VR’s installed base to hit 91 million
As much as some studies have appeared to show low brand interest in VR (virtual reality) advertising, VR could still be a lucrative opportunity for Alphabet’s (GOOGL) Google over the long term.
Low brand interest in VR ads could be because of limited consumer adoption of VR systems, but this is bound to change, as VR device prices fall and more compelling content becomes available. According to IHS Markit, the global installed base of VR headsets should reach 91.0 million by 2021, up from 18.0 million in 2016.
Deutsche Bank (DB) forecasts that there will be 154.0 million VR users worldwide by 2020, up from an estimated 22.5 million users in 2016 and 6.5 million users in 2015.
Brand perception likely to change
As more consumers adopt VR systems, brand interest in VR advertising could improve, and this would feed Google’s VR advertising business.
Google is pursuing VR ads to create revenue opportunities for VR developers and unlock a new advertising revenue stream for itself. Google’s advertising revenues came to $22.7 billion in 2Q17.
Revenues in VR device sales
Besides VR ads, Google also stands to make money selling VR devices. The company is already behind the world’s most popular VR headset.
According to Strategy Analytics, Google Cardboard, a low-cost VR headset, claimed 69.0% of the global VR headset market in 2016. This compares with 17.0% for Samsung’s (SSNLF) Gear VR, 3.0% for Sony’s (SNE) PlayStation VR, and less than 1.0% for Facebook’s (FB) Oculus Rift.