Pokémon Go proves investors were clueless about augmented reality

In case you haven’t been on earth over the last week, you might have missed the recent Pokémon Go launch. With little buildup, this new mobile augmented reality game has taken neighborhoods and the Internet by storm. In little under a week, Pokémon Go has:

• Reached the top of the iOS and Android app stores
• Is reportedly driving over $1.6 million dollars a day from the iTunes store alone
• Is about to surpass Twitter for number of active daily users
• Is being played an average of 43 minutes per day, more time spent than on WhatsApp or Instagram

So what is the magic behind Pokémon Go? A brand-new technology fueled by savvy investors? No. The game is actually based on seven-year-old augmented reality technology.

Investors have focused on virtual reality over the last few years and largely ignored augmented reality (see my VentureBeat OpEd from two years ago called “Augmented Reality: Where’s The Venture Capital?”). The less-hyped technology has continued to be thought of as having a much larger potential market, but most thought that market was still several years away from being realized.

A misplaced focus on head-mounted displays

In the augmented reality space, as in the virtual reality space, what investments there have been have gone towards head-mounted display (HMD) hardware such as Meta and Magic Leap. And Microsoft’s HoloLens.

But what we’re seeing with Pokémon Go’s sudden burst of popularity is that AR doesn’t depend on new hardware. In fact, investors have thought of the type of AR that’s now driving the Pokémon Go experience as a gimmick.

These basic AR experiences have been around for a while. Ogmento was one of the first, and earliest, companies to focus on location-based AR games. Recently, my company, Zugara, helped Hungry Jack’s in Australia launch an AR experience similar to Pokémon Go where you have to search your immediate physical environment to feed virtual ‘Nom Nom’s before they eat your Whopper. And iButterfly, back in 2010, incorporated most of the same game mechanics you find in Pokémon Go – using geolocation to search for virtual butterflies, capturing the virtual butterflies in AR view, and then collecting and trading the butterflies with the community.

These types of apps are not leveraging more advanced mobile AR tech such as geo positioning or object recognition for placement of virtual objects in the physical environment. Pokémon Go is basically using the same mobile AR technology that places a virtual object in your camera feed related to the position and orientation of your mobile device.

VR Lite is restrictive and headset-dependent

Virtual reality is currently receiving the majority of investment interest in the AR/VR space. People have surmised that this is due to all the VR headsets that are now in consumers’ hands and other technology (Oculus hand controllers) that will arrive soon. But the majority of this VR investment has been going to VR content companies that are producing 360-degree videos for lower-end VR headsets including Cardboard, Gear, and the eventual Google DayDream platform. While 360-degree videos aren’t considered virtual reality, we can call them VR Lite for now. Similar to how the same technology found in Pokémon Go would be considered AR Lite. So why such a discrepancy between investment in VR Lite compared to AR Lite?

Recent VR numbers show that the Vive has only sold 100,000 units to date, that only 7% of average consumers will pay above $259 for a VR headset, and that 73% of consumers don’t know enough about VR to warrant purchasing a headset. So these are not flattering indicators for higher-end VR headsets such as Oculus and Vive. But it’s early, and these are really niche devices given their current price tag. There’s also concern that VR Lite 360-degree videos are not yet showing critical key performance indicators (KPIs) that suggest any level of ongoing engagement with these types of videos. Finally, even for a VR Lite experience you need a VR headset.

AR Lite is on-the-go and doesn’t cost consumers anything

AR Lite on the other hand, only needs a mobile device. Unlike VR Lite, AR Lite can take advantage of geolocation to provide engagement and an interactive experience. Most importantly, AR Lite coupled with geolocation actually gets people out of their homes and exercising – something VR Lite cannot do.

Pokémon Go’s success will hopefully highlight the benefits of augmented reality coupled with geolocation and the ”virtual world within the physical world” revenue possibilities it presents. We’re all excited about a HoloLens AR future with gesture control, virtual object positioning, and so on. But AR is not just about the HMD and enterprise segment. As Pokémon Go is showing, there is a worldwide audience ready to engage with even basic AR experiences on their mobile devices.

Investors can continue to sit on their hands and chase other underperforming technology (3D printing, anyone?), or they can finally give AR some love. Nintendo gave AR a little bit of that love with Pokémon Go and gained $7.5 billion in market value in just two days as a result.

Matt Szymczyk is CEO and founder of Zugara, a Los Angeles-based augmented reality software developer working to make online shopping more social and engaging.