The ROI of mobile AR: ARKit v’s ARCore

Key Takeaways:
– It’s estimated that in 2018 ARKit will become the single largest mobile AR platform in the world
– ARCore will overtake ARKit in the next three years based on installed user base projections
– ARKit will outperform ARCore in the long-term based on revenue generation and ARPU

Apple is going big on augmented reality (AR). The company recently announced the launch of ARKit, iPhone 8 and iPhone 10. Following on from these announcements, it’s clear that Apple has an unparalleled opportunity to dominate the four waves of AR technology (mobile AR software, mobile AR hardware, tethered smart-glasses and standalone smart-glasses). With the recent announcement from Google in relation to ARCore, business owners, analysts and software development managers are considering the impact of these emerging technologies from a commercial perspective. As brands and businesses start to develop long-term AR development initiatives, the big questions will surround the commercial ROI potential of each platform. We recently explored some of the top AR trends for 2018, how to develop an ARKit app and everything your business needs to know about ARCore, today we’re exploring the commercial ROI of mobile AR.

ARKit v’s ARCore
There are a bunch of fundamental differences between ARKit and ARCore from a commercial perspective. From a UI/UX and technical perspective there doesn’t appear to be much difference, but how much money they make and the process by which they monetise their respective audiences, could be entirely different as the market continues to evolve. In order to understand these differences, we need to explore the addressable markets of each platform, projected adoption rates, the makeup of existing user bases and projected ARPU’s (average revenue per user). There are also in-app-purchases (IAP’s), advertising spend, premium apps and revenue generated via mobile commerce to consider, but that’s a separate topic in itself.

So let’s get to grips with some of number surrounding mobile AR. For the purposes of this blog and understanding user adoption rates across each platform, initially we’re focusing on ARKit, ARCore and Facebook Camera Effects (AR Studio offers fully customisable tools for creating augmented reality experiences in the Facebook camera and Live broadcasts). In terms of understanding the commercials we need to focus on the install base for each of the above platforms. These numbers are based on app installs for ARKit and ARCore and unique users for Facebook Camera Effects.

From a commercial standpoint, if you’re a business or brand thinking about mobile AR – 2018 looks set to be the year of ARKit. It’s estimated that the volume of ARKit installs will be 200% greater than ARCore and 150% greater than Facebook Camera Effects. The impact of this is that you may decide to develop for ARKit first, with a view to creating an ARCore offering at a later date, based on the success of an ARKit pilot experiment. The main driver behind these impressive ARKit numbers is based on Apple’s enormous iOS adoption rate. It’s estimated that by the end of 2018, when we calculate existing device numbers and sales of new devices, there could be more than 600 million iOS smartphones and tablets running ARKit.

Mobile AR Installed Base: ARKit v’s ARCore
If we fast forward to 2021, the shape of the mobile AR market is substantially different. By 2021 it’s envisaged that ARCore could be 230% greater than ARKit and 250% greater than Facebook Camera Effects in terms of install base. The numbers suggest that by 2021 there could be more than 2 billion Android devices compatible with ARCore. Google has already projected that 2018 could see Google reach 2 billion ARCore app installs, but this is very unlikely given well documented fragmentation issues associated with Android devices and mobile operating systems.

If we remove facebook from the equation, we can start to explore the numbers based on ARKit and ARCore. ARCore is currently in beta/preview mode, with an official release scheduled for December 2017, at which point ARCore will be compatible with Android devices enabled by Nougat 7.0 and above. When compared with iOS adoption, new Android OS adoption has lower penetration and is much slower. This has significant ramifications for Google in the short to mid-term as the ARCore compatible platforms (Nougat, Oreo and subsequent releases of Android OS) may not be available on 50% of Android enabled devices prior to 2019. It’s at this point that ARCore has the potential to tip into the mainstream in terms of adoption as a result of device attrition and sales of new Android enabled devices.

