E2: The Reality of Extended Reality

In this episode of FIVE, Jake explores the consumer and marketing potential of augmented and virtual reality in a 5G world. He talks about the impact of edge computing on next-gen XR devices with Peter Linder of Ericsson and the near-term extended reality opportunities for marketers with Yory Wurmser of eMarketers. Lauren Stearly of Starcom chimes in on xenials, impatient millennials and the exciting technologies that are standing by, just waiting for a better network (5G). Jake discusses AR and VR experiences and their marketing potential with Michael Stich of VML Y&R.

Guests

  • Lauren Stearley, Associate Director of Programmatic at Starcom Worldwide
  • Michael Stich, Chief Business Officer at VMLY&R
  • Peter Linder, VP of 5G Marketing at Ericsson
  • Yory Wurmser, Principal / Mobile Analyst at eMarketer

FIVE – The 5G Podcast for Marketers
Presented by the Emodo Institute and Ericsson Emodo

Host
Jake Moskowitz, Head of the Emodo Institute

Producers
Robert Haskitt
Adam Kapel
Jake Moskowitz

Music
Dyaphonic
The Small Town Symphonette


Transcript of Episode 2: The Reality of Extended Reality

“The possibilities are endless in terms of how AR and VR will evolve now that it has a network to support it.”

Let’s talk 5G.

Welcome to FIVE, the podcast that breaks down 5G for marketers. This is Episode 2: The Reality of Extended Reality. I’m Jake Moskowitz.

You’ve probably heard that 5G is going to enable amazing things, stuff like self-driving cars, smart cities, long-distance remote surgery, 3-D holographic video calls, the $50 smart phone, and the 4-hour workweek. And how 5G is going to take virtual and augmented reality mainstream and mobile. When you strip away the hype and the long-term predictions, that last part is actually true.

One of the most anticipated aspects of 5G is the potential for extended reality, or XR for short. Obviously, there’s been a lot of excitement about it for years now and some of the world’s largest companies have invested billions in AR and VR technology and content. Visionary marketers have imagined all kinds of engaging ways to connect with consumers using highly interactive extended reality technologies. 

But on all fronts, success has been pretty limited so far. There are still real hurdles standing in the way of the solid, predictable mainstream adoption of these technologies. One of the biggest is mobile connectivity. For that, 5G may be the answer, and 5G may help solve a few other issues, too. This episode of FIVE explores the reality of extended reality in the 5G world, and a 5G-enabled AR and VR can potentially up the game for marketers. There are a lot of areas we could cover, but for marketers, here are the five.

  • Is extended reality still the buzz with consumers?
  • Is it a growing market?
  • How will 5G impact VR and AR experiences and consumers’ attraction to them?
  • What does that mean in terms of opportunities for marketers?
  • When?

First, let’s take a minute to talk about what we’re talking about. Extended reality? What is it now? What will it become and when? Here’s Peter Linder, Ericsson’s head of marketing for 5G in North America.

“I think you can describe it like this: the devices today, there are ski goggles that, in addition to being ski goggles, you have to have a powerful computer attached to the ski goggles for executing some of these applications. Where we’re heading towards, we want to get rid of most of the expensive computer, and we want to turn ski goggles into regular glasses. Then that’s when value of 5G is really, really going to kick in. That required two things in the network: it required that you have low latency from wherever the services are streamed from, and the other thing is that it supports the higher video quality that you’re streaming out. If you’re processing everything in the distributed cloud, the things that are going to come out are about 4K, 60 frames per second, and not 480p and 30 frames per second.”

But now that we’ve a couple years of development, adoption and trends in the extended reality market, the projections for growth and adoption seem to be all over the place. Are people still excited about it? Before we can talk marketing, we need to get a better sense of XR viability.

Extended reality, including both virtual and augmented reality, is an industry that’s said to be poised for explosive growth, but is it? Last year, CCS Insight, a technology research firm that studies both 5G and extended reality, reported significant declines in AR and VR device shipments. According to Ericsson’s Merged Reality Report from 2017, user excitement about virtual reality was already starting to wane back then. 

