#260: Predicting the Future of VR & AR with Gartner’s Brian Blau

brian-blauBrian Blau is the research director in the personal technologies group at Gartner specializing in mobile apps and video game software in the consumer domain. He’s also been analyzing the market for virtual and augmented reality for the past five years, but has been involved in VR since the 1980s. Gartner is a technology advisory service and so they’re in the business of predicting the future. A lot of their predictions and reports are not released to public, but Brian was able to hint at some previously made predictions as well as compare their analysis with some of the other analysts who have been estimating the overall market size for virtual and augmented reality.


Brian is in the business of making predictions about the future, and so this was a really fascinating interview to get some insights about the significance of how VR and AR is going to change our relationship to technology and other people. The big point that he wanted to emphasize is that immersive computing represents an entirely new user interface and human interaction design that is way different than anything else that we’ve seen before.

He says that the transition into immersive computing is significantly more different than the transition from typing on a desktop computer to touching a smartphone or tablet. Also, this new immersive computer paradigm is going to change everything from how we interact with technology to how we interact with other people.

It was also fascinating to hear how some other emerging technologies are going to combine with VR and AR. He sees that virtual personal assistants, like we saw in the movie Her, are going to start assisting us on our daily tasks and perhaps start doing things on our behalf. Then when you combine a virtual personal assistant with computer vision technologies and the Internet of Things, then you start to create what they call “ambient experiences.” He expects that we’ll start to have rooms with sensors so that these artificial intelligent programs can help us with a lot of different things in our daily lives.

In terms of making some VR and AR market size analysis, Brian couldn’t share Garter’s latest predictions. However, he was able to provide some older predictions that have been made public as well as compare their predictions to some other analysts. About a year ago, Gartner predicted that there would be 25 million HMDs by 2018, but they’ve since updated their prediction to be more than that. Brian also said that there are other analysts who are saying that the VR market is going to be $100-200 billion within the next 4-5 years, but Brian says Gartner’s prediction is more conservative than that. He also says that the compound annual growth rate of the VR market is expected to be well over 100%, which indicates that VR will continue to be a high-growth market.

Gartner does a combination of top-down research in to the supply side and major HMD manufacturers, as well as bottom-up research by doing surveys to see what type of experiences that the market is going to be demanding using VR. They’ve been producing reports on the competitive landscape of the three major HMD manufacturers, but now they’re starting to report on some of the use cases ranging from training, prototyping, design, and beyond. What they’re seeing is that the demand for VR is pervasive, and that the media coverage for VR trending really high.

One of the things that Gartner invented was to the hype cycle journey of different distinct periods of hype and overblown expectations that new emerging technologies go through over the course of five to 20 years. After an initial “innovation trigger” period, then there’s a period of “peak of inflated expectations” that can be seen as the height of the hype cycle. The media goes crazy with a lot of hopes and dreams of the promise and potential of the new technology, and then reality often sets in and there’s a “trough of disillusionment”. It’s only after passing through that reality check period that technology starts to climb back up the “slope of enlightenment” and then into the “plateau of productivity.”


Brian maintains the virtual reality dot on this hype cycle graph, and he says that it’s just about to cross over from the “trough of disillusionment” and into the “slope of enlightenment.” VR has had a long history where the peak of inflated expectations probably hit in the early 90s when the promise of the potential of VR was about 20 years ahead of where the technology and ecosystem of content creators needed to be. From this perspective, then we can start to see a lot more pragmatic and practical applications of VR being talked about in the media as it’s slowly accelerating towards it’s plateau of productivity. VR has had a long journey relative to other technologies, and Brian says that they’ve artificially slowed down the normal 5-20 year hype cycle journey for VR to more accurately account for where it’s currently at.

It’s interesting to note that the augmented reality dot is lagging behind the virtual reality dot as it’s just starting to really enter in the bottom of the trough of disillusionment. Brian estimates that AR is at least a year behind where VR is at, and perhaps more.

Brian has also covered the evolution of cell phones and the smartphone market, and compares and contrasts what was happening there with how he expects the VR and AR markets to unfold. There’s a lot that is different with the infrastructure that was already in place with cell phones and Apple’s role as playing the market hero, but there’s also a lot of similar parallels in terms of the importance of a software and app ecosystem that differentiates the phones. He expects to see a VR and AR HMD battle and an ecosystem battle that will be continuing to evolve and play out.

