As we enter a new year, it’s time for our annual ritual of synthesizing the lessons from the past twelve months and formulating the outlook for the next twelve. This has been an action-packed year for AR & VR as the world slowly emerges from the grips of a pandemic.

Moreover, 2021 was marked by the emergence of metaverse mania. Though it has legitimate principles and promise, the term has been ambiguated through overuse. It’s also been overhyped in terms of the timing of its arrival. A fully-actualized metaverse is decades away.

Beyond the metaverse, AR and VR continue to be defined by steady progress in several areas. We’re talking mobile AR engagement & monetization; AR marketing and commerce; continued R&D in AR glasses; enterprise adoption; and the gradual march of consumer VR.

So where is spatial computing now, and where is it headed? What’s the trajectory of the above subsegments? This was the topic of a report from our research arm, ARtillery Intelligence. Entitled Spatial Computing: 2021 Lessons; 2022 Outlook, it joins our report excerpt series.

Picking up where we left off last week, AR revenue models are materializing. For example, one of the most popular forms of consumer AR is lenses that are distributed through social channels like Snapchat and Facebook. This has been a foundation for AR monetization.

How? AR lenses lend themselves to brand sponsorship and paid distribution — a business model propelled by several factors. Not only is advertising the primary business model of the social players noted above, but AR lenses themselves are naturally conducive to branded experiences.

For example, branded AR lenses let consumers visualize products on “spaces & faces” through the smartphone camera. This involves paid distribution through AR ad channels such as Snapchat and Instagram, as well as brands’ self-distributed AR efforts (e.g., their own apps).

In fact, the former represents one of the leading AR revenue sub-sectors today, with campaign spending estimated to reach $2.86 billion this year according to ARtillery Intelligence’s Global Mobile AR Revenue Forecast. This total is projected to grow to $6.68 billion by 2025.

So what’s driving AR advertising revenue? First, users demonstrate high engagement with AR lenses as a way to enhance already-popular activities like media-sharing and dressed-up selfies (key term: already-popular). Second, advertisers are attracted to those eyeballs.

More specific to AR’s advantages, advertisers are drawn to its ability to flex creative muscles and transcend 2D media where they’ve been confined for years. There’s also a business case shown in campaign performance metrics that continue to validate AR advertising’s ROI.

As for who’s doing what to tap into advertiser demand, Snapchat is a clear leader, due mostly to its AR focus, and alignment with its “camera-company” mission. Meta also looms large with greater global scale, as well as AR’s natural alignment with feed-based organic product discovery.

Meta has also begun to distribute AR through other properties like Messenger and Portal. But the real opportunity could be Instagram, where AR aligns with its camera-forward audience and business model. It has cultivated a product-discovery use case that’s fertile ground for AR.

Meanwhile, wild cards include TikTok, with untapped AR potential. There’s also visual search such as Google Lens, which lets users point their phones at objects to identify them. This carries the same high user intent that makes web search such a strong advertising medium.

How is AR Monetization Materializing? was originally published in AR/VR Journey: Augmented & Virtual Reality Magazine on Medium, where people are continuing the conversation by highlighting and responding to this story.