Why Spatial Computing is the next billion-dollar media opportunity

Just as monetising mobile was the biggest opportunity of the previous decade, monetising Spatial Computing (otherwise called VR, AR or XR) is the biggest opportunity of the next decade. This is a shortened version of an article I wrote for newdigitalage.co

From the radio to the telephone, TV, desktop computer, and mobile, the last 150 years have been filed with technological progress that has transformed our private and professional lives. Today, we are approaching another media transition: spatial computing — commonly known as immersive technology, XR, or VR/AR.

Spatial computing will define the transition between 2D and 3D: for the first time, the content won’t be limited to our screens but will be overlaid on the world around us. Devices will understand the space around us to place digital content, enabling us to interact with it in a much more natural way.

Creating a business model

Historically, the emergence of new media has always created huge winners, such as Microsoft, Google, or Facebook. These companies have all defined a business model enabling market efficiency in this network: Microsoft by enabling developers to publish their apps, Google by enabling anyone to monetise their websites, and Facebook by enabling small businesses to reach customers.

Consequently, they incentivized creators to keep creating and were the main driver growing their industry. They’re able to reinforce their positions through network effects, which led to a near-monopoly in their respective markets. More creators attract more money which attracts more creators, and so on.

Today, despite billions invested, the business model for spatial computing remains unclear. There is no category-defining company in the space. Apple, Google, and Facebook are focused on building hardware, more robust SLAM algorithms, or products aimed at one side of the market — but they are not enabling market efficiency. They are not incentivising the demand-side nor fulfilling the supply-side.

And yet the opportunity is huge.

On the creator side, tens of thousands of talented developers are already building VR and AR experiences today, hungry to get their content discovered, grow their content, and monetize this audience. Dozens of studios are held back or had to close doors, because of the limited revenue opportunities. The lack of alternative revenue from paid content, more than the nascent audience, is what paralyses the ecosystem. Content creators deserve a suite of tools to generate revenue, from advertising to in-app purchases or cross-promotion.

On the buyer side, the appetite is even clearer — hundreds of brands have created AR experiences and have seen tangible benefits as a result. Yahoo reported that interaction with AR ads in their mail app led to a 25x improvement over traditional banners. Another study by 19 Crimes Wine Maker shows that its AR app helped the brand grow 60% in volume sales. These are not isolated examples — according to Emarketer, spend for AR ads will triple from $420M in 2018 to $1.2B in 2020.

However, advertisers are bound to spend this money by producing and distributing their own experience — as Ikea has done — or through Snap Lens or Facebook Spark. Therefore, this huge spend is retained by these companies and doesn’t benefit the content creators at all. The rich get richer, and the long tail of the market doesn’t grow.

The opportunity

Cracking the business model for spatial computing will be about building the infrastructure to facilitate transactions between supply and demand, to enable that growth — just like it happened on mobile 12 years ago. This is what my company Admix has been focussed on for almost two years. We started with advertising, but will eventually support in-app purchases, cross-promotion, and e-commerce, and any other business model that can deliver value to creators. We see Admix as a ‘virtual estate’ company and are building a market network for creators to grow in many different ways.

While we have made huge progress, enabling 50+ top creators to make thousands of dollars a month in revenue, we are just getting started.

What will it take to make this market work?

First, there is a design challenge: traditional adverts just do not work in VR and AR. They are terribly intrusive, out of place, and something that customers hate. Just as mobile ads are optimised for the smaller device, spatial computing also requires its own ad units.

Starting fresh on a new media gives us the opportunity to build a better future for advertising, that works for all parties involved: not just publishers and advertisers, but also the end-users, who are often forgotten by the industry. Forget banners and desperate call to action: spatial computing ‘adverts’ will be a mix of experiential marketing, 3D products, and e-commerce. It will be about content discovery more than direct response, and also won’t rely on personal data as much as contextual data.

Second, there is the technological problem of delivering programmatic ads into a non-web environment, and getting existing agencies and ad exchanges (who control the brand dollars and infrastructure, respectively) to adopt it. Advertisers are notoriously lagging behind media adoption, but by providing a simple solution, and great performance metrics, we can minimize that lag.

Once the model fully cracked, companies will race to capture the value unleashed from this ecosystem, and defend their position through the power of network effects: more inventory attracts more buyers, who attract more inventory, and so on.

Monetising spatial computing will undoubtedly be the industry’s biggest opportunity over the next decade. As our mission, “empowering developers” states, we’re standing on the shoulders of giants, enabling market efficiency for this new media, so that more creators can get paid and delight us with more content.

I am the founder of Admix, the first monetisation platform for spatial computing, funded by top European VCs. I also talk about behaviour changes, the metaverse, and building the future. To stay in touch with me, follow me on Twitter @samhuber or check out my personal website samhuber.com.