Virtual Reality: Three Opportunities & Three Hurdles

Virtual Reality (VR) continues to generate considerable buzz in the consumer space. January’s Consumer Electronics Show where Facebook’s


announced pre-orders for the


gave the press plenty to write about. The

$81B gaming industry

will continue to drive VR adoption for the foreseeable future. But, for non gaming execs trying to determine how virtual reality will impact their business the question is: how will VR grow from technology gamers love to something we all use? As VR becomes more widely known and available there will be points where adoption accelerates due to a key innovation. Here are three advances that, when they occur, will measurably increase uptake:

  1. Adoption will accelerate when mobile VR works. Current hardware is either mobile or high quality – not both. Mobile headsets like the Samsung Gear VR or Google Cardboard are basically just a smartphone inserted into a device with a lens and a motion sensor. (Often made of cardboard.) The quality pales in comparison to the PC or console-based experience like HTC Vive powered by Valve or the Playstation VR. Yet with a PC or console-based device, your headset is tethered and you have to buy a slew of complicated and/or expensive equipment. The HTC Vive requires two wall-mounted laser sensors to track your movements. These high fixed costs are barriers to mass adoption. VR is a distribution channel for really great content, and offers the promise of game-changing solutions for business. But without true mobility, it’s application are limited. Education, Architecture, Engineering & Construction (AEC), and Health Care are all currently exploring applications.
  2. Social applications will broaden the appeal of VR and give consumers a reason to invest in hardware. Some people still consider Facebook’s acquisition of Oculus the frivolous purchase of an enormous and rapidly growing public company rather than a highly strategic move. My personal experience indicates it is the later. My first experience in VR was using the HTC Vive headset at Valve’s headquarters in Seattle. I was fortunate to experience what many have ranked as the best system soon to be in market. The feeling was so real that my understanding of VR changed in seconds. The emotional reality of Valve’s demo immediately allowed me to picture my parents using VR the same way they now use FaceTime and Facebook to connect with their grandchildren. The growth of social apps was vital to the mass adoption of smartphones. The same relationship between social applications and VR hardware will play out in the coming years. And, once social picks up steam, telecom, sports, and travel VR stand to see rapid growth.
  3. The mix of virtual and real worlds will incent marketers to produce content, creating more compelling use cases for consumers. Virtual reality has yet to provide marketers with metrics that prove it either speeds the path to purchase or increases willingness to pay.  However, Amazon recently filed a patent for Virtual Reality glasses that source content from outside devices. For example: your smartphone feeding your Amazon headset virtual renderings of any product that Amazon sells. Amazon’s success will depend on marketers willingness to create virtual renderings of their products. Marketers are unlikely to invest in and promote these renderings without reliable success metrics. Amazon’s potential entry into the market indicates there will soon be data to demonstrate how consumers react to the technology. Advertising and marketing execs should pay close attention to this development.

An interesting example in the B2B world is the design & construction industry. The industry was one of the few that effectively adopted 3D in “Building Information Modeling (BIM)” and provides a window to the future of VR. Architects & designers adopted BIM early and were quickly able to demonstrate how rendering in BIM lowered costs by reducing the number of revisions and mistakes during construction. Rendering building products in BIM was a considerable expense for manufacturers, but once architects were able to demonstrate the value to their clients, manufacturers were forced to comply with a new standard.

So what are we waiting for? Three hurdles stand in the way of these innovations:

  1. The hardware is expensive and difficult to purchase. Since 99%+ of the market will need to purchase a new console or PC to operate current VR headsets, we are still looking at a $1000+ investment for most consumers. Pre-orders for the Oculus Rift sold out in minutes and the wait list extends months. This will prevent mass adoption in the short term, but look for prices to follow the typical downward trajectory of consumer technology. Smartphones were once out of reach for the average consumer. But today, roughly two-thirds of Americans have a smartphone; and this wide adoption has utterly transformed the consumer landscape. Expect VR to follow a similar path.
  2. Content files are too big and bandwidth is still scarce. A recent study showed that less than 1% of current PCs have enough processing power to be able to use the VR headsets coming to market in 2016. Look for PC manufacturers to reverse the recent trend in more anemic CPUs (to preserve battery life and allow for mobility), and instead equip machines with more powerful processors. But, the biggest issue is the need for bigger pipes and better compression tools. Unfortunately 5G is not expected to roll out until the 2020-2021 time frame and the best compression technology is still in the head of Mike Judge.
  3. Making VR content is still very difficult. Remember when building a website was still only the realm of technophiles?  Creating content for virtual reality is way more difficult than that. When the New York Times shot their first story in VR this year they did so with several GoPro cameras bound together. Currently content creators have two options: Computer Generated Imagery (CGI) or Video. Most organizations have neither the talent to create the former nor the tools/resources to create the later.  Adoption will be about consumers demanding headsets because there is good content to consume (either professional (CGI) or social (video)). Growth will be limited until the barriers to content creation fall.