Grab Your Headset: Virtual Reality Poised For Real Adoption

As with many new technologies, virtual reality (VR) adoption started slowly. But that’s changing now, with the market value predicted to reach $44.7 billion by 2024 worldwide—a compound annual growth rate (CAGR) of 33.5% since 2018. The market for head-mounted displays is forecast to grow at a CAGR of nearly 23% during that same time period.

What’s behind the surge? For that we turned to Eric Hope, a longtime product designer at Valve. Valve is a Bellevue, Wash.-based entertainment software and technology company that, among other offerings, has in market a platform for the creation and distribution of leading-edge VR products. The conversation with Hope also included where VR is headed, brands leading the charge, and how the technology will change entertainment and advertising as we know it.

The 2019 holiday season was one of the most successful seasons for VR. Why do you think that was?

Over the last few years, we’ve seen an accelerating growth curve year-over-year growth for VR—keeping in mind the starting baseline was almost zero a few years ago. Most recently, right around holiday 2019, we saw the curve have a sharp uptick. Everyone has been frequently sold out [of headsets] since then.

As to the why for VR’s success, that’s primarily due to the hardware finally hitting a quality and comfort threshold necessary to carve out a new category with customers, coupled with transformative content that just wasn’t possible outside of VR. These two dimensions are combining to cause a cultural shift where VR is rapidly growing in mainstream understanding and appreciation for what it really is, rather than the niche product it had been purported to be years prior.

Why do you think mainstream adoption was initially slow?

About seven years ago, modern VR started exploding in industry awareness. With much of the consumer electronics and computing platform services market trying to capitalize, there was effectively a race to the consumer that occurred. The problem was, in that race lots of fundamental, quality-of-experience corners were being cut. That resulted in the cardboard-esque/mobile VR explosion, with millions of people trying it out and coming away relatively unimpressed—which was understandable as this “flavor” of VR has very little in common with “true” VR.

It wasn’t until a few years ago that true VR hardware and software, where the user is transported into highly immersive experiences, started to become readily available to customers.

Along those lines, what has been the biggest barrier to entry for VR?

Honestly, it’s a new paradigm, and though I hate using that word, it really is for entertainment and the greater computing context. Anytime there is a new product or experience category for customers, there is an interesting progression that must take place before it can really take off. For example, early hardware is usually expensive because the addressable market is small and your volumes are going to be low, which means adoption costs are going to be high. Couple that with the fact that software makers, when evaluating opportunity costs, are going to look at this nonexistent addressable market and only see warning lights in their cost/benefit analysis spreadsheets. So you end up with expensive hardware and a dearth of high-quality, exemplary software.

That is just at the macro level of the VR category. Down at the micro level of hardware decisions, you see just as hard trade-off triangles between cost, comfort, and quality. It’s within that triangle that certain hardware companies have been indexing in different ways to differing reception of customers.

Where do you see VR heading?

My colleagues and I see VR, and ultimately augmented reality, or AR, very slowly over time developing into a superset of entertainment and productivity.

Regarding entertainment in VR, where we spend most of our time, customers for the first time have immersive experiences that surpass both the spectacle of the best theme parks in the world and the excitement of traditional flat-screen gaming experiences, all in the comfort of their own homes with the convenience and scale you would expect from modern digital platforms.

In entertainment we still feel as though we are only just scratching the surface in considering how these experiences can be networked and shared with anyone in the world. For the first time we have true telepresence and nearly real, high-bandwidth collaboration made possible. This is a clear vector in which these tools will ultimately spill over into the productivity space. Not only can you explore the tunnels of invading alien forces, but you can later share a virtual whiteboard and to-scale mockup of a product with your colleagues in real time around the world.

And that’s just the new stuff. There is plenty of disruption of old stuff, too. For instance, in VR you can have unlimited screens at unlimited sizes, and you can share them with friends via networked connections. This means historically venue-based experiences, like theaters, traditional and e-sporting events, and concerts, all become accessible and in some ways superior in the comfort of your own home. There is plenty of seemingly established behaviors and content that is likely to be transformed by VR.

How will consumers adopt VR into their day-to-day lives?

Like all new contexts, VR will start small. It will primarily be for entertainment. Eventually it will start to permeate the more mundane workflows of everyday life. Shopping for furniture, hotels, homes, cars, clothing, and concerts will be so superior it will be hard to go back to a static photograph that may or may not be zoomable on a monitor.

With VR, those same products can be viewed dynamically and at scale in three dimensions. We’ll have the ability to inspect details at any angle, in incredible resolution, and all in intuitive ways, like leaning in or sitting down.

How do you see VR improving the customer experience?

Apart from the new level of quality of visual experiences just mentioned, the other side of the VR coin is natural input and interactions. The input we do day to day, through a mouse, keyboard, or touching virtual controls on the flat screen of a phone, are all best-effort abstractions.

With VR you have more than a pointer. You have hands—either via controllers or via cameras tracking your actual hands, and that affords the ability to reach out and grab, manipulate, and throw items, which are all natural physical movement we’ve done throughout our lives.

This will all afford new forms of interaction in games, learning, and vocation.

What brands in your opinion are experimenting with VR and doing well?

There are quite a few brands doing great things in VR these days. In the gaming space, I’m biased with all investment Valve is doing through its hardware, like the Valve Index VR headset, and software endeavors, like the “Half-Life Alyx” VR game and the SteamVR gaming destination. But there are lots of companies exploring interesting new concepts, like Bethesda, Ubisoft, Stress Level Zero, Vertigo Games, and many more.

In the general computing space, Tesla is leveraging VR in clever ways. The company internally prototypes the majority of its vehicle exteriors and interiors using VR. As a result, it lets the designers iterate quickly, much more so than printing plastic or shaping parts out of clay or foam. Externally facing with customers, they use VR at their new vehicle announcement events, where the audience can virtually walk around and sit inside not-yet-in-production cars.

Ikea is another great example of reaching customers directly in new ways. With some of their early apps, you have the ability via VR to design a room and see it exactly to scale. Users can manipulate and move items around as they see fit to experience what it will look like and how the design will take shape. The way Ikea is using VR transforms your brain’s ability to comprehend size, shape, scale, and color, and it gives customers a confidence level not previously possible before they order their furniture.

How will VR impact advertising?

VR and AR will change the advertising landscape. It will bring the ability to paint product placements inside of a consumer’s real or virtual worlds with correctly scaled illuminated renderings.

This is where platform choices will really come to bear down the road for customers. When a technology affords access to a user’s surrounding environment—through tracking and depth-mapping cameras—the opportunity for increasing value to, or abuse of, the customer’s attention and perception is orders of magnitude higher than the world we live in today.

On that note, how will VR affect emotional intelligence in advertising?

There is an emerging category of advertising that seems to value not just short-term revenue, but also the long-term trust and satisfaction of customers, colloquially and increasingly being called “emotional intelligence marketing.” This kind of marketing can be of cyclical value to customers, letting them know about a brand or new product they are likely to like but may not have known about previously, or connecting customers over shared interests in products and brands, especially in the hobby industries.

However, the way you build confidence in those offerings isn’t all that dissimilar to the kind of data extraction that some customers find privacy-violating today and may find even more egregious with the multiplier of all of the incoming and outgoing data streams of VR tomorrow. Just like any other dimension of customer connection, it will come down to trust. How companies manage, build, and spend their customers’ trust will be just as shaping as the quality of their hardware and software offerings.

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