  • Half believed the current VR headsets hinder mobility.
  • Almost a fifth actually experienced motion sickness from VR. I’ve experienced it myself.
  • Users complained about the smartphones heating up and consuming lots of battery power.
  • Almost 70 percent of mobile VR users only use their headsets at home.
  • A quarter of them have reduced their overall usage of VR.

Depending on the studies and projections you look at, the industry’s expected to grow annually somewhere between 40 and 80 percent. That’s a huge uncertain range. Does that sound like a wet blanket?

“Peter, what’s different between 4G and 5G, and what’s the impact on devices and the change in the ecosystem that needs to support these devices?”

“Today, we’re living in a world where we talk about our phones as smartphones, as smart devices in general, and we talk about the network or something providing universal connectivity, so all different devices and applications get exactly the same thing. Then, all the apps are at the other end: typically very, very centralized. The delivery of apps to our phones is a centralized phenomenon.

“As we move toward 5G, a few things happen. The execution of especially performance-critical applications are moving close to subscribers. We refer to that movement as even-edge computing and mobile-edge computing, but it’s all about bringing the execution of those applications closer and closer to the subscribers. We’re doing that at the same time as the networks become way better in terms of speed and capacity, and provides a lot lower latency. That speed and capacity combined with the edge-computing could allow you to transition to lean devices, devices that are smaller, lighter, and cheaper, because we have moved off some of the computing memory from the device itself to nearby distributed cloud. From there, we’re streaming down to these devices. That is the big shift that I see.”

“My name is Yory Wurmser. I am the mobile analyst at E-Marketer. I’ve been at E-Marketer for nearly six years, writing reports like the 5G report.

“Latency is basically how quickly the network responds to inputs from the consumer, basically. If you have a phone and you click on something, it now takes between 50 and 100 milliseconds for the network to respond, which means that everything – all the downloads – everything is delayed just a little bit. You couldn’t really control something remotely with any type of sensitivity with that type of latency.

“What much lower latency does is, it lets remote activities become almost as if you are standing right there. In terms of user experience, it means that users, when they’re downloading sites or using augmented reality or playing games on their phones, that the response time is immediate to them. If you can get below about 20 milliseconds, a person can’t even notice that. If you’re getting latency down to 10-20 milliseconds or even lower, which you’ll be able to do with 5G, then it will just seem like you are instantly getting response from the server.”

There are two overarching marketing opportunities that seem likely to spring from 5G: increased personalization of advertising, and greater interactivity. According to a poll conducted by Verizon Media in February, about a third of advertisers are already planning for 5G, and about half see its potential for better consumer engagement and new creative ad formats. AR and VR may be the ultimate solutions for both engagement and creativity.

Michael Stich is Chief Business Officer for VML-YMR, an executive consultancy that works closely with brand CMOs and their peers.

“I look at some of these new technologies and think, ‘Gosh, there’s a whole host of new capabilities, but also new partnerships in an unorthodox way that is coming up.’ You can take a look at how content changes, how media placement changes and for that matter, what kind of experiences can be created for the end user that become much more rich, much more real-world, much more augmented as well. It starts to enter into a whole new chapter of great content planning and delivery.”

“One interesting question is when it comes to those immersive consumer experiences that you just mentioned, what role does the advertiser play in that? Does the advertiser sit around and wait until they show up and then figure out a way to intertwine into them, or does the advertiser play in their creation? Does the advertiser need to think of themselves a little bit more as a content creator?”

“I think it’s both. A good analogy is social media today. The best advertisers both join existing social media circles and contribute to them and build on them where people are already finding good energy, not for a base advertising motive, but really to be a brand in the lives of their customers. And yet, they also will create moments themselves in which people will want to come together with that brand. I would argue, as a marketer, it makes most sense to be first in those things and to try to get about the point of learning. Most marketers are in that process of step one of, ‘What is this thing and why should I care about it?’ In which case, the best agency should own that and should be very clear on what those innovations are and why they matter from a business perspective to the marketers we serve.”

