Mobile augmented reality market to top US$700 million in five years

AR applications have begun showing up for iPhone, such as Presselite's Metro Paris Subway, which shows the locations of the nearest Paris subway stations as an overlay to the live video feed from your iPhone's camera

The mobile augmented reality market will reach US$732 million by 2014, fueled by paid application downloads, subscription services and advertising, according to a new report from Juniper Research.

In 2009, there was an explosion of interest in bringing augmented reality applications and browsers to mobile devices with GPS, cameras and compasses. Mobile AR can create a new level of mobile interactivity in gaming, travel, retail, social networking and education applications.

But that optimistic forecast is called into doubt by the report itself, which notes that only a handful of smartphones today have the needed features. More importantly, "there is much uncertainty as to how augmented reality content and services should be monetized, what business models operators, vendors and content providers should employ," according to the Juniper study "Mobile Augmented Reality: Forecasts, Applications & Opportunity Appraisal 2009-2014."

In other words, can anyone make money from it?

An extract of the Juniper study is available as a whitepaper (registration required).

Augmented reality generally refers to overlaying real-world objects or locations, shown in a camera viewfinder or display, with additional, related digital information about them, including text, images, animations and links. A view facing north on New York's Madison Avenue might show the name of a store with a special offer, the nearest ATM machines or subway entrances, or information and links to an historic building.

To do all that, handsets need a camera, GPS, tilt sensors (accelerometer) and a compass, along with a wireless broadband connection. The mobile AR software uses these elements to identify the user's location and bearing, and then finds any surrounding objects or locations that have been geotagged -- their positions marked and associated with one or more sets of server-based data. The AR software overlays this additional information onto the real object shown in the handset's display.

AR applications have begun showing up for iPhone, such as Presselite's Metro Paris Subway, which shows the locations of the nearest Paris subway stations as an overlay to the live video feed from your iPhone's camera. Android-based phones with the necessary AR features will spur still more interest in and adoption of mobile AR by users, according to the report.

The Juniper authors predict three likely ways vendors will "monetize" mobile AR: point of sale revenues, where the user pays per download; various subscription-based schemes -- paying for something after the initial download of the AR application; and money paid by advertisers.

Juniper estimates that, despite the surge in interest, 2010 mobile AR revenues will amount to no more than $2 million. But the researchers say revenues will rise dramatically after that, as more AR applications are deployed, especially for mobile games with AR features. Enterprise AR applications will become another revenue stream starting in 2012. AR-based advertising will ramp up as brands and retailers exploit "location relevance" for products and promotions.

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