How Virtual Reality Is Impacting the Ad Industry

Virtual and augmented reality could change the world. Through full immersion, users can live out stories they've only ever dreamed of, be transported to an exotic place without leaving their house and interact with products as if they were viewing them in actual reality. The technology seems like the next step in media progression – it started with print then moved from photo to video, and full immersion would complete the circle of escapism and experience that media companies have strived to create for decades.

"We say a picture is like a thousand words and a video is like a thousand pictures," said Samuel Huber, founder and CEO of a VR advertising firm called Advir. "I think an immersive experience is like a thousand videos, almost."

Skeptics, however, say VR and augmented reality's biggest challenge will be getting the right technology into the hands of an unaware and possibly apathetic consumer base. The fate of virtual and augmented reality will become clear over the next few years. In the meantime, those predicting it will take off are positioning themselves in a place to drive content and advance the technology while developing realistic advertising strategies for the future.

Regardless of how this technology develops, one seeming truth is that marketing and advertising will likely exist in the space. Based on early projects, such as Unity Technologies' "Jigsaw" virtual room experience, this may not be a bad thing for consumers. Having the ability to interact with content that features ads in a native or interactive fashion will provide users with a non-intrusive immersion experience. Well, that seems to be the goal anyway.

"The [businesses] that want to overmonetize AR or VR with pop-ups or annoying ads or banners that stand up, people are not going to use that content," Huber said. "I think it's going to self-monitor, in a way."

Right now, most people talk about VR with anticipation. It's clear that advertising in virtual and augmented reality has already begun, and some could argue that it's an impetus behind the overall growth of this technology.

What VR means for advertising today

Virtual rooms

VR allows companies to connect with customers on an experiential level. This has largely happened through 360-view virtual reality videos, immersion-style test drives and brand-related product experiences. One company is working on driving the industry forward. Unity Technologies, a San Francisco-based game development company, has worked with such companies as Lionsgate to merge marketing with a high-tech virtual reality experience.

"We like to talk about the medium of VR advertising as a responsive storytelling ad," said Julie Shumaker, vice president of advertiser solutions for Unity. "Instead of sitting and passively seeing a display or watching a video for a few seconds, this is a completely immersive and interactive experience, and we're able to value [things like] how does the user actually touch the ad unit itself and, ultimately, how much time did they spend with the brand."

This is an inherent advantage VR advertising has over traditional advertising: Users are placed in a distraction-free environment, and companies are incentivized to create high-quality content to engage the viewer for as much time as possible. Unity was tasked with creating a virtual room for "Jigsaw," Lionsgate's latest installment in the "Saw" horror movie franchise. Users can solve a quick puzzle and interact with various "Jigsaw"-related content inside the virtual room.  

A virtual room differs from other forms of VR advertising – say, a 360-degree immersive video experience – in that the user is interacting with the content for 100 percent of the time they're inside the room. Shumaker said this means that brands can create a unique VR sandbox to tell an interactive story and build a relationship with the customer.

"[The] virtual room is the one product that is the most immersive brand product other than owning your own app," she said. "A big benefit is that it is scalable across the full array of VR experiences. So, the short answer is yes, we do see that brands will take advantage of this at a higher and higher rate."

After the virtual room was released, Unity partnered with Isobar's Marketing Intelligence practice to understand how users were responding to the immersive content. The evaluation found that users experienced an elevated heart rate, were sweating and had increased muscle activation associated with smiling. The rates on these behaviors were all higher for users who completed the interactive VR experience compared to those who only watched the trailer in VR, meaning that the interactive aspect of the ad contributed to the increased emotional and physical response.

"What we saw, overwhelmingly, is that an interactive experience creates that deeper emotional impact – it makes your palms sweat, it makes you laugh out loud and grin, it makes your heart race," Agatha Bochenek, head of mobile and VR/AR advertising for Unity. "That's what creates that. It's responsive storytelling."

In-program ads

Virtual rooms are an exciting development in virtual reality ad technology, but for now, creating them will likely be limited to big companies that can afford to create an entire VR experience for their company. Huber thinks that advertising in VR will also include companies advertising within games or other types of VR content.

"They [virtual rooms and other VR ads] can definitely coexist, and I think they will," he said. "I would say that virtual rooms are a very bespoke experience. It's not something at this stage that can really be served programmatically or at scale. So, that would only work for the Starbucks or the Coca-Colas of this world."