Today, you’re still more likely to put AR glasses on at work long before you put them on at home or anywhere else. For example, GoogleGlass headsets are being adopted and used in factories and doctor’s offices. Last year, the U.S. Army announced it was procuring as many as 100,000 upgraded models of Microsoft’s hollow-lens headsets for field work. Pretty cool stuff. But consumer adoption of these headsets has hit a wall. But CCS Insights also insights that shipments are about to increase dramatically from 8 million units in 2018 to 52 million in 2022.

5G won’t be the only reason, but 5G adoption is expected to be exceptionally rapid and that will contribute significantly to the accelerated growth in AR, VR device shipments over the next several years. So does that mean the marketers need to wait several years to launch engaging AR programs that take advantage of 5G? No. Mobile AR already has a hero device; it’s the smartphone. You may be thinking, “Wait, the smartphone, an AR device?” Yeah, and it’s actually pretty smart.

“So I think, over the next couple of years, the replacement cycle is going to drive 5G adoption pretty strongly. The availability of national network areas is going to be a second driver of that. And then, I think you’re going to start seeing these really transformative experiences in a couple of years, which is going to convince some of the laggers that, ‘Okay maybe my phone’s not totally ready for replacement, but I’m going to buy a 5G phone anyway because that’s the only way I’m going to have this experience.’ And I think where you’re going to see that first is mostly likely games, possibly augmented reality or mixed reality. I can see that being the earliest use cases that are really transformed by 5G capabilities.”

“So, you mentioned extended reality, you mentioned cloud gaming as immersive consumer experiences. Are these going to be environments that marketers are going to want to play in?”

“For sure. Anytime you have people spending time somewhere, that’s a place where marketers could and probably should be thinking about spending time there as well. It is a little hard to see exactly what that means yet, because we don’t know exactly what those consumer experiences will be. I think one very likely scenario is that with more gaming moving through the cloud, you’ll probably have more opportunities for richer advertising within the game just because throughput is higher and you’ll have these richer experiences and more interactive experiences. The other likely scenario is more playable ads, for the same reason. You have that instant interactivity. There are going to be all types of other opportunities out there that we can’t even imagine at this point.

I’m talking with Lauren Stearly, associate director of programmatic at StarCom.

“This is Lauren. I’ve been in the programmatic industry for several years now. I’m in the Xennial Generation. I have the analog childhood and the digital adulthood, but I also work in technology. I cannot wait for things to be fast and having that partial millennial in me, in terms of instant gratification, I’m very excited about the speed coming up.”

“I have to confirm: did I hear that word correctly? Did you say “Xennial?” Because I don’t think that I’ve heard that word before.”

“Yes. It’s between Generation X and the Millennial Generation. It’s Xennial, spelled with an X. There’s basically six years between the years of 1977-1983 where enough people were born during that time for it to be considered a micro-generation.”

“Wow!”

“Yeah. It’s pretty interesting. I remember dialing a rotary phone, and now I’m talking to you on a podcast. I’ve seen a lot since I was born. There are a lot of people in my age group that have those same characteristics.”

“That’s interesting. You spoke about your excitement about speed, you spoke about how you love to watch videos on your phone. Let’s use that as a transition to talk a little bit more about the consumer experiences that you expect to become really powerful and popular in a 5G world.”

“You’re going to see people watching Hulu apps on their phone, or Netflix, and that will all be hopefully, a lot easier. I was trying to do that on the train this weekend, and I was like, ‘Man! Why isn’t 5G here yet?’ Because it kept getting interrupted. I’m trying to catch up on all my shows from the week that I didn’t have time to watch. We’re just not there yet. But I think there is technology waiting for the network to catch up. The possibilities are endless in terms of how AR and VR will evolve now that it has a network to support it.”

“I almost wonder, in the early days as the content rolls out for these sorts of experiences, if the marketers need to play a more active roll. So it’s not just inserting an ad, but it’s actually getting into the content creation, product placement, that sort of thing.”

