Why augmented reality is a better investment than virtual reality

Virtual reality is, without a doubt, the fastest-growing tech trend of 2016. In 2015, investments in the space totaled about $700 million. By the end of Q1 2016, that figure had already exceed $1 billion, and may more than double by the end of the year.

The technology has captured the public eye like no other, and it’s not surprising that VCs are doubling down on new virtual experiences, apps, hardware, and more. Analysts and developers alike consider VR a new paradigm, not a fad. The tech is here to stay, and there is money to be made.

The advice applies just as much to virtual reality’s cousins augmented reality and mixed reality, of course. The recent craze for a certain electric rodent proves that augmented reality is just as, if not more, likely to cash in the new tech as expensive HMDs.

In fact, it is entirely possible that augmented reality is more viable than virtual reality as an investment and development opportunity. VR has a striking limitation when viewed from a business perspective, a problem that AR elegantly solves or sidesteps altogether.

Just why is that?

Roadblocks to Mainstream VR
The biggest challenge virtual reality faces in mass market acceptance is its high cost of entry. Although mobile-based HMDs built on Google Cardboard are effective enough in their way, they don’t hold a candle to the experiences offered by Oculus and HTC.

The problem with those experiences is that they require both a $600-$800 HMD, and a PC capable of supporting them. When all is said and done, the total ticket price for high-end VR can easily approach $2,000 if starting from scratch.

Oculus and HTC know it, too, but to date they have not been able to overcome the issue. Even the GearVR, HTC’s entry into the low-end, mobile-based VR market, requires a top-of-the-line Samsung phone on top of the $79.99 MSRP headset.

Although plenty of early adopters have happily paid these prices, it will take time for a critical mass of consumers to buy in. One thing that would help speed widespread adoption would be plenty of compelling content. However, many of the largest game and app developers are taking a “Wait and See” attitude towards VR, hoping that the install base will grow before they invest in content creation.

It’s a Catch-22, and it’s holding VR back.

How AR Is Set for Success
Augmented reality, in most applications, has effectively zero barrier to entry. Although the Microsoft HoloLens, the Epson Moverio line, and other dedicated AR HMDs are impressive technology, they have to date been targeted more to enterprise and corporate use than the consumer space.

From the consumer perspective, augmented reality is based entirely in the ordinary smartphone. AR apps, or AR features in existing apps, are released seemingly every day, and they all require nothing more than the user to point their iPhone or Android camera and peer through the screen.

The act is something millions upon millions of users perform daily, and AR simply makes it more impressive and more useful. And in that way, it makes it more familiar to and more accepted by the mass market.

The largest investors have cottoned on to this simple truth. Today, AR investments are expected to exceed $90 billion by 2020 by analysts at Digi-Capital. Investments into VR, by contrast, are expected to reach $30 billion.

The Pokémon Effect
Digi-Capital’s forecast was made in January 2016, and since then something happened that may have drastically accelerated the timeline. In July, a game called Pokémon GO hit the App Store and Google Play.

The speed with which the game conquered the cultural zeitgeist was nothing short of astonishing. Within one week, the game had been downloaded more than 7 million times. Its two closest competitors, Angry Birds 2 and Candy Crush Jelly Saga, totaled about 4 million downloads in the same time span, taken together.

Although the birds might be angry and the candy might be crushed over Pokémon’s success, the overall effect for augmented industry space is a very positive one. Where before AR was a niche term, something with which only tech enthusiasts might be familiar, today the word is on everyone’s lips. The public knows what augmented reality is, and the public wants more.

Why Augmented Reality is a Better Investment?
For developers and investors alike, augmented reality is likely a better investment than virtual reality. At least at this stage of the game, the potential market for AR is much larger. Although both technologies are certainly “hot trends” and are receiving a great deal of press attention, augmented reality is at this point more familiar to consumers.

The tech world moves very fast. It’s certainly possible that in a few years, HMDs and high-end PCs will be in every home. As developers, we love working with VR, and we believe that it is the future. At the moment, though, we’re placing our money on AR. AR needs only a smartphone, and everyone has one of those.