Augmented reality (AR) just went nuclear. The barnstorming arrival of Pokémon Go has shifted the technology from a highly anticipated concept to a mainstream medium that millions of people worldwide are comfortable with.
The release of the game was an uncorking event like no other. It’s hard to picture another corporate launch that had such an instant and global impact on its market. It has shifted the paradigm in business, technology and even popular culture.
Pokémon Go’s creator, Niantic, is suddenly valued around the $3bn mark. Nintendo, wrongly identified as the driving force behind the game, saw its stock market value climb $7bn, before falling back down when investors did their homework.
Globally, hundreds of millions of people have downloaded the game and in the US alone it is said to generate between $2m and $2.5m a day from paid-for upgrades to the standard free version.
It is also a viral phenomenon, generating tens of millions of column inches in the press and attracting international attention almost overnight. Its Twitter account went from a standing start a month ago to well in excess of 1.3 million followers, while a community news account set up independently has already grown to 750,000-plus.
A proven money-spinner
Needless to say, the individuals and institutions invested in Niantic are enjoying a somewhat protracted day in the sun, as are the companies – including Nintendo and Google – who own a slice of the business, and even Apple, which is seeing millions of new app downloads via its iTunes platform.
For the rest of us, it’s a chance to gawp and take stock of what just happened. Virtual reality (VR) technology was ‘proved’ earlier this year with the release of software and headsets by a series of global brands. If anything, AR has jumped ahead with a single big hit.
Augmented reality could see in a modern-day gold rush, with thousands of startups and established businesses vying for market share in the fledgling technology sub-sector. Expect to see a large number of new innovations very soon.
While AR’s comfort zone is gaming, it has applications across industries such as tourism (just take a look at last year’s ‘Virtual holidays’ campaign from Virgin) to architecture (‘I wonder what our building will look like when it’s completed?’) and lots more besides.
Such is the activity in the space that it’s hard to predict what will happen in the next six months, let alone in the next year or further down the line. Yet there can be little doubt that investors will in future make large returns by backing businesses that follow in the wake of Niantic’s outrageous trailblazing.
Normal investment rules apply
Such a chaotic situation will no doubt create scope for bad bets, so investors should focus on core innovation, potential audience, intellectual property rights and route to market, as well as plans for revenue generation either immediately or in the relatively near future.
But while investors should look for the same key signs of value, AR companies, as with all modern technology businesses, do have some distinct advantages over old-world businesses from an investment point of view.
A striking benefit of investing in AR is that, in most cases, company overheads are extremely low and, therefore, so are the liabilities. Billion-dollar businesses of the past needed tens, even hundreds of thousands of people to make them tick. Today it takes only a handful.
Generally speaking, tech and gaming companies are very lean. Supercell, creators of the fiendishly popular Clash of Clans game with more than €2bn annual gross income, has roughly 200 employees. And though Niantic itself is on a recruitment drive, it is said to have only double-digit staff members.
Investments in tech companies can also mature very quickly, with a single release making or breaking a growing business. This is obviously a good thing if you back a winner – and a very bad thing if you don’t.
Whatever your strategy, AR is a technology on the move and investors will be eyeing opportunities closely in the next 12 months. One thing’s for sure: if you play your cards right, AR has the potential to seriously augment your bank balance.
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