One of the key challenges for Google is that they need to create a consistent experience across different Android compatible devices in terms of quality and performance. It’s estimated that in 2018 ARKit will become the single largest mobile AR platform in the world, outperforming ARCore in terms of installs by more than 320%. However, by 2021 the shape of the market alters considerably with ARCore possessing an installed user base of 1.4 billion which would be 150% larger than ARKit’s share of the market.

Mobile AR Revenue Generation: ARKit v’s ARCore (ARPU)

The above data gives us a clear picture of ARKit v’s ARCore in terms of installed user base projections – but what about ARPU (average revenue per user)? Whilst there will be subtle differences when comparing various geographical territories (historically Android has performed better in developing economies), the global outlook in terms of revenue generation looks set to favour ARKit. On a global basis, it’s estimated that in 2018, ARKit could outperform ARCore in terms of revenue generation by nearly 200%.

Between 2018 and 2021, it’s estimated that ARCore will play catch up with ARKit in terms of revenue generation, but even by 2021 ARKit will outperform ARCore on revenue generation by a magnitude of over 170%. So in practical terms, if you’re a business thinking of extending your current mobile or desktop software offering into AR, and you’re tasked with generating new revenue streams, ARCore represents a good bet, but ARKit’s revenue generating capabilities will offer a better ROI based on the above projections. The numbers would suggest that if you’re considering developing a mobile AR offering for ARKit and ARCore, that you’ll need to acquire twice as many users via ARCore in order to generate the same level of revenue as one ARKit user.

How to develop a mobile AR strategy for your business
The overall impact of the ARPU projections is significant for brands and businesses seeking to invest in mobile AR capability. What’s likely to happen in 2018, is that brands will invest in ARKit before porting apps to ARCore. ARKit will act as a commercial testing ground, based on user engagement and monetisation, to justify the roll-out of ARCore focused mobile AR apps. Some brands may choose to bypass ARCore entirely and focus all development efforts on ARKit. If you’re new to the world of mobile AR, knowing where to start can be difficult, but as with any great software project, you need to start with the end in mind and generate clear and distinct measures of success. If the success of your mobile AR project is going to be measured on monetisation, you need to think carefully about how you approach development in order to minimise commercial and technical risk.

The new IKEA Place app is a brilliant example of how mobile AR can be deployed to increase revenue and user engagement. IKEA Place was launched recently on the App Store in the UK and enables app users to position 3D furniture models around the home using ARKit. In order to use the app, consumers must have an ARKit compatible iOS device with an A9 processor or above. Designed exclusively for iPhone and iPad, IKEA Place uses ARKit to feature thousands of IKEA products in 3D, enabling users to position furniture to scale in a highly contextual way. Users can position full size sofas, wardrobes, chairs, lamps and a whole plethora of furniture items in a way that is true to scale, this means that things appear in the ARKit app, in exactly the same way they would appear in the user’s home. The application asks the user to scan the surrounding environment to detect horizontal planes such as floors and table tops and then prompts them to select a position in the room. Once the right position has been selected, users are then prompted to select a piece of furniture from the IKEA catalogue to fix in place. You can download the IKEA Place app here.

Conclusion
Based on the numbers, 2018 is set to be a momentous year for mobile AR. AR enabled software platforms such as ARKit and ARCore are actively enabling Apple and Google to sell new devices and expand the capabilities of hundreds of millions of existing smartphones and tablets. Whilst HUD’s (heads up displays) may take more time to proliferate the mainstream, mobile gives consumers an immediate access point with AR. If you’re a business seeking to understand more about the capabilities of mobile AR, or you’re thinking about extending an existing software offering into AR, there’s never been a better time to start. Developing apps using ARKit and ARCore gives brands like IKEA immediate access to a lucrative and rapidly expanding user base. In any case, the best fit for your first mobile AR project, in terms of using ARKit or ARCore (or both) will depend on your commercial goals and objectives. Here at Mozenix, we’re working on some super exciting mobile AR projects for some of the UK’s biggest and most innovative companies. If you’re a CEO or software development manager thinking about mobile AR and interested in how it can be deployed to underpin your commercial goals, we’d love to hear from you. Contact Mozenix today to start the conversation.