2018 Market Outlook: Who’s Winning in AR & VR?

Written by guest authors Lindsay Boyajian, Product Marketing, and  Zack Kadish, Professional Services at Conductor.

For the past few years, we’ve seen the buzz around AR and VR build. All the major players from Amazon to Apple to Snap have made investments in the space. Funding for VR and AR startups, according to TechCrunch, has amounted to $2.1 billion this year in at least 217 companies in the AR and VR space.

However, is it all just hype? Is consumer interest really growing? Which brands and publishers have the most market share?

This report examines organic search data from Conductor to realize insights into consumer behavior and brand market share. The Conductor Searchlight platform tracked thousands of the most relevant, high-volume search terms that consumers used to find products, services, and information in Q4 2017 related to AR and VR.

Search market share indicates which brands and publishers own the top positions in search results. This data is invaluable because search behavior is a strong indicator of consumer buying intent. It provides insight into what brands, products, and services consumers are interested in.

The insights in this report highlight trends in AR and VR that will influence growth and adoption in 2018. It has category breakdowns to provide a better understanding of who’s dominating by product category and purchase journey stage.

Is AR or VR winning?

For years, VR was the rising star, overshadowing its cousin AR. But the tides turned in 2016 when experts began hailing the potential of AR. In September 2016, Apple CEO Tim Cook said, “My own view is that augmented reality is the larger of the two [VR & AR], probably by far, because this gives the capability for both of us to sit and be very present talking to each other, but also have other things visually for both of us to see.”

There are 30 times more searches related to virtual reality than augmented reality per month.

Despite the changing tides, VR is still leading among consumers. There are 30 times more searches related to virtual reality than augmented reality per month. Searches related to VR gaming are dominant, indicating that is where consumer interest lies today.

Search terms related to business applications of both VR and AR are negligible. For instance, “virtual reality in architecture” has a monthly search volume (MSV) of 320 and “augmented reality for healthcare” an MSV of 10. Neither technology is winning when it comes to owning the customer mind share for enterprise applications.

Which brands and publishers control organic market share?

Who owns market share for search terms related to VR & AR?

Who owns market share for search terms related to VR?

Who owns market share for search terms related to AR?

When we look at tracked searches related to virtual reality, publishers are dominant with some retailers, related to gaming (Playstation, Amazon, and Steam), capturing market share as well.

In comparison, publishers exclusively dominate tracked searches related to augmented reality. There are no retailers that have significant market share.

We also find that the majority of available market share is still unclaimed, represented by the large “other” slice. This indicates opportunity for late entrants to capture organic market share.

Are consumers ready to invest in AR & VR?

There are 5 times as many searches related to early stage intent compared to late stage. The searches are both more informational and comparative based (Early Stage and Middle Stage), rather than transactional (Late Stage). This suggests consumers are information gathering, rather than looking to buy a product or solution.

If we look at each technology individually, there are more transactional terms related to virtual reality than augmented reality. This indicates again that VR is winning when it comes to customer purchase intent.

What strategies can brands and publishers use to capture unclaimed market share?

Brands and publishers should consider optimizing their content for universal result types. 41% of all the tracked searches have video results. Given that most customers are searching for early stage content, brands and publishers should create early stage video content that answers questions like “how to” and “what is”.

Similarly, 30% of all the tracked searches have Google answer boxes, suggesting brands and publishers should optimize their content for answer boxes. Answer boxes are the search result features that appear at the top of the organic results in a Google Search.

When it comes to what topics to write about, the search data suggests there is opportunity to create content around transactional (Late Stage) search terms. These queries have relatively high search volume, but not a lot of high quality content relating to these topics. Creating content answering transactional queries is recommended.

Finally, as we have seen, publishers outperform manufacturers and brands in most categories— suggesting that it’s an ideal entry point for other brands and retailers. By contributing content or advertising on publishers that have high visibility, brands can also make a play to win market share.

The organic search data in this report comes from Conductor. For more, follow Lindsay Boyajian and Zack Kadish on LinkedIn.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Why the Money’s on 3D and AR for Mobile

Written by guest author Matan Libis, VP of Product at WakingApp.

Remember when VR headsets were going to be as ubiquitous as iPhones?

The launch of Facebook’s Oculus Rift and HTC’s Vive in the spring of 2016 was met with understandable excitement: the technology was impressive and the user experience exhilarating. But any dream of mass adoption beyond gamers has so far been just that. As TechCrunch reported, VR revenue in 2016 fell far short of the $3.8 billion projections.

