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BLOGViewpoint: Virtual and augmented reality

by Randall CraigFiled in: Blog, Digital Strategy, Make It Happen Tipsheet, Marketing, StrategyTagged as: , , ,

Imagine yourself to be Henry Ford, watching the first batch of Model T cars leaving the assembly line.  He might have been able to envision the impact of assembly lines on the economy, but not likely the societal impact of the interstate highway system, the international geopolitics of the oil and gas industry, let alone self-driving cars or Uber.    This is where we are today with VR, AR, and the metaverse.

Today, we have the Oculus and Pokemon Go (and the late Google Cardboard).  One can debate the merits of these specific products/services, but not the glimmer of possibility. What they eventually give birth to will change marketing (and our lives) dramatically, just as the internet did a few decades ago, or automobiles did a century earlier.  And they each represent a fundamental shift in how organizations will operate.  They will be even more game-changing than the internet itself.

First, some definitions:

1) Virtual Reality (VR):  In this mode, we are placed in a world that is completely artificial: we are “transported” into a video game-like environment.  To achieve this, one wears goggles (and sometimes gloves or controllers, and sometimes other sensors) that provide a completely immersive experience.  Think of the Star Trek holodeck, a virtual reality simulator that people walked into and “experienced.”

VR will be used to perform specific functions, including entertainment, travel, education/training, meeting/interacting with other people, and shopping.  But VR commercial success will only come when VR moves from being a silo-ized individual experience, to one where there is connection and interactions between virtual worlds – a term called the “Metaverse”.  A great analogy for this is the movement from PC-based programs (which were very capable but existed in a silo) to the web and cloud computing.  Or the movement from a paper telephone directory, to the likes of Facebook, LinkedIn, and other social media.  The connected experience is richer, and more valuable in almost every respect.  

It is important to note that beyond gaming, many are already using the Metaverse for concerts,  graduations, ecommerce, and other at-scale activities.  And eventually, imagine walking (flying?) down a virtual street, with doors that open to different experiences: from recruitment centers to retail stores, entertainment, branded experiences, community centers, and to private “homes”.  And yes, sadly, also to the likely killer app for VR:  gambling and pornography.  

(Interestingly, a socially-connected VR/Metaverse may be just the solution for the zoom fatigue of the 2020 COVID isolation that many have experienced.)

2) Augmented Reality (AR): In this mode, the virtual is brought into our real world.  Over the last few years, AR has been used in smart phones to overlay data about the world around us, recognizing buildings, streets, etc, principally providing locational and commercial information.  Without a doubt, the killer app for AR for many was the groundbreaking Pokemon Go: it gamifies the experience, and is responsible for introducing the AR experience to an exceptionally wide audience.  A proof point is an initial deal they had made with McDonalds in Japan, where each of their 3000 locations became Pokemon Gyms or Pokestops: this would presumably  drive significant traffic to each of their locations.   (Pokemon Go uses your smartphone to superimpose Pokemons on real-life locations, which users seek out and then battle.)

Eventually, AR will be used to provide background data on everything: click on someone’s picture and get their entire profile, pulled from multiple sources.  It will be used by retailers to provide virtual help with their products and services (Leading to less “may I help you sir?”), and allowing you to superimpose potential purchases into your home.  Museums and historical sites will develop virtual (and “smart”) tour guides. Meanwhile, engineers might use AR to visualize the inside of a machine, doctors to visualize the inside of a patient, and police to visualize physiological changes in a suspect.  AR can change just about everything: A meeting with a colleague who is rendered using AR? Or how about a car without a physical dashboard – just an AR one?

Futures:  Remember “town squares”, a feature of many old cities in Europe?  These venues were a place of meeting, communication, and also a place where each person could choose to enter any storefront of interest to them.  Today, we’re in the midst of the biggest economic race the world will ever see: Who will create, and control, tomorrow’s virtual town square?  (Everyone else will be their tenants.)

The war is being fought by the usual suspects, all of whom are poaching people, filing patents, and acquiring promising VR/AR start-ups.  Their strategies appear to reflect their inherent strengths:

