Like many analyst firms, market sizing is one of the ongoing practices of AR Insider’s research arm, ARtillery Intelligence. A few times per year, it goes into isolation and buries itself deep in financial modeling. One such exercise recently zeroed in on mobile AR revenues.
This takes the insights and observations accumulated throughout the year and synthesizes them into hard numbers for spatial computing (see methodology and inclusions/exclusions). It’s all about an extensive forecast model coupled with rigor in assembling reliable inputs.
So what did the latest mobile AR forecast uncover? At a high level, revenue is projected to grow from $6.87 billion in 2020 to $26.05 billion in 2025, a 30.5 percent CAGR. This sum consists of mobile AR consumer and enterprise spending and their revenue subsegments.
Drilling down, our latest Behind the Numbers installment zeroes in on consumer spending. How much is spent on apps and in-app purchases that involve mobile AR? And how much is being spent on physical goods that are informed or influenced through AR visualization and try-ons?
Free to Play
First, to define consumer AR, it’s any mobile AR apps and experiences that consumers pay for (excluding mobile devices). It doesn’t include software and services that help businesses develop consumer AR (covered here). It’s limited to direct consumer spending.
Consumer AR spending is also subdivided by digital and physical goods. Digital goods include AR apps or in-app purchases (IAP), such as spending within Pokémon Go. Physical goods involve products whose sale is influenced in some way through AR visualization.
Starting with AR digital goods revenue, that was estimated to be $1.93 billion in 2021, growing to $4.64 billion in 2025, a 27.5 percent CAGR. This is dominated by IAP, which accounts for $1.89 billion (98 percent) of consumer mobile AR digital goods spending last year.
One reason IAP is so dominant is because it’s the primary model for Pokémon Go, which is still going strong. IAP is also propelled by consumer comfort and acclimation from its prevalence in more established (non-AR) mobile gaming. It eases users in with a “free to play” dynamic.
Projecting forward, mobile AR IAP spending will be driven by Pokémon Go’s continued success as the world returns to more physical activity. It will also be boosted by the proliferation of Niantic’s Lightship platform (now with 8th Wall) that brings IAP-producing AR to other titles.
Couches to Cosmetics
Moving on to AR physical-goods spending, these will grow from an estimated $12.1 billion last year to $57.8 billion by 2025. Again, this includes consumer purchases that are informed or influenced through AR product visualization – everything from couches to cosmetics.
Steep growth is due to a small initial base and rapid expansion that’s driven by cultural acclimation to AR visualization in the shopping flow. This was accelerated in the Covid era as AR visualization can bring back some of the IRL dimension taken away in retail lockdowns.
But it’s worth noting that, though this is steep growth, there is still a great deal of headroom for AR-influenced commerce. For example, the $57.8 billion in outer-year projected revenue for AR-influenced physical goods is only .09 percent of the 63 trillion in global consumer spending.
In terms of formats, AR-influenced purchases are driven by social lenses, visual search, and web AR. Social lenses lead today due to Snap’s popularity and commercial traction, but visual search will gain ground over time due to a high-intent use case (just like web search).
Web AR will likewise grow over time due to lower friction to launch AR experiences; and the ability to run marketing campaigns through web-compatible channels. Among product categories, cosmetics leads, followed by clothing, jewelry, furniture and home appliances.
As one caveat for the above figures, spending on AR-influenced physical goods isn’t counted as “AR revenue” per se. It’s rather spending on physical goods that’s influenced through AR, meaning it would inflate AR’s value to assign that revenue (e.g., a new couch) wholly to AR.
We’ll pause there and cue the full report, and circle back in a future Behind the Numbers to unpack more market-sizing data…