Finally, Brian sees that we will have access to these wearable computing AR and VR devices that really match the human perceptual system for the next-level of immersion and how we experience each other through technology. Right now we have a pretty good sense of what’s real and what’s not real. And Brian says that AR and VR are going to blend that line, and it’s going to fool us. And we’re going to really love it.

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Rough Transcript

[00:00:05.452] Kent Bye: The Voices of VR podcast.

[00:00:12.115] Brain Blau: I'm Brian Blau and I'm research director in the personal technologies group at Gartner, where I look at all manner of consumer tech. A lot of it has to do with devices, smartphones, tablets, but my specialty is software in the consumer domain. So things like mobile apps, video games. But I actually have a long background in VR. I got started in the 1980s when I was in grad school and I stuck with it for a long time. I helped create this technology called VRML in the 1990s. And today, as an analyst for the past five years at Gartner, I've been covering virtual reality, augmented reality as it's sort of risen up out of the ashes and come to be a very popular media topic today. I do all types of research on it. I know about the tech and I cover the vendors. I know a lot about the use cases. I talk to our Gartner clients that are going to be buying and using VR in the future.

[00:01:05.348] Kent Bye: Great. Yeah. So maybe tell me a bit more about Gartner, because you're kind of providing a service of mapping out the landscape of VR. And so what type of problems are you helping solve these different companies that are coming to you?

[00:01:16.556] Brain Blau: So we describe Gartner as a technology advisory service. We're quite large. We're more than 1,000 analysts and 5,000 or 6,000 employees. And we're essentially the largest company on the planet that does sort of this technology advisory function. A lot of our analysts cover IT technologies. So we specifically talk to CIOs and how they go about implementing technology in the enterprise and for their customers. So a lot of what we do is reporting. We write reports on these various topics. And again, a few seconds ago, I gave you my areas, but there's a thousand of us. So there's lots and lots of topics that we cover. But also more importantly, we give direct advice to our clients, either on the phone or in person. or they invite us in, they want to understand about the topics that we're looking at. We help them not only with their own technology and product effort, but we give them advice around the market, around the technology landscape, even about the future. So we have a big effort in emerging technologies where we really sort of take a look at the future, what's coming down, and how that can be used productively inside the enterprise.

[00:02:19.921] Kent Bye: Now, virtual reality is such a vast topic in terms of how many different industry verticals that it could potentially impact. And so are you covering all of those or are you focusing on any specific subset of those?

[00:02:32.629] Brain Blau: So when we do technology research, we usually sort of start at the top and we take apart whatever it is, the technology, the market, the business, and we sort of dive down into this. So we're into our VR research for probably three or four years now. We started the top with some sort of market trend competitive landscape type advice. It initially was focused on the vendors because that's where a lot of the effort and investment was in the beginning few years. But today it's becoming more about use case not only in the consumer side with video games and movies but on the enterprise side with maybe things like training or prototyping or design. And in the future, we'll have more in-depth reports and more in-depth advice around those things. When Gartner covers a topic, we usually focus either one or the other on the companies that are producing the tech or the companies that are consuming it. In this case, I'm going to do both. We're going to take a look at both.

[00:03:25.821] Kent Bye: And so today you're moderating a panel of different venture capitalists who are thinking about investing into virtual reality. And so maybe kind of summarize some of the big points that you took away from that discussion here at the Virtual Reality World Expo.

[00:03:39.407] Brain Blau: So the panel is very interesting. It was four different VC or investment professionals ranging from big company to smaller VCs. And I asked questions either related around their investments themselves and what they look for or for them to give some sort of market perspective. One of the themes that I took away was they almost all advised startups to not invest in building any more headsets. So they were like, don't build any more hardware. You're probably not a lot of room left for VR hardware in the next few years. I tend to take a similar view to that. I would also say probably if you're a startup, probably don't invest in making a new virtual reality head-mounted display just yet. But if you have something unique there, maybe you can make a component or potentially help another company. Most of the effort that they said, these investors had, is focused on either tools or content development. And I actually asked a question of the audience. I wanted to understand who was sitting in front of us. And I asked, are you more interested in tech or more interested in content? And believe it or not, I got more hands raised, probably two to one, around content. So there's going to be a big effort there. There's going to have to be a lot of very interesting videos, games, movies, interactive experiences. They're going to have to fill all those headsets. you know, give the value to those head mounted displays that people are going to be buying, you know, over the next year. So that was one thing that I took away. One of the other ones that they said, so specifically talking about their investments, and I asked them about how they manage their investments, especially for a market that hasn't been defined yet. And they said, you know what, it's not a lot different than managing any other type of investment. You know, you have your people, you have your business fundamentals, you have to watch the market and the trigger points. And they have to be able to sort of walk the fine line of building the next gen tech, but also putting product and marketing getting paid for it so they can sustain their business and grow it. And those are sort of the two big things that I took away from all the answers that we got today.

