Can Advertising Scale in VR?

One of the potential revenue streams of VR is the ad transfer engagement thinking that displaying its immersion levels can create high engagement with different tastes of ads. Think billboards in a virtual streetcap or sporting venue. Art mimics life and everything. The issue has recently re-emerged in the wake of Facebook’s experimental ads on Blaston VR.

As Lucas Matney of TechCrunch observed, it didn’t go very well. The move sparked a great response after the game publisher, Resolution Games, and the test went out. The events in this series underscore Facebook’s headline in VR ad monetization, which stems from its broader advertising problem. In fairness, this was a test move to test the waters of VR advertising … which Facebook achieved, although it did not get the results it wanted.

Regardless, we have taken this opportunity to review our ongoing analysis of VR advertising in general and market size. Short version: There are opinions in favor of both qualitative and quantitative levels. The opportunity for VR advertising goes back to the reasons mentioned above: the potentially high ad engagement at the immersive instinct level. By that measure, VR has surpassed all other media, which could mean high-quality impressions, brand recalls and other general display-advertising metrics.

Evidence historical evidence also suggests that VR advertising may move toward monetization. VR shows similar patterns in media that support advertising as it matures. This includes videos, social media, mobile apps and games (just ask Unity). To put some numbers behind it, 75% of the apps in the Apple App Store’s first year were paid apps – similar to VR today, this number dropped to 15% in 2014 and is now around 10%. Over time, developers have learned that they can reach the scale through free downloads.

Conventional earning models today include in-app purchases – especially in mobile gaming – and in advertising. The question is whether VR will follow the same path as developers learn that they can quickly reach the scale through free apps with “back-end monetization” like ad support. 

This trend also follows the pace of the audience: early adopters are more likely to pay for content and experience. But as a given technology or media matures, it needs different business models with less business commitment and friction to change its mainstream audience. “Today, VR stores like Steve and Oculus have only 18% of applications,” said Samuel Huber, CEO of Admix.