Immersive brand marketing continues to be a leading spending category in AR. In fact, it’s one of the few subsectors that derives meaningful revenue. Others include industrial productivity and AR gaming… but the latter’s lead is due to one outlier, which is never a good sign.
As we noted in last week’s Behind the Numbers, AR marketing is projected to grow from $3.4 billion last year to $14.5 billion by 2027. This consists of creation software (e.g., 8th Wall) and paid amplification (e.g., sponsored lenses). The latter is projected to reach $3.5 billion this year.
But understanding the scope of that ad spend requires panning back to put it into perspective. To demonstrate, what would you guess is AR’s share of total global ad spending? We’ve seen aggressive guesses of “at least 10 percent and as much as 25 percent of digital ad spending.”
Though the optimism is appreciated, the share is far smaller. Given that global ad spend (broader than the digital subsegment referenced above) is about $738 billion, that puts AR’s share at .0047. This is .47 percent or – in more plain-spoken terms – just under half of one percent.
Glass Half Full
Though the above reads as pessimistic, there’s a glass-half-full message intended. All that space that hovers above mobile’s share represents headroom. While overall ad spending is reaching maturity and decelerated growth, AR advertising is growing at a 33.8 percent CAGR.
In fairness, growth figures are amplified at smaller scales, given a small denominator (the inverse of the law of large numbers). That aside, AR marketing is a good place to be, as younger markets are where growth opportunities and upside lie. It’s small now, but it has to start somewhere.
To back that up with a historical example, mobile advertising was once an inconsequential portion of global ad spend. Today it holds a commanding 74 percent share of digital advertising. AR won’t hold the same prowess as mobile advertising broadly speaking, but it will be meaningful.
Like mobile advertising, that growth will happen gradually (the current stage), then inflect when it reaches a tipping point. That’s when it goes from an experimental initiative among the Pumas and Pradas of the world to a common element of the omnichannel marketing mix.
Carrot or Stick
One way the above sequence will play out is through consumer conditioning. The early adopter brands noted above will start to whet consumers’ appetites for things like dimensional product try-ons. Gradually, that will condition user habits, which evolve into expectations.
Those consumer expectations will then pressure brands that haven’t yet adopted AR marketing to finally come on board. They won’t have much choice because it will be table stakes at that point. Put another way, brands will adopt AR eventually, whether by the carrot or the stick.
To rest on another historical example, the above sequence is how digital photography became ubiquitous in eCommerce. It’s hard to imagine a day when online product listings didn’t contain several images from every angle (and 3D spinners in some cases), but that was the reality.
Of course, AR is more technically complex than photography, which is why this adoption sequence will take longer. That’s what we’re currently seeing in the drawn-out adoption cycle for AR brand marketing. AR innovators with the patience to stick with it could see ample payoff.