eMarketer Webinar: Immersive Media—A New Frontier Powered by Virtual and Augmented Reality

3. © 2016 eMarketer Inc. Virtual Reality (VR) vs. Augmented Reality (AR) Image credit: Nan Palmero, Flickr VR: completely immerses a user inside a virtual world or experience Image credit: Ikea, YouTube AR: overlays virtual objects, other digital information over the real world

4. © 2016 eMarketer Inc. What about Mixed Reality (MR)? MR: real-time commingling of virtual and physical objects. Sometimes used interchangeably with AR Image credit: Microsoft Sweden, Flickr Image credit: Magic Leap, YouTube

6. © 2016 eMarketer Inc. Consumer-level VR and AR hardware landscape Mobile VR Desktop VR AR/MR Devices Samsung Gear VR Google Cardboard Google Daydream (Fall 2016) Oculus Rift HTC Vive Sony PlayStation VR (Fall 2016) Microsoft HoloLens (Dev kit available) Magic Leap (Details thin) Google Tango (Lenovo Phab 2 Pro, Fall 2016) Common Smartphones & Tablets Image credits: Respective companies

9. © 2016 eMarketer Inc. Large tech firms making big bets on VR and AR  Acquired Oculus in March 2014 for $2B  Added 360-degree video support in Nov. 2015  Launched Oculus Rift in March 2016 for $599  AR glasses part of 10-year roadmap  Low-cost Cardboard has brought VR to millions  YouTube 360-degree video support added March 2015  Launching Daydream mobile VR platform in Fall 2016  Major investments in MR startup Magic Leap  Acquired several AR companies in past two years  Continues to file numerous AR and VR patents  Hired Doug Bowman, 3-D/VR interface expert  No Apple-branded VR or AR products … yet

10. © 2016 eMarketer Inc. More than $2.5 billion invested in VR, AR companies across more than 200 deals $76 $17 $56 $626 $117 $131 $165 $238 $1,077 15 8 14 13 25 16 33 44 42 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Amount invested (millions) Number of deals Source: CB Insights, June 2016 Magic Leap Funding Rounds

11. © 2016 eMarketer Inc. Tech has finally improved enough to enable mainstream consumer applications Faster computer and graphics processing Powerful smartphones with array of sensors More vibrant and detailed mobile displays + Improved optics for capture and viewing Easier to use and more accessible creative tools VR: Presence AR: Seamlessness Image credits: Creative Stall, Hysen Drogu, Jennifer Cozzette, The Noun Project

12. © 2016 eMarketer Inc. Confidence that immersive technologies and media are here to stay “For the first time in my professional career, I feel pretty confident that this is not a hype cycle that we’re in. This is the beginning of an evolution in the VR space that will continue. There may be some booms and busts in that evolution, but it is not something that’s going to fizzle and fade away only to reemerge five or six years later. The train has left the station.” —Adrian Slobin, Global Innovation Lead, SapientNitro

14. © 2016 eMarketer Inc. VR and AR estimates are all over the map, underscoring the nascent state of the market By 2020, the worldwide VR market will reach: $10BSource: UBS, Dec. 2015 $30BSource: Digi-Capital, Jan. 2016 $70BSource: TrendForce, Dec. 2015

15. © 2016 eMarketer Inc. Mobile VR users expected to outpace desktop VR users worldwide 18 53 81 110 135 4.5 8.5 12.3 16.2 19.5 2016 2017 2018 2019 2020 Mobile VR Users Desktop VR Users Source: Deutsche Bank, March 2016 “We think the VR ecosystem is in its ‘2007 smartphone’ moment in terms of the adoption cycle. It took 4 to 5 years for smartphones to reach 100 million users in the US; we expect a slower adoption curve for VR, but still strong enough for an enormous market.” —Deutsche Bank

17. © 2016 eMarketer Inc. AR market could be even bigger than VR, but the few estimates that exist are disparate  Venture capital firm Digi-Capital states that worldwide AR revenues will reach $90 billion by 2020. (January 2016)  CCS Insight expects total worldwide market value for AR smart glasses will reach $1.2 billion by 2017. (June 2015)  Tractica anticipates worldwide shipments of smart glasses will reach 5.4 million units per year by 2020. (May 2015)  ABI Research forecasts 21 million smart glasses units to ship worldwide by 2020. (November 2015)  IDC expects worldwide AR hardware shipments to exceed 45 million by 2020. (April 2016)

18. © 2016 eMarketer Inc. VR and AR still in the experimental phase for many companies 25%Marketing executives worldwide that believe VR and AR will have the biggest impact on marketing companies by 2020. (Mobile ranked as top impact, cited by 59% of respondents.) (Source: Economist Intelligence Unit/Marketo, Feb. 2016) Primary tech and content being developed for VR and AR by companies worldwide: 1. Education and gaming (20.0%) 2. AR tools for mobile (14.3%) 3. 3-D simulation, imaging, recognition (11.6%) (Source: Knight Foundation, Oct. 2015)

