Augmented and Virtual Reality Markets Will Hit a Combined $150 Billion By 2020

According to new research from digital advisory firm Digi-Capital, the augmented reality market will deliver roughly $120 billion in revenue by 2020, while the virtual reality market will earn approximately $30 billion. The combined revenues promise to significantly "disrupt" the mobile space, Digi-Capital maintains.

While the terms "augmented reality" and "virtual reality" are sometimes used interchangeably, there's an important distinction to be made. When it comes to headsets, for example, though both augmented reality and virtual reality headsets provide 3D high-definition video and audio, VR is a much more immersive experience. A user can see through and around an AR headset, while a VR headset would be fully encompassing. This distinction plays a key role in how the technologies will be used as the market gains momentum, Tim Merel, managing director of Digi-Capital, explains. Virtual reality has promising potential for the gaming industry, where a total transformative environment is crucial to the experience. As for business use cases, augmented reality is the way to go, Merel says.

The proliferation of augmented reality–enabled devices opens the door to a number of different types of enterprise and consumer applications, such as enterprise applications that deliver marketing content in an entirely new format or consumer applications that allow users to project a customer service representative onto any screen around them. The technology may also pave the way for a-commerce, the so-called "cousin" of e-commerce and m-commerce, according to Merel. Eventually, augmented reality devices may become yet another purchasing channel for shoppers that will behave somewhat like the mobile channel.

Augmented reality software and services are closely tied to the mobile market, and have a symbiotic relationship—though AR technology competes with mobile technology in some ways, it is also responsible for growing it in others. "The potential scale of augmented reality and AR's cannibalization of mobile are relatively new concepts. We anticipate disruption of hardware and software across [the] mobile Internet," Merel says. At the same time, "together with innovative applications nobody has thought of yet, AR's scale could prove a bonanza for mobile networks' voice and data businesses. Someone has to pay for all that mobile data," Merel wrote in a blog post.

Though Digi-Capital expects the augmented reality and virtual reality markets to grow quickly in the coming years, Merel admits that it's very early in the game, and enterprise software vendors aren't ready for the rush yet. A device from a major consumer electronics company such as Apple may be the catalyst required for getting the industry's attention, and such a device may not be a far-off prediction, Merel speculates. Other companies such as Microsoft, which recently debuted HoloLens, or Facebook, which has also entered the playing field after acquiring Oculus, may add fuel to the fire as well. "Looking at how today's giants are or are [rather] not prepared, there is a lot of room for the growing list of early-stage companies," Merel says.

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