“Yeah, absolutely. I think product placement is a great idea.”

“Yory, what sort of consumer experiences should we expect are going to be very prominent in a 5G world that marketers are going to be a part of. Specifically, you have a section in your report about cloud gaming.”

“I’m going to flip that question and answer it with the general first and then go to gaming, because it is an example of it. So, I think it’s just going to make interactive experiences much more common because you can this immediate exchange between the phone and the server or other users. You can very easily create user experiences that rely on the cloud and give the user a lot of real-time feedback and real-time sensitivity to controls.

“So what that does for gaming is, you can have really powerful games going on on the phone because, first of all, you can have a lot of the computing in the cloud and just the data that you need sent out to the phone. And very importantly, with the low latency, you can have a user on the phone have almost an immediate response from the cloud whenever there is something going on, which makes cloud-based gaming with other users possible, where you’re both seeing what the other person is doing in real time.”

“I think that regarding VR, I think some of this has been limited by the fact that it’s a large device that you have on your head. It might even be warm when you’re doing it, and then you most likely have to have a dedicated computer next to it that is doing part of the processing, offloading it off the glasses. I think that has been part of the problem why VR why hasn’t developed as we intended. If we look at AR as more a totally new market, and we add in capabilities so we augment reality, we’re not trying to re-create the reality. I think that’s where I see a lot of exciting things, both for professional and leisure purposes, and because I would love to have access to all the data you have in a screen.

“Let’s talk about how people learn how to do small tasks, either for private life or professional life. When I grew up, you read in a manual how you changed tires on a tire, and it is quite exact to how you are supposed to change tires. Fast forward 20 years, you watch YouTube on how you change tires on a car. Well, fast forward 20 years more, and you say, Hey, I just bought my AirGlasses, and I look at the car and the tires, and it’s coming out with instructions on, Hey, this guy is looking at a car with a tire. It’s in the springtime, it’s time to change from winter tires into summer tires. Let’s help him. Ask him, ‘Do you want to change tires?’ ‘Yes, I’m changing into summer tires.’ ‘Okay, let’s get going.’ And then you get your instructions there as you’re going. You don’t have to either read the manual or watch the manual and YouTube. The manual is assisting you as you’re doing things. Instead of looking it up on Wikipedia or reading the manual, or watching it on YouTube, I get assisted with that support, in real time. We’re barely in the beginning of that one. I see very large potential there.”

“Thanks, Peter!”

Okay, so augmented reality is going to go mainstream first. 5G makes it a mobile, real-time experience. If you’re a marketer getting ready for 5G, most near-term opportunities are going to be in the AR realm because it’s more conducive to mobile, more scalable, and requires only a 5G phone and connection to work.

Before we go, there’s one other thing about mobile extended reality that some critics say will keep it out of the mobile mainstream for a long time. That’s the massive drain on the battery. Does 5G do anything to address the power issue? Critics have been quick to point out that even casual use of even simple AR applications, like Pokemon Go, just barrels through smartphone battery power. Consumers are unlikely to tolerate advertising that drains their batteries. That’s not a trivial issue. But 5G addresses device power efficiency by pushing the processing off the device.

“You’re right, because a lot of the computing is going to the cloud, it’s going to be less of energy drain. It will likely have price impact and make devices a bit cheaper, and certainly, they’ll last much longer as a result.”

“Thanks, Yory.”

On the next FIVE, we’ll take a closer look at how 5G changes the dynamics of home connectivity. Will 5G fix wireless access, start an ISP cord-cutting revolution? Will the smart house finally become a real thing? Will it really be that smart? What does 5G mean for the future of WiFi, bluetooth? What do we mean by an IOT explosion? What do the answers to all these questions mean for marketers?

Thanks for joining us.

The FIVE podcast is presented by Ericsson Emodo, the Emodo Institute and features original music by Diaphonic and the Small Town Symphonette. This episode was produced by Robert Hasket, Adam Kapel, and me. I’m Jake Moskowitz.