21. © 2016 eMarketer Inc. Costs for immersive content vary, with in-demand specialists pushing up prices “Costs are all over the map. We’re seeing projects that range from $10,000 in the low end to up into the hundreds of thousands, and potentially more, on the higher end.” —Ben Nunez, CEO, Littlstar “You have the same titles as you do in the film industry, but everyone has to be a specialist in VR. That carries a higher cost than traditional filmmaking, because you’re having to get these people who are in extremely high demand at the moment.” —Henry Stuart, Co-Founder and CEO, Visualise

22. © 2016 eMarketer Inc. Immersion vs. complexity, cost with VR content Complexity and Cost LevelofImmersion Rotational Tracking Rotational and Positional Tracking Roomscale Experiences Haptic Feedback

25. © 2016 eMarketer Inc. Defining goals and measuring success with immersive digital marketing experiences “From a quantitative perspective, we had goals for how many consumers we wanted to touch, how many events we were going to execute and how many samples we were going to pass out. From a qualitative perspective, we wanted our consumers to walk away not only talking about the experience, but also talking about the brand, so we tracked the social conversation, including comments and photos from events.” —Rachel Harris, Director, National Brand Activation, Beam Suntory

29. © 2016 eMarketer Inc. How The North Face approached distribution for its initial foray into VR content: “We had a distribution setup with Outside Magazine in November 2015, which I think is a good example of us investing in distribution of that content. Some 75,000 subscribers of Outside Magazine received a branded Google Cardboard viewer polybagged into their delivery and were encouraged to download the app to check out the experience, and then learn more about the story at the magazine online.” —Eric Oliver, Director, Digital Marketing, The North Face

30. © 2016 eMarketer Inc. A new medium with new rules that are still being written “The biggest challenge of creating virtual reality content is it undoes all the rules that have been created for traditional filmmaking … the passage of time, the way you cut and even the lack of having different ways that you tell an actual story with close-ups or mid shots—you don’t have that in VR because it’s a full capture of the world.” —Gevorg Karensky, Founder, Bipolar ID

31. © 2016 eMarketer Inc. Pondering marketing within virtual environments where people spend hours, not minutes “As we talk to our clients, the big thing they’re thinking about is how to move beyond the ‘big splash’ event and actually create content that would drive a consumer back to the virtual world they’ve built.” —Adrian Slobin, Global Innovation Lead, SapientNitro

33. © 2016 eMarketer Inc. What about VR commerce? One-third of US internet users said they would be more likely to shop at a retailer if it offered a VR experience. (Walker Sands, Feb. 2016) Clothing and apparel, consumer electronics, home decor and furniture were top categories that excite US internet users for VR shopping. (SUMO Heavy, April 2016) Seeing items in real size and form while shopping online was the top VR activity smartphone users worldwide were interested in using. (Ericsson ConsumerLab, Oct. 2015)

34. © 2016 eMarketer Inc. Barriers to virtually replicating some categories of physical goods, especially in fashion “When you pick up a matching jacket or you want to buy some other type of fabric-type material [in a virtual environment], it’s extremely challenging to make it look real. It’s demanding to make a 3-D model of these soft goods that can run on mobile devices or even on PCs in real time, especially when it’s moving.” —Amir Rubin, Co-Founder and CEO, Sixense

37. © 2016 eMarketer Inc. Markers and Cues Elements that enable AR experiences: Content Overlays Calls to Action Distribution Integrate with existing mobile app or create new standalone app Access via consumer apps offered by AR companies: Codes Graphics Faces Surfaces Locations and Other Signals 3-D Models Video/Audio Interfaces Social Shares Directions Incentives Image Credit: Mara Julieta G/Noun Project

38. © 2016 eMarketer Inc. Bringing engaging digital content and analytics to physical media Magazine Ads Direct Mail PackagingCatalogs Bills and Statements Signage Merchandise BrochuresCirculars Image Credits: Marxent, YouTube Image Credits: Aurasma, YouTube Books

39. © 2016 eMarketer Inc. Hyundai Virtual Guide utilizes AR to assist car owners with a variety of functions  Announced at 2015 LA Auto Show and launched in Jan. 2016  Built based on customer insight about need to better educate owners about car features  Measure of success: improved customer satisfaction scores Image Credit: Hyundai Motor America

40. © 2016 eMarketer Inc. Advice for supporting an AR project: “You have to understand all of the use cases up front. There are always going to be a few unplanned implementation roadblocks, and you have to stop and re-evaluate exactly how the app is going to work in a real-world use case. Allow yourself enough time to test the app in real-world situations.” —Miles Johnson, Connected Care Communications Manager, Hyundai Motor America

41. © 2016 eMarketer Inc. Sephora Virtual Artist uses AR to enable mobile ‘try-before-you-buy’ lipstick experience  Launched in February 2016  Integrated with its Sephora to Go app and powered by ModiFace  Feature generated 1.6 million visits and 45 million “try-ons” in 8 weeks after its launch  Powerful tool to improve mobile conversion Image Credits: Sephora, Yahoo Finance, Multivu