There may yet come a day when VR is realized for its full commercial potential, but in the immediate future, the tech world is setting its sights on AR and 3D for mobile. The oversize and unexpected success of Pokémon GO ($600 million in AR mobile revenue in the first three months alone) last year turned heads and reframed the conversation.

And unlike VR, there’s more to AR than just the “wow factor.” AR has real business use cases that can be applied now, from the manufacture and design of the Internet of Things (which one report estimates could be a $7 trillion AR market by 2027), to 3D ads on mobile, to customer service and educational training. For those reasons, Tractica predicts that AR usage on mobile will grow to 1.9 billion unique monthly active users in 2022, from 342.8 million in 2016—to the tune of $18.5 billion in annual mobile AR revenue.

The tech giants are already signaling a shift to AR. Facebook, which bought Oculus for $2 billion and poured millions more into its VR efforts, announced the launch of a platform for augmented reality at Facebook’s annual developer conference in April. Microsoft is adding an AR viewer directly into Windows 10 later this year. And Apple has just released its ARKit, hoping to open the AR market to users of all kinds, with apps for gaming, design, home improvement and much more. Last year, the company’s CEO Tim Cook envisioned a future when we “have AR experiences everyday, almost like eating three meals a day. It will become that much a part of you.”

In fact, some of Snapchat’s 166 million users have already internalized this message. Those silly selfie lenses have brought AR into everyday usage, and last month the company added 3D objects to the mix. It’s not a stretch to imagine 3D/AR as the next big format for sharing data, just as we once texted each other jpgs, then videos, then GIFs.

The question is, why strive to build a device as universally used as a mobile phone when you can add an AR or 3D layer to existing phones? Mobile-first has to be the mantra of any business today. And the good news is that for companies that want in on this AR/3D wave, the barriers need not be so high.

A mobile-optimized platform allowing anyone—even non-programmers—to easily integrate 3D and AR/VR into existing apps – has the potential to revolutionize business at many levels.

For example, Autodesk has recently enabled AR/VR in its software so that CAD users and customers can experience their designs in real time. Microsoft, too, is using AR in its Power BI iOS app to give its customers the ability to augment dashboard tiles within the Power BI app by displaying AR content directly above a scanned QR code. The possibilities are really endless – easy access to AR would allow engineers to gain a real picture of what their creations will be like in the real world, it will allow interior decorators to build a virtual scenario that lets clients walk around and experience for themselves the designed space that they have invested in, and it is already being applied in retail sales; there’s Amazon’s new AR View that lets customers visualize online products in their own home, and stores like Gap and Adidas are using AR to show customers how they will look in outfits with “virtual dressing rooms”. Industrial companies can use AR technology to virtually train employees instead of exposing them to risk by placing them, untrained, in sensitive environments.

The rapid adoption of AR technology is happening and not only are large corporations jumping onboard, but small and medium sized businesses are as well. For AR and 3D, the future is bright—and it’s happening now.

This piece originally appeared on WakingApp. For more, follow their blog and LinkedIn.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

2017 Loup Ventures Holiday Gift Guide

Here are a few gift recommendations for the 2017 holiday season:

And here’s a look ahead to 2018 with some of the products we’re hoping for:

  • Apple HomePod | Apple’s foray into the smart speaker market.
  • Apple iPhone X Plus | We’d love a larger screen for our iPhone Xs.
  • Oculus Go | Oculus’ $199 standalone VR headset.
  • Magic Leap | Augmented Reality glasses.
  • Tesla Model 3 | Already on the market, we’re hoping to see shorter reservation times.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Nvidia Foundational Player In Future of Tech; Introducing 5-Yr Model

Today we’re rolling out our 5-year model for Nvidia, joining Loup Ventures’ Apple, Tesla, and iRobot model coverage. It’s important we write on Nvidia given its products are an integral part of the future of technology, based on their use in datacenters, autonomous vehicles, virtual and augmented reality platforms, cryptocurrency mining and eSports. We’re believers in the long-term story of Nvidia. While shares of NVDA has performed exceptionally well this year, up 100% YTD (market cap of $129 billion), we think there is further upside given Nvidia’s foundational exposure to frontier technologies.

