All the main takeaways from the most recent SuperData and Ecorys AR/VR market analysis

I’ve read a lot of commentaries in these days about the recent report about “Digital games and interactive media” (and so AR and VR, too) that the market analysis company Superdata has released last week. These comments were pretty bad, so I decided to read the report to have some personal opinion about what they’ve written and I discovered that this document is not that bad at all and has, in my opinion, some interesting takeaways. In those days, my friend Enrico Speranza (the author of VR Awesome) has also sent me another report on the status of AR/VR in Europe and I learned some useful information from it as well. So, I decided to write this post to tell you what are the most important things that I’ve learned reading these documents. Follow me and you’ll discover them.

SuperData report

SuperData report is very easy to be read: you just need 15 minutes or such. There are a lot of graphics and images and some very punctual information, to give you a grasp of what is the status of the various gaming technologies (mobile, PC, AR/VR, etc…) after 2017. You can find it here: to get it you have to perform a fake purchase of $0.00, register and then wait for SuperData to send you an email with the report attached. Since you can read it in very little time, my advice is to get it and read it.

This is the most useful info that I got from it.

2017 for XR has not been that bad

Reading the various comments on social media, I thought that this report said that 2017 had been a bad year for XR. Actually, I see a good picture of it from what I’ve read. The revenue trends for virtual and augmented reality are both positive: 2017 has been a step forward after 2016 and 2018 will see both technologies make significant improvements of the turnaround. The overall XR ecosystem generated in 2017 a total $4.0B revenue, with a +37% with regard to 2016. It seems a great news to me.

2017 has been good even for VR

Let’s be honest: we VR innovators have had better years. 2017 has been the year of the various “VR is dead”, “VR is a fad” and “AR is useful, VR is not” articles… as if there was a war between these two technologies, while actually, they are part of the same ecosystem (as even Mr. Graylin from HTC Vive says). So, since the media started scaring the users (and so the investors), I didn’t expect a huge growth for VR, that in fact has not had a huge growth. But it has grown anyway.

While the total revenue has “only” grown by 22% since last year, the software revenue has more than doubled (Yikes!) going from $0.23B to $0.55B. This is an awesome news for all the VR developers out there, even considering that this doubling trend is expected to replicate also in 2018. In 2018 we should also see the hardware doubling its expected revenue, maybe even thanks to the introduction of standalone devices as Oculus Go and Vive Focus.

Big franchises are important

One of the reasons why the software revenues have grown so much is because some VR games related to famous franchises like Doom, Fallout, Skyrim and Resident Evil have been released into the market. The same report, even when talking about mobile games says that “Powerful brand recognition is key to winning in the Western (market)”. So, here in the West, the brand of the game is very important to make money and we can easily see that this statement holds for all gaming platform. Fallout 4 VR has recently reached the quota of 100.000 users: multiply it by the $59.99 price tag and you get an interesting amount of money for sure. If they’d have released the same game but without the Fallout brand, very few people would have bought the game for that price.

We still need more diverse content

There are still people talking about the killer app for VR, but the truth is that we just need a better VR ecosystem. Most apps on the VR marketplaces are games, but for VR to succeed as a mainstream device, we need more diverse content: we need the Word of VR, the Firefox of VR, the Visual Studio of VR, etc… PCs are widely used because they’re useful for everyone to do any kind of task… if we want VR to because the same, we have to provide to any kind of people the app that they need.

VR hardware sales have winners and losers

Mass-market VR devices saw a +27% growth, but this datum doesn’t represent a happy news for everyone. The two winners regarding hardware sales have been Oculus (thanks to its aggressive price strategy) and Playstation VR (because it works out of the box with PS 4). In particular, PSVR in 2017 has more than doubled its 2016 shipments! All the other headsets have seen a downward trend of their shipments, even the Gear VR and Daydream are not performing very well… I think because people do not find them that useful since you can only use them for watching videos and playing minigames. This trend is something that scares me about Oculus Go, too: if these devices are selling less, why a standalone clone should interest more the general consumer?

