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Decoding the Goldman Sachs Report on virtual reality

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Virtual Reality (VR) has been identified by top investment funds, and by corporate and investment banks, as more than a hype: it is the next big thing to happen. There are plenty of opportunities to invest and make a significant return. There have been unicorns but also many bad experiences with significant losses.

Which is the market forecast? According to many sources, the market will experience a huge growth. But again there are bears and bulls. In general terms, even the most cautious agree on the growth of the VR market, considering that the VR world includes Augmented Reality (AR) and Mixed Reality.

This post is intended to help with a marketing vision:

    1. What is the market
    2. Who are the players
    3. What are the forecasts
    4. And particularly about WiiFM (stay tuned to WiiFM)

Virtual reality and augmented reality trends

The VR/AR market: is there a hype?

 

The forecast made by G&S in January 2016 envision US$ 80 billion by 2025:

 

A very significant part, more than 50%, corresponds to hardware and its related key enabling technologies (KETs).

Goldman & Sachs literally states that the market will reach US$ 80 billion by 2025:

 

 

Tim Merel from Digicapitalist thinks that it will take longer than announced and that the growth of AR and MR is going to happen but later and at a slower pace.

 

By March 2016, Venture capital funds had invested US$ 1.2billion in VR, an impressive amount.

Information published by the same source (Digi-Capital) shows a total investment at that time (March 2016) of US$ 2.6 billion.

Finally, the same source shows that the installed base of VR/AR/MR devices will grow to 300 billion units by 2020, including:

  1. PC and consoles (10%)
  2. Mobile VR (20%)
  3. Standalone AR/MR (35%)
  4. Smartphones and tablets (35%)

Considering that Digi-Capital is specialized in digital companies and their work is more focused than a generalist company such as G&S, we think that their analysis should be mentioned here. Digi-Capital describes several waves for the VR market and identified by H2 2016 that the new wave was the 4th wave and had just started with huge players now investing heavily and assuming a leading role.

For further information we recommend you to visit their blog.

 

In brief, this company advises their investors that VR/AR/MR is the next thing to happen after the PC, Internet and Mobile waves. For those more deeply interested we recommend their full report. The new platform wave is VR/AR/MR, but who are the players? These are mentioned:

  1. HTC
  2. NVidia
  3. Google
  4. Magic Leap
  5. Facebook/Oculus Rift
  6. Sony
  7. Blippar
  8. Valve
  9. Jaunt
  10. Go-Pro

We miss many key players here: some enablers and other key players like Microsoft, Polhemus, Sixsense and Nintendo, among others.

They warn literally that the tsunami and the waves are more like tides that can really destroy some business to bring new models to others. What side of the tsunami is yours?

“There are different ways you can pick a wave wrong. If the wave is smaller than you expect, you just bob up and down a bit. If the wave is much bigger than you think, you get dumped head first into the sand. Not fun. But platform changes are more like tidal waves, and are much more dangerous for incumbents than regular waves. When did you last use your Nokia?” Digi-Capital

The big difference between our two mentioned sources is that AR is expected to be a market at least 3 times larger:

A first obvious finding is that AR or VR hardware will account for the lion’s share of the cake. This is why tech giants are turning their strategies into KETs. Anyone interested in this matter knows that VR/AR has infinite applications but the challenge is getting enough processing power (from GPUs and CPUs) with high precision, low energy consumption and low cost. At the end hardware is, once more the key with a share of more than US$ 30 billion by 2020. Another KET corresponds to immersive technologies.

Business Insider has just published the last forecast made by G&S and has just updated the figure under the “accelerated update” tag, which shows US$ 110 billion by 2025. In just one year the revised figure exceeds US$ 30 billion.

In terms of the current amount of technology adopters, it is significant that they are not any more just early adopters. In any case, there is a gap between users and business forecasts, so the adoption rate should be much higher. Another source, eMarketer, states that “… asking its first look at the augmented reality (AR) and virtual reality (VR) video markets, research company eMarketer sees strong growth ahead in the U.S. In 2016, 30.7 million people used AR monthly, a number that will grow to 40.0 million in 2017 for a 30.2 percent increase. The company predicts 48.1 million users in 2018 and 54.4 million in 2019…”

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