Virtual reality (VR) and augmented reality (AR) are still emerging technologies and, for now, it remains unclear where the hype cycle will land. However, with established tech companies such as Google, Facebook and Samsung throwing their weight behind VR/AR, the sector seems poised for rapid growth.

S&P Global Market Intelligence spoke to Anthony Karydis, founder and CEO of London-based live 360 and VR company Mativision, to discuss the impact of VR and AR on the future of the industry.

Anthony Karydis, CEO of Mativision

S&P Global Market Intelligence: 2016 has come to be known as the year of VR but you’ve been developing this technology for more than a decade. Have you seen a change in pace in VR development this year?

Anthony Karydis:

Absolutely. There's been a huge momentum in the VR space this year. Just two years ago, there was no VR scene. When the Oculus Rift virtual reality headset turned to Kickstarter for funding in 2012, they raised $2.4 million. Two years later they sold to Facebook for $2 billion and it has since taken their headset another two years to reach the market. Facebook's hedged bet on Oculus validated the industry and kicked off the road towards remarkable changes to come in the computing world. Today, a number of players are propelling the industry forward. Developments by the likes of Samsung and Google will make VR more familiar to a mass consumer audience. Until this technology is easily accessible on the high street, it won’t become mainstream.

There was an equal amount of hype surrounding 3D technology. So far, what are the indicators that AR and VR will have better chances of success?

The biggest difference between VR/AR and 3D is the immersiveness. Looking back in hindsight, we stood to gain little from 3D; it was not as big a leap from 2D. Today, the ability to create fully immersive VR/AR experiences goes a step beyond 3D and is a boost to the visual experience.

How much of a breakthrough is Google Daydream from a consumer perspective?

Google Daydream is a major step in what remains a transitioning industry but we have many great breakthroughs ahead. VR headsets are cumbersome and heavy. They are one of the biggest hurdles to mass consumer adoption. I find it difficult to imagine a family would wear such isolating devices to watch a live event, for instance. The delivery of VR limits interaction with others and we need to move beyond physical VR interfaces. This is where holograms and AR could play a major role. For instance, Magic Leap, which is backed by Google, Alibaba and others, is working towards projecting 3D computer-generated content directly to the user’s eye, sending stimuli directly to your brain.

Google Glass fell short of most AR expectations. Will the recently announced Snapchat Spectacles do any better?

I think Snapchat will succeed because they are addressing a completely different target market to Google Glass. With more people now so accustomed to taking snapshots and with Snapchat’s glasses being quite inconspicuous, the Snapchat Spectacles will easily be immersed in everyday life.

Does that mean AR will be bigger than VR as Tim Cook suggested?

These two will merge into a single reality in the future and we will no longer differentiate between the two. VR is still in its infancy at the moment but going forward, mixed reality will become the standard.

Headsets and AR aside, surely the cost of powering VR software, rather than headsets, is the biggest challenge for consumers?

The cost is an issue for PC-based VR experiences such as Oculus. However, the cost of smartphone-based VR like Samsung’s Gear VR is not too prohibitive. The solution to mass adoption is to improve mobile-based experiences and applications. Samsung’s new S8, which will have a 4K display, is a good example of this.

So far VR's value chain has been somewhat dominated by the gaming industry. What other genres of content or industries work particularly well in VR/AR?

Education and training, particularly for real-life emergencies, will be one of the big areas we will see this technology being applied to. VR will be used to showcase processes and AR will provide guidance and the ability to interact.

What won’t work?

I do not think we will see much VR in sports because of the nature of live sports content. Can a spectator game be immersive? It is difficult to imagine where to position oneself in a football match, for instance.

Outside of a handful of large deals, substantial investments in VR have been few and far between. Is there enough money pouring into VR/AR development or are the larger deals indicative of an overheated market?

On the one hand, there is a lot of investment coming out of the Bay area, which is arguably comparable to the dot-com boom. There has been a rapid rise in funding for companies without a product or go-to-market strategy and this has led to soaring valuations for the likes of Oculus and Magic Leap.

At the same time, we need to bear in mind that this is still an emerging industry that requires a few more years to develop. Investors sometimes want to see a significant turnover from companies not yet ready to produce substantial revenues and I think this is the wrong approach for the industry.

Is there a significant difference in the approach taken by U.S. investors in comparison to European investors?

Absolutely; U.S. and European investors are worlds apart. U.S. investors have more appetite for risk and invest heavily in future potential at the idea stage. Meanwhile, early-stage investors in the U.K. often want to see projections substantiated and examples of similar investment cases that have worked before, which is often difficult to provide in an emerging industry.