Anyway, notwithstanding the negative trend, Gear VR is still the most sold headset (Cardboards are not included in the report), while Daydream shows as a failure. This platform was born with the idea of disrupting Gear VR thanks to its open ecosystem, with lots of compatible phones and we had all great expectations for it: the result has been that the number of shipped Gear VR headsets is more than 24 times greater than the one of the shipped Daydream View viewers! Of course many Gear VRs have been given out for free and there is still a long road to go, but at the moment Daydream sales are surely disappointing.

The “loser” in the tethered realm is instead HTC Vive: in 2016 it was the market leader because of a better reputation among enthusiasts and because of a better tracking technology, but in 2017 it lost a lot of market shares. The problem is: it has mostly the same features of the Rift, but costs $200 more, so people are choosing the competition. I think this is the reason why HTC has created a new awesome premium product as the Vive Pro, to position itself as a company offering high quality products at a higher price. I put the world ‘loser’ between quotation marks because if you sum the shipments of 2016 and 2017, it still appears that Vive has sold more than the Rift. (Even if I have to say that from Steam hardware survey we can extrapolate data saying the opposite… maybe because many Vives have been sold for enterprise usages, so to people that don’t use Steam)

Enterprise is the key

Since adoption among consumers is going slowly, most of VR companies are gearing towards enterprise adoption. We all know that VR has a lot of possible applications: training, medical, psychology, fitness, art, etc… and selling VR solution to companies working in these fields is the key to survive this transitional moment. If you’re wondering what is the most promising sector: it is training, with 56% of VR enterprise customers using the technology for this purpose.

AR is jumpstarting

The release of Apple ARKit and Google ARCore has been a good news for the XR ecosystem and while in 2017 there has not been a great growth for AR, in 2018 things should improve a lot. It has to be said that Pokemon Go, with its $890M revenue in 2017, has a huge impact on these statistics. Anyway, I’m still a bit skeptical about these predictions: in 2017, during the hype about ARKit, I published a popular article where I explained why I was not sold to this “revolution”: the various AR frameworks still lack a lot of features (e.g. multiplayer and environment recognition) and the mobile forces the users to experience AR through the screen of their phone, making them walk like zombies. And in fact now there is a lot of disillusionment about this technology: I’ve already read various articles highlighting how ARKit apps are few and not that much used… so I think that we’ll have a growth in mobile AR, but not as big as SuperData has forecasted. We’ll see.

Investors believe in AR

Investors are more willing to invest in AR than in VR. I think that this is mainly because:

• AR has a bigger future forecasted market since we’ll wear it every day and it will be pervasive for our life;
• AR has a present bigger market since all the ARCore and ARKit enabled phones can already run AR. I have to say that we’ll have to see how these technologies will be successful in 2018 since I’ve read another report where it was said that mobile AR developers will probably start making revenues in 2019;
• Currently, VR is in a stage where there is skepticism about it (“VR is a fad”, etc…).

Two last pills

• If you aim at developing mobile applications, China (and Asia in general) is your ideal target market. if you aim at PC or console, the Western world (America and Europe) are where you should plan to sell your products;
• If you want to live shooting videos of yourself playing games, Twitch is the best platform to have donations. Youtube comes really after that.

ECORYS report

The report by ECORYS is very different from the SuperData’s one. First of all, it is very focused on Europe, then it is very long and detailed about all the aspects of the European virtual reality ecosystem (investments, revenues, differences among the countries, etc…). It also spends various pages detailing the characteristics of the VR ecosystems of all the various most important European countries.

If you’re writing a business plan for a European startup, it is worth reading; if you are a business analyst, it is worth as well. If you’re just an AR/VR enthusiast, IMHO it is just worth a very fast look. If you’re interested, you can download it from this page.

These are the main takeaways I had from it.

Differences between Europe and Asia, America

The report highlights some key differences between the various continents when it comes to VR and AR:

• USA has the top AR/VR startup ecosystem. It is also easier to access funds for your projects;
• Europe has a great tradition in research, also in researches performed by companies and institutions from different European countries;
• Asia is growing fast and is clearly the leader in hardware manufacturing.

Most of European VR projects are made in R&D departments or as a research funded by European funds, as the Horizon 2020 calls. Many European companies working on VR are little or medium-sized ones. Getting funds by VCs in Europe is not easy, so often European companies seek external funding from China or the US. The problem of an ecosystem that is so much research-oriented, is that it is less business-oriented, meaning that many research projects do never arrive at the market.

