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AR continues to show early-stage characteristics, including erratic interest and investment. But how big is it, and how big will it get? AR Insider’s research arm ARtillery Intelligence has quantified the revenue position and outlook, resulting in the fourth and latest wave of its AR forecast.

At a high level, the firm projects AR revenues to grow from $1.96 billion last year to $27.4 billion in 2023. That includes lots of moving parts and sub-sectors including consumer, enterprise, hardware, software, advertising and AR commerce enablement (full list of inclusions here).

Figures reflect market factors at the time of creation. Always see chart date for context, and refer to newer data if applicable.

Drilling Down: AR Advertising & Commerce

Drilling down into one of those areas, how do AR advertising & commerce look? Starting with ad revenue, it will grow from $453 million in 2018 to $8.8 billion in 2023, an 81 percent compound annual growth rate. This mostly involves product promotions through AR interfaces.

As proved by Snapchat and Facebook, AR lenses can demonstrate products in highly immersive ways. This has shown strong ad performance, which continues to attract brand advertisers and reinforce return on ad spend. Conversion rates are high, while reach is small but growing.

AR advertising also has a rare ability to span the “purchase funnel” from awareness-based advertising to direct-response. The former is delivered with high-reach mediums like the Facebook News Feed, while the latter is accomplished through AR lens-based product try-ons.

All of the above stems from display advertising, but search could be next. Visual search, a la Google Lens, identifies objects using the smartphone camera or AR glasses. As an ad medium, it will see strong performance and premiums due to high consumer intent (just like core search).

Figures reflect market factors at the time of creation. Always see chart date for context, and refer to newer data if applicable.

Alternate Channels

Beyond search, other channels will develop as vehicles for AR advertising, such as gaming and email. AR email will be a bit of a wild card but gaming is already proving out. Unity has begun to serve AR ads in its extensive in-game ad network and is worth watching closely for best practices.

Messaging apps could likewise be opportune for AR ads and product visualization, parallel to their existing growth as customer service channels. This “conversational commerce” channel could fit well with AR, given growing affinity to contact businesses and transact through messaging.

As a corollary to advertising, ARtillery Intelligence projects $12.7 billion in products to be purchased through AR interfaces by 2023 (not counted as “AR revenue”)*. This will drive affiliate revenue (counted as “AR revenue”)* for AR ad-tech startups to the tune of $404 million by 2023.

Like AR advertising, these AR-driven consumer purchases will happen across channels such as social lenses, visual search, gaming, email and messaging. High-intent channels like search will eventually pull ahead in transaction volume, just like historically seen on the web.

Cautiously Optimistic

At a high level, ARtillery Intelligence’s position on AR revenue growth is best characterized as cautiously optimistic. Growth and scale will come, but slower than many industry proponents have thought, due partly to the pace of adoption and other signals that ARtillery Intelligence tracks.

In fact, you may notice that AR revenue projections in outer years are lower than other figures you may have seen. They’re also lower than ARtillery’s past estimates, as it adjusts to market signals. This is common in market forecasting, as market watchers course-correct to market variables.

Stay tuned for more forecast tidbits and insights over the coming weeks. Meanwhile, find out more about the market-sizing methodology or access the entire thing here. There will be lots to unpack as the AR market unfolds and brings us a combination of expected and unexpected outcomes.

*The transaction value of consumer goods bought through AR interfaces is tracked in this forecast but not counted towards “AR revenue.” More inclusions and exclusions are spelled out here

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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.