Huber and his company are trying to spur advertising in virtual and augmented reality by selling ad space within VR programs, which would give content providers another way to monetize. The space would be sold and charged per impression, which would be tracked using gaze-tracking data that is collected and interpreted by Advir. This model, while significantly different from Unity's virtual rooms or other experience-based VR advertisements, could provide publishers with the opportunity to develop content and incorporate ads in a way that doesn't poison the user's experience. This is a key ingredient to Huber's idea.

"If you think about advertising in immersive media just like we're doing on the web, that's not going to work," Huber said. "So, our approach is really to blend ads and placement within the environment … In VR and AR, [advertisers] suddenly have access to the entire environment. So, I think that's going to really unleash a lot of flexibility on their part. I think we'll regain a lot of creativity, and focus on creating great experiences instead of just focusing on how many clicks and how many views we can get."

Storytelling and the VR approach

At the heart of advertising in virtual reality is a new form of storytelling driving fascination from users as well as from advertisers. More traditional forms of media support linear storytelling – there's a clear-cut beginning, middle and end of the overall advertisement. With VR, a user has autonomy in the story and can look and go anywhere. This has prompted a new approach.

"What [the users] do, where they look, how they're interacting within that space or with the objects is different from user to user to user," Bochenek said. "They have to get the same feeling and the same overall story. It's something we're calling responsive storytelling where what the user does actually has to impact what then ultimately happens and that's really that magic of that platform."

Immersive storytelling is also present in how this technology is developing as well. Developers like uSens have created VR technology without remotes so the experience feels even more lifelike for the user.

"By allowing users to use their bare hands to interact (instead of a controller) and give them and virtual objects true positional data, developers and headset manufacturers can create interactive, immersive and intuitive AR/VR experiences," William McCormick, head of marketing for uSens, said in an email.

This kind of changing technology has resulted in different companies offering education to brands on how to use VR and responsive storytelling to better a company's overall brand. Cortney Harding is the founder of Friends With Holograms, a VR and augmented reality agency that works with brands to create immersive content. Harding's company offers educational components so that brands can fully understand the technology.

"With most brands, we start with an education program called VR/AR101," Harding said in an email. "From there, we consult with various teams to generate ideas to use VR in different campaigns."

The future of advertising in VR

AR before VR

As this technology continues to develop, it's likely that augmented reality will take shape before VR. The reason for this is augmented reality faces lower barriers to entry – certain types of smartphones are already augmented reality-ready devices. This, coupled with the release of ARkit and ARcore, two programs from Apple and Google that allow developers to build AR frameworks, mean that 2018 should see an uptick in AR mass-market AR content.

"Estimates say that 800 million people will have an AR-ready smartphone by the end of Q1 2018 [March 31, 2018]," McCormick said. "Now AR branding experiences have become so exciting, as companies like IKEA allow you to place a virtual coffee table or couch in your house … VR is able to provide a more immersive experience and brand engagement, but AR can literally show you how a product looks before you commit to buying."

Many VR advocates feel that consumers accepting augmented reality on a mass scale is a stepping stone for VR and the advertisements that come with it. The difference between augmented reality, VR and regular reality is often viewed on a spectrum, with reality at 0 percent immersion, AR at 50 percent and VR at 100 percent. If the market can get to 50 percent immersion with AR, VR could not be far off.

"It's one media, it's the immersive media, and within this media, you have different technologies," Huber said. "We think that advertising in VR is easier, the rules are easier because you're just immersed into a different world. So, you don't really have to care about context and where you are in the real world."

Understanding data

Virtual reality presents marketers and advertisers with the opportunity to gain data on consumers on levels that have never been seen before. Because users are 100 percent immersed in the experience, marketers will be able to track where you are looking, how you feel and what kinds of products you interact with. This means marketers can gain a better understanding of what kinds of products consumers want and eventually segment users based on where they look.

"We can extract a pretty precise profile with how people interact with different types of placement," Huber said. This means that advertisers can take data and better market the right products to each consumer based on their interests.

Bottom line

Virtual and augmented reality are still very new forms of technology. Early adopters say that this kind of tech will change the way we consume media. If it does end up developing and becoming a major entertainment medium in America, advertising and marketing will likely follow. If marketers can "self-monitor" as Huber indicated, a user's experience won't be ruined by advertisements. Instead, built-in ads and immersive virtual room-type experiences will allow consumers to interact with products while they're enjoying content.

"The interest [in VR] is very deep," Shumaker said, "and the good news for any of us in the ecosystem is, unlike many ads that tend to be almost completely driven by the agency world, this seems to be a consumer experience driven by the brands themselves."