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Why Virtual Reality will Never be the Future of Marketing and Advertising

09. 05. 2017.

The virtual reality (VR) buzz coming out of the marketing world is near deafening at times - and with companies like Google, Facebook, HTC, Samsung and Sony in the VR business now it’s easy to see why. Even brands like Mercedes, HBO, The New York Times (NYT) and Lowes have stuck their big toe into the VR pool.

The amount of earned media garnered by these companies for being early VR adopters has been tremendous, however, earning media for doing a VR campaign likely can’t be sustained forever.

So, which is it – hype, hope or hot? Let’s explore these three possibilities.

Virtual Reality is Hot

This year total VR revenue is expected to hit $4.6 billion. That’s a pretty large total, leading many marketers to think VR is definitely hot right now. The only problem is that most of that revenue is going to the gaming industry and the manufactures of the devices. It’s doubtful Lowes or NYT will do much VR advertising in-game.

Brands can certainly make their own app, but cost is a barrier for most. According to NYT, production of a virtual reality environment for a brand often starts at $500K. The marketing spend in VR barely has an impact on the total revenue of the vertical. 

A full 26% of CMOs believe that VR (and augmented reality – we’ll get into that shortly) will have the biggest impact on marketers. Wow – that’s a lot of CMOs, but with all of the positive media coverage surrounding VR this isn’t surprising. Anecdotally, this optimistic view of VR is expressed on and off stage at many marketing conferences around the world. 

Virtual Reality is a lot of Hope

The below image looks like a lot of excuses and hope combined. The companies that have gone 'all in' on VR have a vested interest in spinning the facts on the ground in order to keep the media happy, and CMOs thinking that this technology will have the biggest impact on marketers in the next three years. While many admit VR isn’t exploding as predicted, they’re making the news about it as rosy and optimistic as possible.

TechCrunch has gone so far as to literally blame Samsung’s Galaxy Note 7 and its tendency to explode for what went wrong with VR last year. Analysts projected that VR would drive $3.8 billion in revenue last year. They were off nearly 30%. If that was a class project they would have scored a C-.  

Virtual Reality Advertising Technology

While the above image points out that there’s no clear monetization model yet, the below native advertising technology vendors would beg to differ. Out of the over 300 native advertising tech companies we uncovered in The 2017 Native Advertising Technology Landscape, we came across three vendors that do VR advertising.

  • Amobee – Robust platform enabling native and non-native advertising. Includes mobile, social and VR
  • Vertebrae – Virtual and augmented reality native advertising network
  • MediaSpike – VR native advertising network

With companies like this cropping up, having a sense of hope for VR as a marketing channel would be sensible. But alas, their prospective audience is still very niche and small today, and will likely remain that way for the foreseeable future.

Virtual Reality is just Hype

VR has a major fatal flaw that will prevent it from ever having mass adoption – head gear. Both men and women complain about what the gear does to their hair. Many women also complain that the robustness of the head gear’s design makes it difficult to properly fit on their heads. These concerns are clear in the pictures below.

It’s not just the complaints mentioned above that doom VR. It’s also the social stigma that comes from wearing such bulky head gear. Let’s be honest – people look like idiots with this stuff on. Again, see the pictures below.

Just last week Facebook announced it was shutting down its Oculus Story Studio. They have their public reasons and spin, but it doesn’t take a genius to figure out that the slow adoption of VR technology might have something to do with it. Just a few years ago they spent $2 billion to buy Oculus.

That said, Facebook has committed to investment with third party content creation studios to create non-gaming experiential VR content for their Oculus Store. This was just one of a number of big changes happening at Oculus in recent months.

Augmented Reality (AR)

The above is indeed a harsh criticism of VR as a marketing channel - however, there is a silver lining: VR is the technological bridge to full, unobtrusive AR.

The difference between VR and AR seem small, but actually they’re huge, from a consumer product standpoint. AR eliminates all the social anxiety caused by VR’s equipment.

Below is an example of how marketing through AR might work. It’s a clip from the movie 'Minority Report' - Tom Cruise walks into the GAP and through his implanted eye contacts he, and only he, sees and hears a personalized native advertisement.

When watching make sure to pay attention to the flash in his eyes. 

The title of this post opines that VR is NOT the future of marketing and advertising. However, AR likely is the future of marketing and advertising. In the chart below it’s clear that AR (in dark blue and orange) is barely a blip today. However, take a look at that growth curve over time.

It’s AR, and not VR, that should drive 26% of CMOs to believe it will have the biggest impact on marketers in the near future. Unfortunately, most of the time, VR and AR are mentioned as one and the same when reporting data and contemplating potential use – VR/AR. They shouldn’t be. 

There are three types of AR that marketers will be able to take advantage of – mobile, glasses and body implants.

The Minority Report example is of a body implant - we’re likely a long way away from that technology. On the other hand, glasses probably aren’t too far off in the future. It’s easy to imagine a Google Glass-like device that delivers AR.

The third is mobile and it actually already exists. Remember when 'Pokémon GO' exploded on the scene? That game is an example of AR delivered through a mobile device - as someone peers through their phone they’ll see what surrounds them in the real world. However, there’s a layer of augmentation overlaying the view (see the example below). Imagine a consumer standing in a grocery store aisle looking at the shelves through their phone to scan for AR deals. Brands could do all kinds of cool things with that capability.

So is VR hype, hope or hot right now? The evidence to date leads me to believe it’s absolute hype for marketers. The only exception to that would be marketers looking to specifically target hardcore gamers that use VR products on a regular basis. Other than that, I see VR as the technological bridge to the next generation of marketing and advertising – AR.

To the VR companies out there – keep doing what you’re doing, and use as much spin as you want to keep the capital rounds flowing. It’s your work in VR today that will end up powering AR as the marketing and advertising channel of the future.