The EU should invest more money in supporting the cooperation between different countries (through hubs, etc..) and in supporting projects that aim at creating a product that can actually be sold on the market. The fact that Europe is made by a lot of different countries, everyone with its cultural heritage, opens to opportunities where people with different points of view can contribute to every project, enriching it a lot.

According to this report, Europe will play an important role in this “VR revolution” (even if, as a European, I think that we are behind US and China).

Most successful applications

The top application areas of VR in Europe are:

• entertainment and gaming;
• simulation and training for professional and industrial use;
• healthcare;
• real estate;
• architecture.

While the top areas of research are:

• industrial design;
• healthcare;
• training;
• simulation.

This confirms what we’ve read in the previous report, that is that training is a very important application for enterprise VR.

VR is also indicated as a factor capable of transforming and innovating sectors such as:

• manufacturing industries
• construction
• healthcare
• education
• culture
• traveling
• entertainment

This is nothing new and I think that VR and AR have the power to disrupt every sector.

(And, by the way, as a little commercial, if you’re interested in a consultancy about AR or VR for this sector, why don’t you contact my NTW agency?)

Most interesting cities and countries

The most interesting countries to perform research on these new technologies are France, UK, and Germany. As an Italian, I’m happy that my country has been quoted as well:

The European research scene is concentrated in France (especially in Paris and Laval), the UK (London and Manchester universities), and Germany (Berlin and Munich). Spain (Barcelona), Sweden (Stockholm), Austria, Italy and Greece are also engaged in virtual research. R&D is focused on health care, industrial use of VR or general advancement of VR and AR technology. European universities are used to working together and also cooperate on large-scale international projects funded by European research funds.

On the business side, things are only slightly different:

In terms of European VR and AR businesses France, Germany, the United Kingdom and the Netherlands are clear frontrunners, with growing VR and AR activity to be observed in the Nordic Countries (Sweden and Finland), Switzerland, Spain, Italy and to a more limited extent Eastern Europe (Poland and the Czech Republic). Specific “hot spots” of VR activity can be found in Paris, Laval, London, Amsterdam, Berlin, Munich, Stockholm, Zurich, and Madrid.

Regarding Poland, it is the house of a lot of interesting companies, like Riftcat, WIDMOvr and Carbon Studio, so I’m not surprised at all to see it there.

If you’re unsure where to start your VR business, you’d better move to the UK or to The Netherlands:

In terms of business environment, London and Amsterdam in particular create a favourable atmosphere for new VR and AR start-ups thanks to their vibrant business environment and innovative culture. Meanwhile, Paris and Stockholm are likely to go through a rapid growth in the upcoming years as they record the highest annual increase in investment.

Regarding business environments, I can confirm that at the moment Italy is surely not the best place for a company to start up.

VR has currently more practical uses of AR

It is the first time that I’ve read a report praising VR over AR. This document highlights how VR technology is more developed than AR one, so while devices like HoloLens will be pervasive for our life in the future, currently they have lots of issues, so they’re good for research, but not good for real products. At the moment, as the report says, “VR is currently ahead of AR when it comes to realistic expectations and the real potential of use in various consumer and business areas”: with it is already possible to create usable solutions, for instance in the training sector. So, investing now in VR for a consultancy company seems a great choice.

VR is growing: we have to give it time

Virtual Reality numbers are growing and VR, according to Gartner, has just left the Though of Disillusionment to enter the Slope of Enlightenment. But this “enlightenment” is a long process:

VR is now entering the “Slope of enlightenment” that smartphones entered around 2007. For smartphones it took 9 years to reach a 50% adoption rate by consumers in Europe.

Putting things in perspective, we all understand now why, even if VR is growing and probably will get real momentum in 2019, it will still need lots of years to get to mainstream adoption. Maybe 9 years is too much, but 5 years will be needed for sure.

I hope you found all these data interesting as I did… even if our dear friend Palmer Luckey doesn’t agree that much with Market Analysts…

Another year, another round of "data" from analysts on VR sales and adoption. I can't share specifics, but suffice to say that not a single analyst is getting things right. It is maddening to see people reporting bad guesswork as fact.

— Palmer Luckey (@PalmerLuckey) February 1, 2018

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(Header image by SuperData Research)