Was Oculus, maker of a cool immersive virtual reality headset, really worth the $2 billion Facebook paid to acquire it? That all depends on whether virtual reality (VR) can make the jump from gaming to other facets of daily life. As a technology investor, I believe that it can -- and will do so very soon.
The term “virtual reality” conjures up a futuristic world where humans live inside digital realms, interacting with holograms rather than real people. That dystopian vision makes a good sci-fi flick, but it has little to do with current VR technology. In fact, companies have already devised promising business models based on virtual reality and we’ll soon see more real-world applications. VR headsets like those from Oculus allow gamers to compete in immersive 3D worlds, but that’s just one use of the technology. Industries as diverse as movies, journalism, nonprofits, manufacturing, real estate, conferences, and retail could soon embrace virtual reality applications. Facebook’s record-breaking acquisition of Oculus shows that Facebook at least understands the potential of virtual reality to enter diverse markets.
What are some of the nearest-term investment opportunities in virtual reality? Aside from gaming, where VR has already made strong inroads, here are four industries where virtual reality will quickly begin to take root.
Movies, TV, and music: It’s almost a no-brainer that virtual reality will impact the main entertainment sectors. Watching a movie in 3D has become commonplace and it’s just one step further to create a truly immersive experience where you don a headset to actually enter the movie’s universe. For movie and TV studios, virtual reality will enable a whole new level of storytelling where viewers no longer have to “suspend their disbelief” but are instead part of the movie. Music fans could “attend” a VR concert, feeling like they’re truly at a live performance with all the noise, energy, dissonance, and emotion that provides. VR video startup Jaunt recently demoed this possibility with a virtual Paul McCartney concert.
In other words, virtual reality creates an immersive experience where the default state is belief, creating deep emotional responses from viewers. Chris Dixon of Andreessen Horowitz described this concept in a recent blog. Many different types of VR startups could flourish in the entertainment industry, from VR creative studios and special effects companies, to technology platforms used to create and edit VR movies. (Several emerging VR studios and production companies made their debut at the recent Sundance Film Festival.) Magic Leap, a stealth “cinematic reality” company, has already raised $542 million and is valued at over a $1 billion, so it’s clear investors believe VR entertainment holds a lot of profit potential.
Advertising and marketing: If movie and TV studios understand the promise of virtual reality, advertisers can’t be far behind. Creating a visceral, emotional response to their brand messages is the advertiser’s Holy Grail, and virtual reality “brand experiences” hold out this promise. Virtual reality will give advertisers the opportunity to go beyond 2D video and TV commercials to create unique consumer experiences around their products or brand. If brands are willing to pay over $4 million for a 30-second commercial during the Super Bowl in hopes of “connecting” with consumers, how much would they pay for a virtual reality commercial where consumers become part of the brand experience in an emotional, visceral way? The opportunity for startups in the virtual reality advertising space could span creative VR ad agencies, VR ad tech platforms, and VR digital ad networks. Already, early experiments with immersive 3D video ads have shown significant improvements in ad viewing frequency, according to several VR media companies.
Enterprise collaboration and videoconferencing: Holding video meetings with your colleagues via Google Hangouts, Skype, or Go-To Meeting may soon seem like a quaint and outdated way to collaborate. What if, instead, you all donned VR headsets and actually worked on a project together inside an immersive 3D world? Instead of just discussing a design project and sharing screenshots, what if you and your colleagues could tinker with a virtual product inside a VR world in real time? Or what if you could hold a walking meeting through the virtual streets of Paris enabled by Virtuix’s Omni treadmill?
VR will make collaboration between remote colleagues seem to take place in the same room, allowing far-flung teams to be more productive and cohesive. Companies are always searching for ways to boost employee productivity and creativity, with the ultimate goal of boosting profits. In other words, VR technology could contribute to increased profits for companies, so they’ll certainly explore ways to use it. Near-term applications in the enterprise VR space include virtual meeting and conferencing software, 3D modeling and design software, and immersive collaboration tools.
Education: Almost everyone is clear the US education system needs an overhaul. Tackling everything from lackluster elementary school performance rates, to skyrocketing college costs, many startups have tried to improve education systems. But one big barrier to so-called virtual learning comes from the video format itself. Students can watch video lessons and interact with professors and students via text or video chat, but they don’t feel like they’re actually in a classroom. Virtual reality solves that problem. Younger students may don a VR headset to enter immersive learning environments; roaming around a Jurassic world to see dinosaurs up close, or plunging into the Mariana Trench to visit creatures of the deep are just two of limitless possibilities. College students may take virtual courses where they enter a VR classroom and interact with the professor and other students “as if they were there”. This type of truly virtual learning could transform education in a measurable way. Companies that could emerge in the VR education space include content companies creative virtual coursework and lessons, VR online schools and education networks, education VR app developers, and more.
These four sectors are just the tip of the iceberg when it comes to VR penetrating new industries. Engineering, design, real estate, travel, finance, conferences, healthcare, recruiting and other industries that draw on creativity, connectivity, and collaboration will soon be disrupted by virtual reality. (Many of these sectors are represented by the 13 early-stage startups in the world’s first VR incubator.) As an investor, it’s never easy to pick the winners in brand-new, highly disruptive sector like virtual reality, but now is the time to place bets on VR startups. From hardware makers, to tech platforms, creative content companies and beyond, we’re on the lookout for new VR companies.
And beyond potential profits, VR “experiences” will also be used in the non-profit sector or for social advocacy work. For example, The World Economic Forum recently commissioned an immersive journalism piece to try to tell the plight of Syrian refugee children. By putting the audience “on scene” and giving them the feeling of “being there” VR is a proving to be a powerful empathy and advocacy tool capable of evoking deeply resonate and emotional responses that are simply not possible through other forms of media.
A sci-fi future where we all become robotic beings plugged 24x7 into our VR headsets will hopefully never come to pass. But a world where we pop on a headset to experience a movie from the point a view of a character inside the film? Or the day when students can wear a headset to wander the virtual halls of Versailles palace and speak to Louis the XIV? That day is sooner than we think - and I, for one, can’t wait.