AR/VR’s $80 billion-plus market could split before it consolidates

Some in the AR/VR industry see it converging into a singularity of spatial computing in one magical device, but mobile AR, smartglasses and VR could actually diverge in the medium-term (at least commercially).AR (mobile AR, smartglasses) is forecast to top 2.5 billion installed base and $70 billion to $75 billion revenue by 2023 (note: installed base is different to active users). VR (mobile, standalone, console, PC) could hit over 30 million installed base and $10 billion to $15 billion revenue in the same timeframe. This divergence is driven by installed bases, form factors, prices, use cases, business models, and unit economics – so why are they so different? Mobile AR looks like the medium-term mass-market for AR/VR, with over 850 million installed base at the end of last year, and a Digi-Capital forecast over 2.5 billion by 2023 (ARKit, ARCore, Facebook Spark AR, Snapchat Lens Studio, web AR etc.). Being a free software platform on ubiquitous smartphones has natural advantages. The challenge for mobile AR is critical use cases, to transform user experience in a way that users care about and that couldn’t be done any other way. Pokémon Go, messaging filters and Google Maps are a start, but additional critical use cases are needed.