Today I want to talk about the Augmented Reality kit that Apple released recently and what it means for you, the app and indie developers, marketers, entrepreneurs, appreneurs.
Augmented Reality is and will continue to be very big. That is a proven thing, with Pokemon Go probably the best example of the first real big one. We’re going to see more and more Augmented Reality apps and integrations in the world and in the marketplace.
Million Dollar Question
But this is the million dollar question for you: Is this going to be something that you can make money on? Is Augmented Reality the new thing for app developers like you?
My personal take on this is that it’s not. I don’t think there’s going to be a viable business model for AR apps for individual developers.
What I do think there’s a big future for is gaming studios or app studios at large integrating AR into their apps and then providing some sort of service. And maybe even selling it off to Facebook or Snapchat or Google or something like that.
Why Not AR Apps?
First, I don’t think there’s going to be a lot of opportunities to build stuff that the average user is going to want, that the big guys aren’t going to build already or the studios won’t build already.
Second, I’m not convinced that the advertisers are going to dive into Augmented Reality the same way they dove into banner ads. The whole reason for the App Store is the ad networks. That’s the way the money flows, that’s where the growth comes from.
Where’s The Money in Augmented Reality?
The money that’s going to go in Augmented Reality will be in things like product placements. But I’m not convinced that that is going to be a very successful ad platform for advertisers. They’re obviously going to try. But I don’t think people are going to want to use AR, click on something and then get taken to another experience.
As Apple Pay evolves there may be some opportunities there. But I don’t think the money’s going to flow through the ad networks nearly as well as it did on the other apps like Applovin, Chartboost, and Admob. That’s going to be a big barrier to entry.
The Creativity Side
Finally, the bigger piece of it is the creativity side. Other than games, how many Augmented Reality apps could you make that the average users will really love?
There’s going to be a few categories that really dominate, like productivity, reference and news, and maybe gaming, and fitness. But, once you get in those categories, I don’t see how after the top 10, there’s going to be a million other apps that are worth downloading or paying for.
Focus on Monetizing Apps
I think the App Store is going to explode not necessarily on the AR side, but on the ability to monetize, like Apple Pay, subscriptions and messaging-related payments.
Apps are just going to be a better way to collect data and to transact.
I think there’s going to be a place on a mobile phone for transactions. And, for most of you, it’s the place to focus on if you want to build a business for that, if you want to make money.
If you want to make something really cool that you can eventually sell or that maybe goes big, if you want to get into AR, start a studio and got a bunch of partners and do that.
But if want to stay lean, stay as a developer and make passive income, you have to focus on the subscriptions, Apple Pay, the money that’s flowing through the App Store which is getting bigger and bigger. That’s the real opportunity for people like you, not in Augmented Reality.
The evolution of information and the payments through apps is going to be a big opportunity.
What about Virtual Reality (VR)?
I think VR is just virtually the same thing. It’s just AR with goggles, right? It’s more immersive, but all the same things. All the same concepts apply where I think that the barrier to entry is high enough that it’s going to be difficult to break in as an indie and to monetize.
What do you think? I’d love to hear from you guys.
I think you’re completely wrong. AR is going to bring the internet into the real world.
Now advertisers can put ads everywhere for next to nothing. No more billboards, it will all be digital.
It’s a digital, monetizable layer over the real world.
@Doug – Walk through the details of how exactly that will be implemented. An advertiser, lets say Clash of Clans or even Pepsi, creates some sort of universally immersive experience. They go to AppLovin (or any exchange) and buy real estate in your AR focused game. How exactly do you integrate their creative into your unique experience? How does it seamlessly enter the app? Or is it a video interrupt like it is now which, in my opinion, will be a huge issue for users.
Lets say it’s not an interrupt and they figure out how to do product placement inside your AR app. Are they paying CPM (impressions) since it will not be direct response marketing? Surely no user is going to stop an AR experience to actually click out of the app and go install something else the way they do now. It will be based on eyeballs, similar to TV.
I agree with you that this will change but I don’t think it trickles down as easily as it has in the past. If I meet advertisers or ad networks that can prove me otherwise, I’m all ears.
It seems to me that AR is now at a similar stage as apps were 8 years ago. You mention two problems for indies: building a great product and monetization. If we can assume these areas develop in AR as fast as they did in mobile, AR has a bright future ahead.
Right now in mobile, platforms such as Unity, Appcelerator or technologies such as React Native or Xamarin make it quite easy for indies to create high quality apps. If there is as much money in the AR market as currently forecasted, similar platforms will pop up in this market too.
As for monetization, it’s a similar situation. Since AR experience is so immersive it will be very valuable for ad networks to build platforms around it. There could be innovations like deep links from app to app, and ads that integrate much more seamless into apps than possible now.
So I guess right now it’s still a high risk/potentially high value situation but that could change very soon.
@Simon – this assumes there is an equal market spread for the money. 8 years ago there were no market leaders in the app space. It was very much democratized with individuals becoming millionaires or making five figures a month. 8 years is a long time for a market to consolidate.
I agree that it is in the best interest of ad networks to adapt to AR but my point is that I don’t think it’s going to be “connect huge apps/brands with small apps” the way it has been for the last few years. I think it will be more like a television model where deals are brokered without an exchange + implemented into the winning AR apps.
Maybe there will be some sort of Minority Report style ad solution but I don’t know how an SDK will ever be able to deliver a consistent experience across a platform that is fundamentally designed to be customized. Interruption is going to be phased out at some point.