different content to different customers depending on their demographic, and businesses can display coupons and discounts as holograms outside of their stores.

Future advertising on AR has the potential to be more helpful and less intrusive

GPSAdvertising will become more local and will show ads of nearby businesses which are more relevant to the user

Outward-Facing CameraThis camera can supply data on individual consumer preference and supply relevant ads about businesses the consumer is currently looking at.

Inward-Facing CameraData on consumer interest in products and ads can be gathered by measuring pupil dilation of the consumer and coupling this with data from the outward-facing camera. This information can be used to create better advertisements that interest the consumer.

GamingAR games can give in-game rewards for the player visiting or interacting with real-life businesses. Many games similar to Pokémon Go can be expected to be developed in the following years.

Social MediaAdvertisements can be fun, and be shared on social media by the consumers themselves. Snapchat offers businesses opportunities to sponsor filters at major events such as the Super Bowl and Cinco de Mayo.

Ethical & Legality IssuesThe second assumption is that there will be no derailing customer-based or regulation-based issues. For example, a current concern with any highly connected technology is legality issues. Augmented reality technology constantly analyzes and records what it records around it. This may lead to legal issues when recording people in private or when viewing copyrighted media. Further, there is an ethical controversy of recording information that consumers may not want to share.

Potential barriers to the successful integration of augmented reality and advertisingFor advertising to be as successful as projected in augmented reality technologies, three significant barriers have to be overcome.

The first two are focused on the technology itself. Although the majority of projections indicate that augmented reality is on a path to becoming mainstream technology, there have been some key assumptions made to get to those projections.

Technological SetbacksThe first assumption is that the companies developing the HMDs will overcome technological hurdles and create usable and scalable hardware. Current progress is promising, and early trials and reports suggest that the technology will be here sooner than later. However, there is still room for growth regarding the spatial technology and connectivity in order to create a seamless experience.

Customer ReceptionThe third significant barrier deals with how customers might react to AR advertising. As previously mentioned, this new advertising has the ability to be non-intrusive, however, the opposite can easily be true. If this is the case, while AR would still take off, the advertising industry would likely cannibalize itself and prevent it from intersecting properly with AR.

Despite these significant barriers, the current projected trends suggest that they

will be overcome. Previous technologies faced similar developmental hurdles and

social stigma and, in most cases, overcame them.

About the authors

Livia studies Art History and French at Duke University, and

has an interest in the Travel and Transportation industries. She is

originally from London, England.

Evan studies strategic business management, data analysis, and

computer science in the Wharton School of Business at the University of

Pennsylvania. He currently lives in Long Island, New York.

Ken studies Biology and History at Bowdoin College with

a minor in wine tasting. He is originally from Tokyo, Japan and currently

resides in Brunswick, Maine.