Virtual reality is quickly growing into a multi-billion dollar industry, but like most new technologies, it has its challenges. That doesn’t mean marketers shouldn’t pay close attention.
In theory, virtual reality is a marketer’s dream.
Its hardware — think of the iconic visor-like headset — enables trendy technology like 360-degree video and spatialized audio, and has the potential to create a completely immersive space that places the user entirely within the world of a marketing campaign. The sensory advantages of VR are a cut above other new and emerging technologies such as augmented reality (AR), which adds virtual elements to the existing world instead of simulating a completely new one of its own.
While Apple CEO Tim Cook predicted earlier this month that “VR … is not going to be that big, compared to AR,” the experts interviewed for this story suggested that AR and VR shouldn’t be compared apples-to-apples, given the wide disparity in the experiences they provide. Cook may be right about the greater scale of AR — especially considering the success of apps like Snapchat — but VR holds more deeply immersive potential.
The bad news for marketers interested in the immersive VR experience is that it remains expensive and is an incredibly nuanced medium to put into practice. The complexity and cost of VR have made it difficult for mid-priced devices to emerge, with hardware largely limited to either cheap, do-it-yourself options like Google Cardboard or heftier, pricier sets like the Oculus Rift. It’s a wide gap that has made the product very niche and has resulted in frustrations with consumers seeking an immersive trip.
Widespread adoption is another obstacle, particularly for expensive and high-quality hardware. Strategy Analytics reports only 6% of Americans will own a VR headset this year — with 93% expected to own simple smartphone models, and just 1% of purchases going toward high-priced devices like the Oculus Rift.
While more affordable hardware and growing consumer spend on VR are on the horizon, some manufacturers are taking a wait-and-see approach until a core audience emerges, and the IAB told Marketing Dive that marketers are holding back from VR “on a broader scale” until costs come down. Along with a steep learning curve and the significant buy-in needed for content development, the ups-and-downs of VR’s emerging market present challenges for marketers intrigued by its dreamy potential.
On cost alone, virtual reality bites
While the expense of VR isn’t necessarily prohibitive for major brands, it certainly doesn’t come cheap.
In terms of raw numbers, interactive video production carries direct costs anywhere from $30,000 to $60,000 per minute, according to Vincent “Vince” Cacace, founder and CEO of Vertebrae, a VR marketing firm.
The Interactive Advertising Bureau (IAB) released a study last month titled “Is Virtual the New Reality?” that concluded the “deepest levels of immersion also cost the most to produce” — and deep immersion is what really counts when it comes to campaigns that connect with users.
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Experts say levels of immersion have a direct relation to development costs. IAB
Other expenses attached to the medium, like pre- and post-production considerations, are nebulous at best.
“Far more important [to marketers] are the indirect costs,” Clifton Dawson, CEO of Greenlight Insights, a business analytics firm for immersive technologies, told Marketing Dive. “While it is very expensive to produce the content, whether it be 360-degree video or CGI, a lot of the indirect costs are still being figured out.”
On top of the hefty price tag, VR is hard to pull off. “The learning curve for marketers (and all experience creators) is steep, given the radical nature of both the creative and technical requirements,” Dawson said.
Barriers exist for marketers hoping to reach consumers who are new to technology as well. There are concerns among some experts over the low early rates of user adoption thanks to VR’s price tag and niche market, according to the IAB — problems the trade association says can best be fixed if “the technology is broadly distributed … beyond the gaming community” and if “the pipeline for content is fast-flowing.” Lucas Matney, a TechCrunch writer focused on the virtual/augmented reality space, says that “consumers seem to have grown oversaturated with all the media coverage of expensive tech that’s inaccessible to them.”
While VR has already won fans among hardcore gamers and early adopters at the bleeding edge, the hype surrounding VR simply hasn’t corresponded to an experience mainstream consumers can connect with — at least not yet. Analysts’ forecasts suggest that may be set to change soon — and it could have significant ramifications for marketers.
A ‘billion dollar niche’ no more
In a report from early October, Juniper Research predicted consumer spend on VR could hit $5 billion in 2016 and reach $50 billion by 2021. Investors clearly see the opportunity emerging fast: VR and AR scored $1 billion in investment in Q1 alone, per CB Insights — a growth of about 7.5x over last year — while Deloitte predicted that 2016 could net $1 billion for VR alone.
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Deloitte says VR could be a “billion dollar niche” in 2016 — and it might hit the multi-billion dollar mainstream soon after. IAB
There’s no shortage of exciting — and accessible — products on the horizon, either. On Oct. 4, Google announced its affordably-priced Daydream View headset, which joins options like Facebook-owned Oculus Rift on the market. For its part, Oculus recently inked a major deal with Disney to produce VR films and other features, and its headset is about to get live demo spaces in 500 Best Buy stores nationwide, an expansion that shows the electronics retailer believes the technology is ready for the masses.
“There will be more headsets out in a short time, so there’s more and more possibilities for users to consume it,” Anna Bager, senior vice president and general manager of mobile and video at the IAB, told Marketing Dive. “I think that marketers are very interested in building these activations.”
The next few years are a critical time for digital marketers hoping to reach an eager, previously-untapped VR audience, but that doesn’t mean it’s time for marketers rush in. Marketers’ concerns shouldn’t lie with costs or any sort of window closing on the VR opportunity, but instead on the “innovation side,” Bager said. “It’s about advertising in VR but also advertising [for] VR.”
“You need to educate consumers that this exists and when they can use it,” she said. “Finding great content and making sure users are aware of that content is what’s going to help.”
Bager suggested that marketers can help edge the medium into the mainstream. The IAB report illustrates several case studies of major brands — including Dunkin’ Donuts, Post Cereals and Hilton Hotels and Resorts — who are already running VR campaigns that both elevate brand awareness and consumer engagement with the technology.
The specifics of what people will latch onto within these types of VR campaigns going forward is something marketers need to figure out for themselves — and Dawson said the process is ongoing.
“Marketers need to invest years to figure out how to leverage VR to create compelling integrated campaigns before they’ll need to worry about loss of the ‘wow’ factor,” he told Marketing Dive.
But what if marketers themselves become the ones killing the “wow” factor?
Out with the old essential for VR marketing
Despite the obstacles ahead, the state of VR marketing is hardly all doom-and-gloom. It’s a fresh, innovative technology that’s already leading to the type of “compelling integrated campaigns” that Dawson speaks of, including a recent Mountain Dew immersive skate park experience he cited as an example of what the medium can produce at its best.
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Source: Retail Dive