Advertisers aren’t sold on virtual reality, but they are starting to buy into the hype around augmented reality

Sales growth of VR headsets has stalled — 1 million fewer VR headsets were sold last year than expected and, excluding Oculus Go, major headset sales were down 50 percent in the first half of 2018, according to SuperData– and advertisers have become more reluctant to spend on the technology. Lego’s head of emerging platforms, James Poulter, said the technology right now is just too expensive for the payoff.

“We’re still at the point where you’re not carrying a VR device in your bag at all times,” said Poulter. “The arrival of Oculus Go may change that, but VR isn’t something you can do on the street at the moment. VR is an interesting area for us in the future, but it’s far from becoming something we do at scale. AR, on the other hand, is one of the most immersive ways that we can get people experiencing the product without having to have it in their hands.”

Lego is no stranger to AR apps, having launched a few of its own already. However, recent developments show a shift from using the technology for its novelty. It is working on an app for Apple devices that may allow a user to scan a real-world set they have built already, and then turn it into an AR game. Poulter would not reveal details of the app ahead of its launch, though did reveal that the team wants to use AR to change the buying experience.

Other advertisers are looking to take advantage of the novelty effect of AR, particularly on social media. Facebook is threatening Snapchat’s dominance of AR, and the ensuing tussle has attracted more advertisers to the technology. Michael Kors launched an effect on Facebook last month that let people try on a pair of its sunglasses virtually as part of a wider trial of AR in the news feed. The trial is emblematic of the fact that many brands want to push ads and transactions closer together now. AR enables this, VR doesn’t.

“In AR, an advertiser can drive a click through to a sale or direct someone to a retail location nearby, which is all completely measurable,” said Adam Hemming, chief revenue officer at Advertly, a company that sells AR and VR ads. “In VR, we are still wrestling with how to take someone out of the experience they are having to purchase or sign up or whatever.”

Even VR stalwarts are putting their plans for the technology on ice due to AR’s growth.

Publisher USA Today had been all in on VR until around last summer when it saw Apple and Google adopt the technology. It spent the rest of 2017 testing the technology and in March launched its first AR app 321 Launch in partnership with Florida Today, which covers the 30 rocket launches scheduled for Cape Canaveral, Florida, this year.

Sponsorship of the app, which lets users see a rocket fly through the sky on their phone screens alongside information such as forecasted flight patterns, is planned for the future. USA Today has also recently introduced AR stories to its app. For the publisher, it’s less about AR’s scale in these early days and more about the PR, positioning and building knowledge of it.

“We’re not giving up on VR and will continue to keep an eye on but the opportunity [now] is with AR,” said Ray Soto, director of emerging technology at USA Today Network. “With VR we focused on creating content that would get a user to stay within the experience for as long as possible, whereas with AR we’re trying to create bite-size experiences that people are excited to check out and potentially share with their friends.

There isn’t mass adoption of AR just yet, but it’s growing, and advertisers know it. AR users in the U.S. will reach 51.2 million this year, up 36 percent on 2017, per Boston Consulting Group. AR is, however, a new medium and so as much as brands like Lego are encouraged by the growth they’ve seen to date, there are still issues around measurement and expertise that need to be addressed. It took Facebook seven months before it let advertisers access basic performance data on their AR effects, for example.

Technology agency Inition has seen investment move away from VR over the last year. While creative agency Ralph has found some clients have used VR to provide a moment of immersion such as a winter wonderland at an event. In some ways, maybe VR is just a bit too immersive for advertisers and indeed for a lot of consumers too — it’s hardly a communal experience after all.

“The media owners who have tended to own VR are the OOH vendors, which means that this type of creative is often recommended as experiential activity, which again restricts the reach,”said Starcom Worldwide’s head of strategic innovation Amy Kean. “While I’d love to make my job amazing by constantly churning out virtual reality campaigns, it’s not always practical and is sometimes best left in the hands of filmmakers and games designers. There’s nothing wrong with the ad industry admitting that and upping the creative levels of existing work in traditional media.”

Ubiquitous use of VR might be more hype than reality now but the anticipation of what the technology could bring to advertisers persists.

“The change for VR will be when 5G comes in because it could potentially be 100 times faster than 4G, so there’s potential for mobile experiences,” said Dan Calladine, head of media futures are Carat Global. “5G is due to arrive by 2020, and by that point, the VR headsets will be cheaper, more sophisticated and faster.”

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