Agora Media Group Innovation Blog

Augmented Reality is on the rise, this means also creating business models which are profitable and sustainable for the Augmented Reality industry.

An extended and interesting attempt to do so, is written and visualized in the 16 Augmented Reality Business Models by Gary Hayes.

Below you’ll find the graph and here the link to the bigger version.

The two axis are the Adoption versus the Likely Commercial Value which position sixteen Augmented Reality business models in the grid.
When combining the grid with our post 17 fields of Augmented Reality Applications, you’ll get a good and clear picture of which industries and markets can benefit with what kind of Augmented Reality application.

The graph states it’s a starting document, hereby my additions and comments to contribute to the effort to create insight and understanding.

First of all, “business models” is too broad in this context. The two elements which are explained in this graph are Value Propositions and Target Customer, (These two elements are taken from the Business Model Canvas). The third important element which should be added is the Revenue Streams.

Why Revenue Streams? 
In terms of the Hype Cycle, Augmented Reality is in the Technology Trigger phase. The technology has a long way to go before it’s adopted in the mainstream. One pitfall that can be encountered is the lack of profitability or revenue models which makes Augmented Reality viable and sustainable as a commercial sector. With no sustainable business model it’s more challenging create long-term investments and strategies.
A distinction should be made between B2B and B2C applications because business models, reach and impact differ between the two.

The likelihood of the Commercial Value does not reflect the potential profit per sale. An application can be Niche in terms of adoption, and the commercial value might be Low, that does not mean it’s not profitable or worth to develop from a company point of view, it does depend for instance on the cost structure, B2B/B2C and the utility (of course) of the applications.

Augmented Reality offers many business opportunities,  ’new’ payment models can be unlocked which shed a different light on the subject?
Mr. Hayes already mentions three of them: Pay-per-Use, Pay-per-Visit and Pay-per-Play.
Other models which focus on the more informative Augmented Reality applications can be Pay-per-Info (you buy / unlock certain information you want to have) and more entertainment driven ones that let you buy enriching modules for the AR apps.
Furthermore, let’s not forget the network effect / community model which can also be applied to Augmented Reality apps. Beyond a certain critical mass, value is achieved, not by the product itself but by the network. Think of the mentioned Social Gaming and Location Layers. Because in some cases the information extracted from the community can be overlaid on the real world is the unique and intrinsic value.
The abovementioned business models though are B2C focused and not have always proven themselves to be profitable.
B2B can focus much more on specialistic equipment/hardware, licensing and all sorts of subscription models.
The profitability or revenue per unit could be visualized in a third axis, making it 3D to understand the influence and interaction of adoption in combination with commercial value in the total -monetary- outcome of applications.

A last observation is that Mobile Augmented Reality has higher chance to reach the mass market than those Augmented Reality applications that aren’t. A new graph should be created to take the two apart.
The buzz around Augmented Reality is implicit to it, where the technology already exists for years it was not before AR could be implemented in smartphones which got this technology in the spotlights and got the attention of many.