[00:05:37.802] Kent Bye: You know, is Gartner in the business of kind of projecting out potential sizes of the VR market? Or are the customers coming to you wanting to know, like, hey, is this going to be a thing? And if it is, how big is it going to be?

[00:05:49.267] Brain Blau: So VR is definitely a thing. It has been for a while. It's more of a thing now than it was a few years ago. So Gartner is definitely in the business of forecasting the future. So we do this all the time. And we have hundreds, if not thousands, of individual forecasts. So I've actually come out with a head-mounted display forecast. It combines virtual reality and augmented reality together. Unfortunately, we didn't make our numbers public, but I can tell you the most recent public thing that we did put out, which was about a little more than a year ago. And we said we predicted around 25 million head mounted displays sold into the market by 2018. I can tell you in the revised forecast that we made, it's going to be more than that. But our forecast also goes out a couple of years. I will tell you, though, we're a little bit more conservative than some of the other analysts that are covering the virtual reality market. We've seen some very high valuations from these other analysts, some as high as $100, $200 billion a year type market within a short four or five years. And we just don't subscribe to that. When we look at the types of orders that are being put in on the semiconductor side, we can look at the investment in VC and using our sort of very sophisticated sort of modeling formula, we don't see that big of a market. That said, It's very hard to predict sort of a standout, a breakout, one hit wonder, and how that could impact the trajectory. So we could say that we're a bit on the conservative side, but that's fine. We don't mind changing that. And this was our real first year doing a full blown forecast for the market. And we're going to take a look at how we did and then revise that one year from now. But it is a high growth market. I can tell you the compound annual growth rate is in the hundreds of percent and that's indicative of a market that really doesn't exist today and one that's going to grow in the future. We see virtual reality coming to the consumer market much faster than augmented reality. And I think it's sort of well known that's going to focus around games and other entertainment on the augmented reality side which is also part of the forecast. We see that more coming to business first. It's probably going to be delayed behind virtual reality probably up to about a year. So we're looking at the 2016 but more 2017 time frame before devices are going to be in the hands of either businesses or consumers. But ultimately though we think that the augmented reality market or mixed reality sort of some sort of combination of features of AR and VR are going to be the sort of the dominant device type out of starting around four or five years. And we can see that see-through capability that augmented reality brings you as being something very significant for businesses. And we think that there's gonna be a lot of businesses that adopt those types of head-mounted displays.

[00:08:23.844] Kent Bye: Now, when you look at virtual reality in terms of its potential impact into different aspects of society, you know, I have my own shortlist of where I see the most leverage point where VR is going to have, but is that something you're also looking at in terms of like, hey, this, you know, architecture, for example, is going to be kind of a no brainer. VR is going to revolutionize the entire industry or, you know, gaming, entertainment, you know, from your perspective, you know, what are some of those areas where you see that VR is going to have like a really big impact?

[00:08:51.722] Brain Blau: So my answer is going to be a little bit different. It's not necessarily going to call out a particular use case, which I think there's going to be many. What I'm going to call out is a different way of experiencing computing. So one of the favorite things that I love to talk about is the fact that, you know, wearing these devices on your head is sort of a computer in your head or a computer on your face. And it's a fundamental change in user interface and user experience. And I don't think that we know yet how the use cases are going to play out. We have an idea that sure, architecture will be very interesting, medicine and health, games, all these things are really going to have traction. But what's going to be the killer app or the killer use case, we don't know yet because we haven't put that user interface in the mass market. And so for me, the impact is more about use of digital technology in the future, and how it's really going to change how we interact with not only the computing technology, but with each other. When I look into the future, I see a lot of Very cool tech around virtual personal assistants helping us do our daily tasks and do our jobs. They potentially could even do our tasks for us, not just make recommendations, but do something on our behalf. I see that integrated with computer vision technologies. That is having a computer recognize the topology and the objects that are in front of the particular user combined with something that we call ambient experiences, ambient experiences, are much like VR but they're in a room and a room full of sensors and monitors where you would do work whether it's a factory or the field or even in your living room you're going to be in these environments that have lots of sensors and when you put all these things together combine that with the head mounted display all of a sudden it really changes the nature of how we experience those apps how we do our content, how the AI system behind the computer helps us, you know, do our work or do something fun in our daily lives. And I think that's really what the promise of VR brings. It's a bit far out there. It's something that's probably in the five to 10-year time frame, but I'm pretty confident that we're going to get there now that we can see these devices being built and a lot of enthusiasm, for example, that we're seeing here at the show today.

