AR & The Future of Advertising

We are living in an increasingly digital world. Advertisers know this, and have adjusted their budgets accordingly. Companies such as Google and Facebook are built around massive digital ad networks. Global digital ad spend was $194 billion in 2016, and is expected to grow to over $335 billion by 2020 (Source: Statista).

However digital ads are reaching a point of saturation. Websites face consumer backlash from overzealous ads. Facebook has reached this limit on how many ads it can show users per chunk of content. Studies show users are increasingly “blind” to banner ads. Perhaps most disappointing is the level of digital ad conversions, which have fallen into the single digits. Advertisers need a new process, a new medium, and an improved user experience if they want to continue to connect with potential customers.

Enter Augmented Reality. Thanks to the nature of AR itself, the physical world becomes an interactive canvas, with the potential to create experiences that both increase sales and provide direct benefits to consumers.

There are two primary types of AR Ads: Marker-based and Location-based. Marker-based augmented reality mobile applications are based on image recognition. They use a camera of a portable device to detect certain patterns or markers, such as QR codes or images. Once a pattern is recognized, the app overlays digital information on this marker. The orientation of the AR object depends on the position of the marker.

Location-based AR apps don’t need markers; instead, they use GPS and other position detectors (accelerometers and digital compasses) to establish your location and create augmented reality objects. Location-based AR mobile applications can show you directions to where your car is parked in a huge parking lot, for example.

Beyond the technological aspects, AR allows advertisers to harness multiple factors that improve conversion and increasingly create value for consumers.

Unique Experiences & Emotional Connection

Augmented reality has the ability to create a host of interactions and experiences in the physical world that were not possible before. Watch Pepsi integrate a video panel into a bus stop in London to the surprise and delight of commuters (https://www.youtube.com/watch?v=Go9rf9GmYpM)

Coca-cola teamed up with the WWF to immerse users in a polar bear habitat (https://www.youtube.com/watch?v=h2Jg8ryVk1k), creating an emotional connection to the endangered species and the partner brand.  

These types of experiences and interactions are much more immersive than reading an ad on a page of a website, and more fully engage consumers.

Hyperlocal Potential

Digital ads use advanced machine learning algorithms to analyze user behavior and interests in order to recommend the right products and services to the right people. Augmented reality ads offer marketers an even better opportunity: advanced hyperlocal advertising.

AR brings location based advertising directly in front of users’ eyes, offering just in time advice and suggestions that could create real value for consumers. See an example (https://www.youtube.com/watch?v=AgRdutPZNug)

The recently announced Google Lens project aims to build camera-based platform that lets users access information about the world around them. Furthermore, the AI system behind the camera can take action based on information it ‘sees’ in the physical world (“Is it raining outside? Here is the nearest place to buy an umbrella”)

Focus vs Distraction

Bringing this all together, AR ads turn the tables on traditional advertising. In the current model, ads are essentially a distraction to users. Banner ads and pop-ups attempt to distract users from the actual content they want to consume. When ads work against the desires of users, it becomes difficult to build brand equity or to drive a user call to action (CTA).

The AR model turns this around and actually helps to the user focus on what they are trying to achieve. Looking for a cafe in a 2 block radius? AR puts locations, reviews, and directions directly in the user’s field of vision. Want to know how those sunglasses will look on your face, or how they desk will look in your house? AR can do that. In this context, advertising becomes a tool that helps consumers accomplish their goals, a huge step forward in the relationship between brands and consumers.

Growth of AR Users & Ad Spend

The good news for advertisers is the AR user base is quickly expanding. Statista forecasts 200M mobile AR users worldwide in 2018, compared with 60M in 2013. We expect these numbers to continue to grow quickly as use cases increase and mobile AR platforms become more ubiquitous. Mobile phones users around the globe are increasingly gaining access to the world of AR using their current devices.

AR ad spend expected to reach $13B in 2018, vs a mere $1b in 2014 (source Statista), a fraction of total digital ad spend. However, given the benefits AR ads bring to both advertisers and consumers, its not hard to imagine AR advertising grabbing a much larger piece of the ad market in coming years.