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Augmented Reality Market: Innovation and Hysteria

  • April 2014
  • -
  • Frost & Sullivan
  • -
  • 16 pages

Executive Summary

Augmented reality will destroy privacy!
Augmented reality is simply a way for narcissists to increase their exposure!
Augmented reality is the latest fad: one which will disappear once the hype is over!

It seems that the news is now full of stories concerning augmented reality; mostly in the context of the Google Glass project. Google glasses have been banned from bars, casinos, locker rooms, healthcare facilities and many government agencies. The fear is that, armed with a forward facing camera, the devices will compromise peoples’ privacy and perhaps disclose confidential information. The dynamic is definitely one of concerned skepticism.
Nevertheless, augmented reality is entering the market, riding on the coattails of increasingly capable smartphones and a rich ecosystem of innovative software applications. Add in the new wave of wearable devices, such as smart watches, and the market is primed for explosive growth that will transform both mobility and consumer communication services.

Regarding smart watches, just about every mobile device manufacturer is introducing smart watches—Apple being the notable exception for now—and consumers who use them tend to like them a lot. From the standpoint of applications, the smart watch represents a new screen available to present data in the context of the user and user location. Such a screen provides a way to unobtrusively deliver information to a mobile consumer; one in which the user is not distracted by the need to interrupt an activity, such as working or driving. In fact, smart watches are likely to turn around the dynamic that has been developing where younger people have given up wearing wrist watches in favor of simply looking at their smartphone.

Most mobile device manufacturers are exploring heads-up displays. And, while unclear on how heads-up displays will play out in the consumer market, there are already niches in the business space where such devices are the best solution for enabling mobile workers: situations such as manufacturing and health care.
In fact, augmented reality is largely penetrating the market under the radar screen. Rather than appearing completely thought out, with a rigid set of services, augmented reality is delivering usable and useful solutions that consumers are already growing to depend upon. This trend will continue, and will likely define augmented reality adoption over the next year.

What is certain, though, is that augmented reality is driving a real change in consumer expectations for their wearable computing devices. Having devices and applications that cannot interact with GPS positioning data to customize the delivery of information is no longer acceptable. Augmented reality applications are now moving to penetrate—and ultimately dominate—niche areas such as local search and navigation; and will increasingly come to define applications that enable social interactions and general Internet access.
Network operators are finally paying attention to the augmented reality dynamic, and some are moving to deliver services in this space. Yet, their movement into this new market has been glacial compared to new market entrants; and this is one area, defining as it does the future of communication services delivery, where coming in second place may be lethal to business growth.


Augmented reality (AR) is a term that is largely foreign to most consumers. In the same way that 4G is simply a branding label to the average cellular subscriber (he knows it is good, but doesn’t know why), AR is starting to percolate within the market. However, unless told that something is, in fact, AR, a consumer typically does not think in those terms.
AR refers to a specific set of functionality that allows data to be superimposed on a person’s visual field, either through a handheld device or by using special data display glasses. When one includes the capabilities of new devices such as smart watches, AR can be simply defined as the ability to augment the user’s experience of reality through the use of real-time information.

Although most consumers don’t know what AR is, a growing percentage of them are coming to believe that AR functionality might be a useful capability to have. In fact, certain demographics seem most open to the capabilities of AR—the young and highly compensated, in particular.
Stratecast has the notable distinction of examining the AR market since before the term was in general use in the technical sector. In our examination, we have seen a gradual acceleration of interest and research in the area of AR. Now, we are seeing the introduction of special purpose devices that will make clear to the consumer space what AR can deliver. This is an exciting time to be involved in this new market; and Stratecast believes that it will evolve rapidly from this point.
Network operators are beginning to explore this space, but perhaps not quickly enough to contend effectively with service providers who are making substantial investments in this market.

State of the Augmented Reality Market

The augmented reality market is not one-dimensional; it is composed of many discrete segments that add up to a relatively substantial amount of potential revenue. In addition to the obvious—the new emerging class of AR devices—there is a wide variety of AR services, applications and support activities. Taken as a whole, this could amount to as much as $ billion globally by 2017, according to industry sources.

Stratecast tends to subscribe to the more optimistic projections, however. The reason for this is that most AR market projections simply treat AR as a new class of wearable computing devices rather than the transformative and substitutive technology it is. One example that serves to demonstrate this is the idea that an AR heads-up display could substitute for a large, wall mounted television monitor, a personal computer, an e-reader, or a game console. When one takes into account the potential to replace existing consumer electronics, it is easy to see that the market may be dramatically under-rated; even by those who are participating in it.
Nevertheless, the aspect of AR that has received the most attention in the market is wearable computing; specifically, heads-up displays and smart watches. In the next section these will be reviewed.


If the year 2013 was the year in which AR was first introduced to the wider consumer market as a concept—mostly in the guise of Google’s glasses—2014 is the year in which wearable computing and communication devices are actually being delivered to the market. The device class that achieved the most prominence and, currently, the most traction in the market is the smart watch. Primary vendors in this space, as of this writing, are: Pebble, Samsung, and Microsoft; with new offerings by Google and, expected shortly, by Apple. Google, in particular, is making waves in the market with the announcement of its Android Wear initiative, and can be expected to push the envelope of wearables, as well as the uptake of them by consumers.

Smart watches are currently extensions of the smartphone, with which they connect over Bluetooth. As such, they can serve as indicators of incoming calls, texts, and emails. Additional functions can include control of smartphone functions such as music, calendar functions, and so forth, as well as serving as conventional time pieces.
This somewhat limited functionality might lead one to believe that smart watches are likely to remain niche solutions; yet, that would be a mistake. Smart watches are penetrating the market rapidly, and are already capable of running thousands of applications: Pebble, in particular, currently has an app library in the hundreds, and cannot keep up with demand.

Table Of Contents

Augmented Reality Market: Innovation and Hysteria
Executive Summary 4
Introduction 5
State of the Augmented Reality Market 6
Devices 6
Applications 9
Market Dynamics 10
Consumer Receptivity 10
Public Policy 12
Implications for the Market Players 13
The Last Word 15
List of Figures
Figure 1: Global AR Market 6
Figure 2: Smart Watches 7
Figure 3: Heads-up Displays 8
Figure 4: AR Applications 9
Figure 5: Awareness of AR (2014) 10
Figure 6: Willingness to use AR (2014) 11
Figure 7: Awareness of Google Glasses (2014) 11
Figure 8: Willingness to Buy Google Glasses (2014) 12
Figure 9: Basic AR Model 14

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