Google and Facebook’s Battle for Virtual Reality and Apple’s Entrance

Between a recent virtual reality/augmented reality study I did and a host of conversations and demos I’ve had at the Game Developer and VR Developer Summit this week, I have been able to form some important perspectives. The virtual reality market is unquestionably gaining steam. To highlight this, I was talking to a Best Buy representative who was saying they were seeing a dramatic increase of in-store demonstration requests for the Gear VR at the Samsung stores within Best Buy. This is likely people just wanting to experience it for the first time, not necessarily purchasing. However, the interest in the mainstream market appears to be growing. Even from my consumer market study completed last week, 65% of US and UK consumers have some level of interest in VR. Even with the market being so new, only 33% said they have absolutely no interest in virtual reality.

The battle for VR mindshare will be fierce. The most interesting nuance I captured from the show in my meetings with key players was a hesitancy to embrace Android, or the Android developer ecosystem, due to their lack of trust of Google but also their desire to not simply commoditize the hardware quickly. It is the larger concern of getting too close to whatever Google is doing. This why Facebook is not building their VR strategy on any Google platform but instead on the Oculus platform. Similarly, Qualcomm has released their own SDK, designed to capture developer value from their own assets vs. whatever Google releases. Yet, it has become clear to me it would be detrimental to Google’s business model to not be a major player in VR, for the primary reason of the advertising opportunity in VR.

Behind closed doors, I saw some VR demos of travel destinations. One was a virtual/immersive tour of a new resort in Tahiti. You could explore the rooms, the restaurant, the facilities, etc. as if you were there. There were guided tours, exploration of the food options and more. A completely new way to experience a travel destination before you go there. It was compelling and in no way felt like and ad. More importantly, it was an ad but it was an extremely useful one from a travel perspective. If we believe VR headsets will disrupt TVs, as many do over the long arc of time, then advertising or commercials could play a key role in this experience. It could usher in an entirely new era of producing commercials, ones that are deeply compelling when done right. Which means those with advertising business models and ones who want to take more of the video ad share, like Google and Facebook, can not afford to miss the virtual reality movement.

Looking back at our fresh VR consumer study, consumers stated “travel” –as defined in the statement: Being able to explore a location or vacation spot to see what it is like before traveling there– 57% indicated interest in this use case. 31% of respondents indicated retail exploration as defined by: Being able to sit in and explore a car you may be interested in, or a new food establishment, etc., without leaving the house. — as a use case of interest. So more than 80% of mainstream consumers indicated interest in use cases where ads can play a role. Which is why it is easy to reason this will be a fierce battle between the advertising-based companies.

Lastly, I found it interesting from a number of backroom conversations I had that Apple was the elephant in the room. It seems everyone fully expects them to enter this market and play a relevant role for Apple’s customer base. Thinking through the custom silicon and componentry needed to deliver quality VR, an engaged developer and content ecosystem who will embrace a VR solution, and the broader ecosystem value, the industry is right to be concerned if Apple enters the market and takes a chunk of the share. In my VR study, I asked consumers what brands were not in the market yet who they viewed as a viable and trusted brand to bring a quality VR experience. 70% said Apple. So I think others are right to be worried.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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