AR Briefs is a video series that outlines the top trends we’re tracking, including takeaways from recent reports and market forecasts. See the most recent episode below, and past installments are here

2018 was an up and down a year for XR. We learned a lot as market signals indicated a softer — or at least slower — market than previously expected. So what are the biggest learnings? And what’s the outlook for 2019? We tackle these in our latest report and AR Briefs episode (below).

First, we learned that Mobile AR is scalable in its installed base of almost a billion smartphones, but active users are more like 129 million. So it needs more time in the oven including the tech itself, developers’ native footing, and consumer acclimation — all of which go together.

Bright Spots 

But we’re also seeing bright spots. Pokemon Go has made $2 billion to date in in-app purchases which is the business model we believe will be dominant in AR apps in the next few years. It piggybacks on existing consumer comfort levels and has unit economic benefits, such as ARPU.

But what everyone’s waiting for is a killer app for truly world-immersive AR, and we believe that could come as soon as late 2019 which is about two years after the launch of ARkit. This a historically validated timeframe for killer apps, such as the two-year window after the iPhone 1.

What will that be? We believe it’ll likely be a communications, social or utility-oriented experience, all of which have the greatest potential stickiness and frequency of use. Utilities are a mundane use case but could prove sticky, and we’re bullish on things like Google Lens.

It’s All about Building Blocks

The AR cloud also came into the collective consciousness in 2018. The realization emerged that we need a cloud data resource to feed AR devices with spatial mapping data object recognition blueprints, and other AR enabling resources. And several AR cloud startups launched.

Another key concept that emerged was AR as a service (ARaaS). This will provide AR cloud functionality, architecture and other capabilities developers — thus lowering some of the barriers to AR. The first example to emerge this year was Niantic’s Real World platform.

Along those lines, one of our 2019 predictions is that a breakout category of AR will be enabling technologies like this. It also includes building blocks and creative tools like Sketchfab, Adobe AeroAmazon Sumerian and anything that democratizes AR creation and distribution.

Follow the Money

Another important realization in 2018 is that AR advertising is actually working. It’s currently one of the few places being monetized in AR, with just over $400 million spent in 2018. That’s mostly been branded AR lenses in Snapchat and Facebook. We project it to grow to $760 million in ’19.

The appeal to advertisers is strong brand engagement, due to the immersiveness of things like trying on cosmetics. And it’s going beyond brand awareness to drive actual conversions given transactional functionality that’s baked in. This makes it a rare full-funnel ad medium.

We believe that going forward the AR ad mix will shift from social lenses to visual search, such as Google Lens. Currently, the latter is a bit behind in monetization, due to its complexity. But we believe the high-intent use case, just like search, will be a strong revenue driver in a few years.

AR at Work 

Lastly, Enterprise AR is a sleeping giant. It’s showing demonstrable ROI in areas like industrial productivity and error reduction. But there’s still a lot of inertia and risk aversion as it gets stuck in “pilot purgatory.” The resistance is mostly from IT departments and job-insecure employees.

That resistance will be slowly eroded by continued ROI proof points, but the tipping point won’t come until 2020. The good news that it will then accelerate in a sort of enterprise herd mentality, and that’s the same thing we saw a decade ago with enterprise smartphone adoption.

Those are just a few of our takeaways and predictions. You can see more in the full report including a deep dive on VR, and the outlook for accelerants like the competitively-priced Oculus Go and Quest in 2019. It will be an action-packed year and we’ll be watching closely.

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Disclosure: AR Insider has no financial stake in the companies mentioned in this post, nor received payment for its production. Disclosure and ethics policy can be seen here.