42. © 2016 eMarketer Inc. Lowes experiments with Google’s Project Tango tech for greater AR precision  Device uses special depth motion sensors to capture more data for info, object display  Helps ensure before purchasing that large items like fridges and stoves will fit in designated space Image Credits: VentureBeat, Sydney Morning Herald

44. © 2016 eMarketer Inc. Pokémon GO mobile AR game is breakout success shortly after early July 2016 launch  Gamers can catch Pokémon in real-world scenarios  Rapid adoption among iOS, Android users  Average use: >43 minutes per day— almost double that of average time spent with Snapchat Image Credit: Polygon

45. © 2016 eMarketer Inc. Key Takeaways:  It seems that 2016 is the year VR and AR enter the mainstream conscience of consumers, but we’re still at least a few years from widespread immersive tech adoption.  Smart mobile devices will be key enablers for early widespread adoption of VR and AR, with the potential for longer-term take up of smart glasses and head-mounted displays.  Though not always the case, VR marketing experiences tend to be used to drive awareness, while AR marketing experiences are utilized for conversion and engagement.  With either format, experimenting, measuring and iterating will be critical to delivering truly engaging and valuable experiences to target audiences.

46. Aurasmaischangingtheway weinteractwiththeworld. Wehelpmarketersand organizationsuseaugmented realitytounite thephysical and digitalin anewworldof immersive experiencesthat driveengagement,innovation, andconversions

47. © Copyright2014 Hewlett-Packard DevelopmentCompany, L.P. Theinformation containedherein issubject to changewithoutnotice. The Next Marketing Channel AR blends traditional and digital channels Traditional Channels Print, packaging, direct mail, tradeshows Static Not measurable Digital Channels Display Ads, Mobile Ads, Email, Social Campaigns, Mobile Apps Crowded landscape Augmented Reality A new, immersive marketing channel that leverages benefits of print, digital, and mobile. Tangible experience Targeted Measurable Interactive Mobile High touch

48. © Copyright2014 Hewlett-Packard DevelopmentCompany, L.P. Theinformation containedherein issubject to changewithoutnotice. How to Use AR Start with traditional channels and add digital content = Measurability Targeting Interactivity Engagement Traditional Marketing Channels DIRECT MAIL CATALOG PRINT ADVERTISING Augmented Reality + COUPONS TAP TO PURCHASE VIRTUAL TRY-ON

49. © Copyright2014 Hewlett-Packard DevelopmentCompany, L.P. Theinformation containedherein issubject to changewithoutnotice. Bridging the physical and digital Enhance traditional marketing channels with digital and mobile Direct Mail Catalogs Statements Products Advertisements Merchandise Events Packaging In-Store Signage Business Cards Consumers unlock augmented reality experiences with their mobile devices, bringing printed materials and product packaging to life.

50. © Copyright2014 Hewlett-Packard DevelopmentCompany, L.P. Theinformation containedherein issubject to changewithoutnotice. Bridging the physical and digital A new channel to enhance traditional marketing and communication channels with digital and mobile Tap to Purchase Increase Sales Virtual Try On Increase Revenue Schedule Meeting Higher Conversions On-Line Help Reduce Call Center Set-Up & Support Customer Sat Surveys & Social Engagement Contest & Games Engagement Contact Brand Awareness Increase Revenue Grow Sales Higher Conversions Mobile Coupon Increase Sales Exclusive Content Increase Value Lower Cost Improve Customer Satisfaction Better Engagement Grow Brand Awareness

51. © Copyright2014 Hewlett-Packard DevelopmentCompany, L.P. Theinformation containedherein issubject to changewithoutnotice. Aurasma Cloud Create, Manage, Track Augmented reality experiences Brand content Videos Graphics Photographs Audio 3D models HP Aurasma Create AR and share with everyone Aurasma App Your App + SDK Skinned App Social Collateral Ads Direct Mail Catalogues AudienceCampaign Inputs Print Marketer

54. © 2016 eMarketer Inc. Learn more about digital marketing with an eMarketer corporate subscription Around 200 eMarketer reports are published each year. Here are some recent reports you may be interested in: Q&A Session Made possible by You will receive an email tomorrow with a link to view the deck and webinar recording. To learn more: www.emarketer.com/products 800-405-0844 or webinars@emarketer.com Bryan Yeager Immersive Media: A New Frontier Powered by Virtual and Augmented Reality  Virtual Reality and Beyond: The Current State and Future Potential of Immersive Digital Marketing Experiences  Virtual Reality Technology in China: Opportunities and Challenges in an Emerging Market  What We Know So Far About Augmented Reality for Marketing: Q1 2016  Digital Video for Brands in the US: Challenges to Consider and Questions to Ask Ahead of the NewFronts

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