25+% CAGR Story Through 2023. We expect Nvidia’s core gaming business to continue to grow, but decrease as an overall percentage of revenue (57% today, to 41% by 2023). In addition, we see Nvidia’s datacenter and automotive segments taking second and third place, growing to 36% and 14% of revenues respectively.  We believe Nvidia will see 20+% annual revenue growth through 2023, driven primarily by four catalysts:

Catalyst #1 – Demand for core gaming business products remains strong.  Historically, Nvidia has been known for providing high-quality GPUs for gaming. Nvidia was well-known in the PC gaming space in the mid-t0-late 1990s, and even won the contract to provide graphics hardware for the original Microsoft Xbox. Nvidia has maintained its leadership in the space, and stands as the go-to GPU component for gamers. Despite competition from AMD, ASUS, and Intel, Nvidia has remained a leader. In addition there are two trends that add to the growth of Nvidia’s gaming business:

ESports continues to rise in popularity. Newzoo expects the ESports market to reach $1.5B by 2020, up from $696M in 2017. Not only are more users participating in ESports, but more advertisers are flocking to the industry as well.

Gaming is becoming more social. This is driving engagement and bringing more people on to various platform, including PC platforms where Nvidia’s products are often used. While this can partially explain the rise in ESports, the trend impacts users that opt out of participating in eSports in favor of playing with their friends. Most platforms are spending more time creating online communities where users can interact with each other. Separately, with more kids using tablets and mobile phones at an early age, the exposure and transition to gaming is greater than ever before. As parents continue to let devices act as virtual babysitters, the number of children that get into gaming grows.

Catalyst #2 – Companies are adopting artificial intelligence in order to remain competitive. Nvidia’s datacenter business (20% of revenue today, to 36% by 2023) has seen triple digit growth for the past six quarters. A big part of this growth is due to the expanding use of artificial intelligence by companies, specifically deep learning. Even more positive for Nvidia, we are only in the early innings of the game. Just as all companies evolved to be internet companies in the late 1990s and early 2000s, and mobile companies in the late 2000s, they will soon evolve to be AI companies. On Nvidia’s last earnings call, CEO Jensen Huang shared:

“…Artificial intelligence and its emergence and applications to solving problems that we historically thought were unsolvable. Solving the unsolvable problems is a real realization. I mean, this is happening across just about every industry we know, whether it’s Internet service providers, healthcare, manufacturing, transportation, logistics, you name it.” – Jensen Huang

We expect Nvivia’s datacenter segment to continue to see high growth as companies rely more on artificial intelligence. By 2023, we expect Nvidia’s datacenter business to account for over one-third of its revenues and be growing at 30% annually.

Catalyst #3 – The market for autonomous vehicles will be bigger than most people think. Nvidia’s opportunity in the automotive space (6% of revenue today, to 14% by 2023) is bigger than many anticipate. As stated in our Auto Outlook 2040, we expect 90% of vehicles on the road in 2040 to have level 4 or 5 automation, which would require a platform such as Nvidia’s DRIVE PX. Nvidia’s products are used in two different instances as it relates to autonomous vehicles. First, Nvidia’s DGX system is used to train neural networks at data centers. Second, Nvidia’s DRIVE PX platform provides cars with the necessary on-board computing strength for autonomous capabilities. Currently, Nvidia has partnered with Toyota, Mercedez-Benz, Audi, Volvo, and Tesla, among other. We see the ramp of autonomous vehicles beginning in late 2020 as autonomous taxis enter the field, and further expanding in 2021 as autonomous consumer vehicles enter the market. By 2023, we expect Nvidia’s automotive segment growth to accelerate from 16% in 2017 to 100% y/y in 2023. 2023 is only the beginning of autonomous vehicles, and Nvidia’s automotive segment will continue to accelerate past the 5-year window. Based on our auto outlook, we feel 2028 is the year where there will be an influx of demand for level 4 and level 5 autonomous vehicles. We expected Nvidia’s automotive segment growth will continue to accelerate until that time.

Catalyst #4 – Nvidia has planted seeds in other industries with bright futures. OEM & IP is 8% of revenue today, to 3% by 2023.

Virtual Reality. Nvidia’s GPUs are a core component for virtual reality solutions. Today, high-quality VR solutions require a headset tethered to a desktop or laptop computer, which are often running off of an Nvidia GPU. While we believe that VR content will move to standalone devices in the future, those devices will still require enough processing power to delivery high-quality experiences. Nvidia’s solution, the Tegra mobile processor line, is currently a leading option for manufacturers. Nvidia is well-positioned to benefit from the growth of virtual reality gaming, as its products are used in three (mobile, PC-based, standalone) of the four VR solutions, missing out on only console-based VR; for now.

