Augmented and Virtual Reality Devices to Become a $4 Billion-Plus Business in Three Years

Virtual reality has the potential to be one of the most disruptive technologies for a decade, according to industry analyst firm CCS Insight. Its new forecast for augmented reality and virtual reality devices signals the market is at a tipping point for both technologies.

After years of development, 2.5 million virtual and augmented reality devices are expected to be sold this year, rising to over 24 million device sales in 2018. The analysts estimate that more than 12 million virtual reality headsets will be sold in 2017, with sales of augmented reality smart glasses expected to be worth $1.2 billion in the same year. CCS Insight believes that although augmented reality and virtual reality are two very different technologies, they each have the potential to deliver transformative experiences.

Virtual reality has the most potential with consumers in the near term. Several technology giants are making huge investments, most notably Facebook’s $2 billion acquisition of Oculus VR. Other firms pursuing projects in the area include Google, Sony (with Project Morpheus) and HTC, which has a partnership with games company Valve. Samsung, working closely with Oculus VR, has also produced virtual reality devices for use with its flagship smartphones.

Currently, gaming is the low-hanging fruit for virtual reality devices, but video, entertainment and user-generated content will also drive adoption of this technology.

Ben Wood, CCS Insight’s Chief of Research commented: "Most consumers find virtual reality a mind-blowing experience the first time they try it. We believe it has tremendous potential and it’s not just about expensive high-end devices such as the Oculus Rift. For only a few dollars, consumers can dip their toe in the water with an inexpensive cardboard holder for a compatible smartphone. We expect this democratisation of the technology to deliver growth not just in affluent mature markets but also in emerging markets where smartphone penetration is stronger than ever."

Augmented reality is also starting to gain traction in industrial and business arenas. CCS Insight believes Europe is currently the largest test bed for this technology, with numerous blue-chip companies across all sectors evaluating its capabilities. There are already some fascinating pilots underway that could deliver significant benefits and cost savings, such as those being conducted by DHL to help with warehousing and fulfilment.

Wood observed: "Despite the reputational damage done to the consumer smart glasses segment by Google Glass, companies have realised augmented reality can be used to increase productivity and cut costs. Over the next two years we’re going to see the technology move out of trials into full-scale deployments. Companies that embrace augmented reality will gain a competitive advantage."

The data in this release is taken from CCS Insight’s Augmented and Virtual Reality Device Forecast, 2015-2019, which is published as part of the company’s extensive wearables research service.