  • Google:  Google has momentum on a number of fronts:  Android (and the Android developer base) is huge.  Their search engine is the de facto go-to venue for anyone looking for anything.  It has been creating a “virtual” world through Google maps and Street view.  It is experimenting with products like Google Cardboard and Daydream. And finally, it has significant sales infrastructure, content deals, and agency relationships that can “sell” advertising, and likely more.
  • Facebook (Oculus):  Facebook’s strategy is based on their de facto status as the world’s relationship engine.  Facebook has steadily improved how and what the community can share, from text updates, to pictures, to videos: “being there” (with people or brands you care about) is not that much of a jump.  The Oculus platform – the intimate connection with the user – completes the ecosystem.  Facebook’s robust apps (and app developers), sales infrastructure, content deals, and agency relationships make it a formidable competitor.  Furthermore, the sheer number of users that log in to their system every day gives them a huge advantage.
  • Microsoft (HoloLens):  Microsoft’s strength is building the development platform, and they are hoping this exact strategy will be successful in the VR/AR world (or as they like to call it, “Mixed Reality”).  The HoloLens isn’t just a piece of wearable technology, it is a complete development environment and platform.  Behind the scenes, Microsoft has the somewhat advantage of Bing (search, advertising, maps), a growing cloud infrastructure (Azure), and a huge developer base.  Probably more significant is the footprint of their existing software: what if HoloLens was built directly into the fabric of the Microsoft technology that just about everyone around the world uses?
  • Samsung (Gear VR):  Samsung is primarily a technology company, so it isn’t a surprise that their Gear VR product is a headset powered by an Android phone. That being said, a system without software (or content) will never sell, so they have acquired exclusive VR content that works with their product.  Unfortunately, this has proven a dead-end for Samsung, and they have folded their product into the Facebook Oculus platform.
  • Apple (???):  Apple’s biggest strength is their brand: users are rabidly loyal, and will adopt just about anything that has an Apple logo.  A key reason for this loyalty has been that Apple products are slick, beautiful, useful, and “just work.” Apple has built significant private cloud infrastructure, the world’s most profitable App store, powerful mobile (and desktop) platforms, and a content sales and rental business.  Apple has also invested significantly in maps.  One additional advantage is that their users are used to paying monthly fees – whether it be for music, cloud storage, or the myriad of other service offerings.  Given their absolute secrecy, the world will only know what Apple will do when they announce it, but in the meantime, it is obvious that the building blocks (including dev toolkits) are being put into place.  Their challenge will be breaking from their go-it-alone “walled garden” history: if they don’t figure out how to interoperate, they may find themselves squeezed out.  Likely they will want to provide the access points into the metaverse (“iGlasses”), as well as operate services within it.
  • Amazon (???):  Amazon’s strength first came from their entire e-commerce book-selling infrastructure.  Then it built one of the world’s largest cloud infrastructure businesses.  They then started hosting other’s stores (which accounts for approximately half their volume).  Then they started developing and selling content.  At the same time, they have been developing respectable hardware (Kindle, Fire tablets, Fire-TV, Echo, etc) and an entire voice-driven ecosystem (Alexa).   More than any other player, their real-world distribution system is a strategic advantage:  it connects the virtual world with the real one. Their biggest strength, however, is the loyalty of their user base, and particularly, their high-spending Amazon Prime subscribers.
  • Unity, Roblox, Epic games’ Unreal Engine (and to a lesser extent Valve/Steam):  These are the largest major competing engines/publishers/distributors that underlie almost all computer games, whether they be mobile-hosted or delivered streaming, real-time video, over the cloud.  Their tools have transformed movie-making, game design, multiplayer game operation, and are reaching quickly into non-game markets – everything from product design to architectural renderings.  They already – Fortnite being the best example – allow people to place “themselves” into virtual reality games.  The major challenge will be converting these game systems into a “real” metaverse while also building a real-world economy with walled gardens (Apple), incompatible VR worlds (themselves), and interoperating with Google/Facebook/Microsoft, all of whom have a vested interest in their own (VR) world views.  As the “bones” of the metaverse will eventually be created on one of these platforms, expect strategic partnerships, investments, or possibly even an acquisition by one of the “traditional” players. 

Despite the great promise of VR and AR, there is a fly in the ointment: the high cost of development and content. And not everyone has the necessary software.  But what is the prognosis?  Two points:

  1. Supply: Since we began developing websites 27 years ago, web development costs have fallen dramatically; the same will happen with VR/AR, resulting in greater supply.  And development costs and timeframes on Unity, Roblox, and Unreal engine will get better and better.  In addition, user generated content and brand investments will make it happen even faster.
  2. Demand:  Pokemon Go was revolutionary because it uses existing hardware (mobile phones) to widely introduce AR.  Google Cardboard was revolutionary because it removed the cost barrier to VR; it made VR accessible to everyone.  Demand will definitely be increasing.  But without the “Killer App” – and an easily traversable metaverse, demand won’t spike.  (Sadly, again, all bets should be on gambling or pornography as the first killer app.)

While it may sound Star-Trek-futuristic to consider where and how VR/AR will fit into (or alter) your organization’s strategy, now is precisely the time to do it:

  • Might there be possible business model changes?
  • Might you look at social media and community-building differently?  (And also look at your client service/business development/call center functions differently?)
  • Might the data you collect from your Marketing Automation and CRM systems be used in a completely different way?  (And what data should you begin collecting now?)
  • Might there be certain R&D or partnerships that make sense to look at now?
  • Might there be certain experiments in VR/AR that you might consider doing, to test concepts and build internal capability?  And maybe even “first-ish” mover advantage? (Yes!)

THIS WEEK’S ACTION PLAN

Digital Transformation can improve today-efficiency and today-marketing/engagement.  But more importantly, it must improve the tomorrow-possibility, serving as the foundation for opportunities such as VR/AR.  This week, look at your web, social, marketing automation, CRM, etc, and ask whether they have been designed with this future possibility in mind.  (Most aren’t.) And then, ask yourself the questions posed earlier in this article.

Does this topic resonate? Reach out to Randall: he can present it to your group.  (More presentation topics)
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