[00:10:59.451] Kent Bye: And with this revolution in human-computer interaction paradigm, how do you quantify that in terms of, like, making predictions and looking at the future?

[00:11:08.575] Brain Blau: Well one of the things that we do at Gartner day in and day out is make predictions about the future. So we're very good at taking a look at the trends, assimilating that, combining that together with how we see the vendors acting and the orders that they're placing. But I have to admit it's pretty difficult. I've been following and been in VR more than 25 years and in the early days we thought we would be at this point already and clearly that's not the case. But after making a lot of predictions and getting a lot of them right and some of them wrong, you kind of get used to the fact that, okay, you have to look into the future, you have to make a guess about it, and then you kind of have to refine it along the way. One of the things that we do a lot of is really to take a look at the demand side of the business. The supply side is a little tricky because certainly we can see the vendors pushing products in the market and that's what they want to sell, but the demand side is really what's going to set the market value. So we do surveys with consumers, we ask them if they want these types of experiences and how much they'll pay for it. And so we do estimates of average selling price and average amount of time somebody wants to spend in this type of content. And that's sort of where we see the real value. And that's what we look at. So we try to really understand the demand side of this. And that's how we get to our predictions. We kind of double check it, the supply side. on how well we did, especially after the fact. But it is to take a look at the demand, and I can tell you when we take a look at the demand for VR, it's quite pervasive. It's a topic that trends in the media very high, especially in Silicon Valley. There's a lot of VC investment, so we can see a bubble, so to speak. Not an actual bubble, we can see a rise in the amount of investment that's being put into VR and immersive technology. So those are the kind of factors that we use that sort of go into our predictions.

[00:12:46.470] Kent Bye: And I've done over 250 interviews now of people in the virtual reality field, and one quote that Mike Skiger told me about the Amira's Law, which is like, we tend to overestimate the impact of new technologies in the short term, but underestimate them in the long term. And I'm curious if you've found that to be true, that there seems to be like a bit of a hype cycle of wild expectations, and then we're kind of have this trough of disillusionment, and then we go into eventually in the long term, there's things that we can't even imagine now that this technology is going to enable.

[00:13:16.572] Brain Blau: So thanks for mentioning the hype cycle. This is a Gartner invention. It has this rise to the peak of inflated expectations, and then this weird trough of disillusionment, and then the plateau of productivity. And so I actually manage the virtual reality dot on this particular line. We publish it every year. And we've just moved the dot forward. The dot travels on this sort of curve between a 5 and 20 year period. And if you actually look at the start of VR, the dot should have already gone off. But we artificially slowed down the pace of the dot movement. And it is now edging out past the trough of disillusionment. There was this extended period, kind of from the late 90s up until maybe four or five years ago, where there's really not a lot of activity going on. But we've clearly seen that change. So we've moved the dot forward. The same thing for augmented reality and the other dots that we have on the hype cycle that are related to immersive. OK. But it is a slow moving dot. Right. It's going to take the full length of what we call the plateau of productivity to reach mass market. And that's going to be another five to 10 years from now. I mentioned our competitors and analysts sort of predicting the market. And I think it falls in line with exactly what you're saying. So we're a little bit more conservative. We pulled back a little bit and said, hey, let's look at what the real sales are going to be and we can advise our clients like that. Some of the other analysts, especially here at the show, are going to say, oh, there's going to be 150, 200 billion dollar market within a four or five year time frame. And while that's possible, we have not really seen any other device market take off that fast if you consider 2016 being year one of those device sales, or even 2015 being year one of those device sales. It certainly was not for cell phones or smartphones. For smartphones, maybe, but don't forget smartphones came on the back of almost 20 years of cell phones or more. So there was all of that that came before. VR has similar sort of legacy and there was many years of development, but also there was many years of stagnation where nothing was developed. So it has a little bit different. technology and also argue too that the transition from typing to touch is a lot smaller user interface transition than from touch to immersive or from anything to be honest to immersive. It's a much bigger leap in user interface and a change in computing paradigm. And I think that's also part of the unknown here. And if that gets worked out then sure the market can accelerate a lot faster. I just tend to think it's going to take us a few more years for all the app developers and the content developers to get that experience right, to match it with the hardware and to go through a couple of iterations on hardware upgrades before everybody's, we've got like great devices and great software and it's readily available anywhere.