Augmented Reality. We’ve written many times before about the future of augmented reality and the impact that it will have on how we interact with the world in the future. Similar to VR, AR requires sufficient computing capacity on any device. As the market for AR develops, Nvidia will benefit as either a manufacturer of specific solutions for customers, or tangentially through expanding cloud use for deep learning algorithms used by AR applications.

Cryptocurrencies. Lastly, Nvidia is poised the benefit from the continued growth of cryptocurrencies. Cryptocurrencies require individuals to dedicate computing power to the the blockchain, those that do are referred to as miners. Miners often turn to GPUs for the necessary processing power to complete blocks on the blockchain. Here is an explanation of how mining works, and why it is necessary.

If you read that article, your reaction might match James Franco’s above. Putting it another way, miners rely on GPUs to provide a cryptocurrency network with the necessary processing power to function. As a particular cryptocurrency is mined (with GPUs), customers will ask for specific ASICs to be built by companies such as Nvidia (positively impacting OEM and IP). As these custom ASIC components are deployed, the specific coin’s mining market becomes monopolized, and forces smaller miners to move a different currency in order to remain profitable. The smaller miners will turn back to GPU-based solutions (positively impacting Gaming) before the cycle repeats itself. Because of this ebb-and-flow and the volatile nature of cryptocurrencies, modeling the impact of cryptocurrency mining is difficult. While highly speculative and volatile, we feel that cryptocurrencies will be a part of the future. We are modeling OEM and IP business to grow by the low single digits in the future.

Bottom Line. Artificial intelligence, autonomous vehicles, virtual reality, and augmented reality are technologies that will have a profound impact on our lives. As these technologies take hold, companies supporting the development of the underlying components are sure to benefit. Betting on Nvidia is betting on frontier technologies, and Nvidia has planted seeds in numerous areas that we are optimistic about. Despite competition from Intel and AMD, Nvidia will continue to be the dominant component supplier in various spaces.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Nvidia Weighs In on Timing for Seismic Tech Shifts

Nvidia Corporation beat earnings today, posting revenues of $2.64B ($2.36B est.), up 32% y/y. Nvidia also posted $1.33 EPS ($0.94 est.) an increase of 60% y/y. In addition, Nvidia is raising its quarterly cash dividend 7 percent to $0.15 per share.

What we learned about the size and timing of seismic shifts in tech. Today, Nvidia’s bread and butter business is around data centers and gaming, but the company will evolve to become the hardware foundation beneath AI, autonomy, and cryptocurrencies.

Size. To put the significance of this shift into perspective, CEO Jensen Huang shared on the call:

“I happen to believe that everything that moves will be autonomous some day.” – Jensen Huang

As evidence of everything moving to autonomy, the company reported DHL is using its Drive PX chips for autonomous light trucks. Separately, the company outlined why the in-car infotainment is going to become an important market in the future. As drivers become passengers, their actions inside a car will change, increasing the need for living-room quality mobile entertainment.

Timing. Separately on the call, Nvidia offered their perspective regarding the timing of these upcoming seismic tech shifts.

  • Expect robotaxis in late 2019 or early 2020.
  • Consumer level 5 fully-autonomous vehicles on the road by late 2020 or 2021.
  • Largely absent from the earnings call was talk about the VR opportunity, suggesting Nvidia sees ESports gaming as a bigger opportunity in the near-term. This observation does not dampen Loup Ventures’ optimism around VR’s long-term potential.

CPUs passé, GPUs the future. As a starting point, Nvidia is a GPU company. Over the years, Moore’s Law related to CPUs has been the measurement of computing capacity. Jensen mentioned the well-documented breakdown in Moore’s Law multiple times on tonight’s call given his belief its coming to an end as CPU performance improvements plateau. Nvidia’s belief is that GPU improvement will replace CPU improvement as the measurement of computing capacity, giving the company an open-ended growth opportunity in the years to come.

The plot soon to thicken as Intel tries to catch up in GPUs. Intel has been a laggard in the past year with INTC shares are up 37%, compared to NVDA shares up 203%, illustrating investors’ optimism around Nvidia’s 5-year opportunity. However, Intel isn’t letting Nvidia run away with the GPU market, and this week, hired AMD’s GPUs head Raja Koduri to help establish Intel as a player in the GPU space.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.