[00:15:49.628] Kent Bye: Yeah, and it seems like, you know, with cell phones, people are able to use them on the buses, use them in public, use them all the time, really, and not be so disruptive as to kind of shut yourself off completely from outside reality. But I think there is some people that look at the growth of the cell phone from the iPhone on, in terms of, like, smartphone technology, of how quickly the adoption has been. Has Gardner looked at that and said, yes, that was sort of a unique aspect of cell phones and the function they play in society in terms of communication and connection to the internet, but yet VR seems to be a little bit fundamentally different in a lot of different ways. And so I would expect that it would be a lot slower growth than, let's say, like the smartphone technologies.

[00:16:30.036] Brain Blau: It certainly will, and I would agree with that. It's definitely going to be slower. We do take a look at all types of devices, markets for consumers and for business. So, you know, in looking at smartphones, you definitely can see that there was something with smartphones that was built on cell phones of previous years. So there is that. Also, the smartphone market, has a lot of external factors that are built into it. The fact that there's carriers were the distribution point and the manager of your connectivity. The fact that there was two year or longer upgrade cycles sort of dictated how the device replacements were going to go. We also had a hero vendor in there, that being Apple. and the fact that they went after the market very differently than their competitors, and that made the market very interesting and dynamic in a unique way that we hadn't seen before. So there's a lot of factors in the smartphone market that may or may not happen in the VR headset market. So there probably will be premium devices, but we may not see those for a while. Everybody asks me, okay, when will Apple make a VR device, right? And well, they may or may not. And that may be one of the trigger points in the future, seeing them come into the market potentially. with some sort of hero or premium type device that people will just love. Until then, it's going to be a battle. There's three vendors today. They're going to battle it out for VR headgear. There's probably an equal number on the AR side. So we're going to see a lot of vendors battle. We're going to see an ecosystem battle. as well. And in the beginning, smartphones, we didn't even realize that ecosystems mattered. We certainly knew about Mac, OS and Windows as ecosystems, but not in the way that we know them today in terms of mobile technology, smartphones, tablets, computing on the go. So there's so many different factors. I'm very curious to see how the ecosystems are going to play out. Who will be the operating system of choice? Will it be Facebook? Will it be Valve? Will it be Sony? Will it be equally split? Or in the coming years, will AR take over? And will it be Android or another mobile operating system that will kind of shine first? There's a lot of very interesting dynamics that are going on today. Hard to answer some of these questions because those products aren't in market. And we're going to have to wait a little bit to see how well they're going to do.

[00:18:35.012] Kent Bye: And finally, what do you see as the ultimate potential of virtual reality and what it might be able to enable?

[00:18:41.665] Brain Blau: The ultimate potential for virtual reality, I think, can be summed up in just sort of this very sort of short idea. The fact that you're going to be wearing this computing device in your head and you're going to have this display close to your eyes, what you wind up having is a device and a technology that really matches well to your human perceptual system. And if we thought that cell phones were immersive or, you know, these 3D games we play on our big screen TV, if we're really into the action with those, using a wearable computing device is going to really fundamentally change how we all view each other through digital technology or interact with our AI or our avatar. These to me are sort of the great challenges in computing and because virtual reality and even augmented reality are visual technologies, we have a keen sense with our human perception and it's something that we always strive for. You know, the fun thing is, is we can easily with our own brains tell the difference between something real and what's not. We just look at it like, okay, it's not real or it is. Virtual reality is going to blend that in the future, and it's going to fake us out, and we're going to love it.

[00:19:49.316] Kent Bye: OK, great. Thank you. You're welcome. And thank you for listening. If you'd like to support the Voices of VR podcast, then please consider becoming a patron at patreon.com slash Voices of VR.

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