US$600bn Augmented Reality Market Tempts Telefónica


Telefónica Digital is partnering with augmented reality (AR) platform developer Aurasma in a long-term, multi-market deal that significantly expands the Spanish company ' s exposure to the fast-moving digital advertising and e-commerce markets worldwide. More importantly, this is the most ambitious and extensive use to which the fledgling technology has been put so far and provides AR with some much-needed credibility among advertisers and retailers looking to invest in mobile advertising. Nevertheless, despite Telefó nica ' s global reach and Aurasma ' s pedigree, BMI foresees considerable challenges ahead in a market where personalised advertising remains very much a hard sell.

Und er the terms of the deal, Telefó nica will integrate Aurasma ' s technology into the growing range of media services the operator offers to brands and advertisers worldwide, starting in the UK, where the company operates the O2 network. Services and applications wi ll be rolled out to other Telefó nica markets in Europe and Latin America ' in due course ' , according to the company. Telefónica serves 309mn mobile and broadband customers worldwide , and Aurasma is part of Autonomy , the UK-based software company acquired by Hewlett-Packard in 2011. Achieving mass-market AR adoption would benefit long-held plans for a spin-off of Aurasma.

AR can transform existing static forms of advertising into interactive content that can be unlocked by mobile multimedia devices such as smartphones, media players and tablet computers. Via mobile devices ' cameras and wireless sensors, A urasma's proprietary technology rec ognises images and objects such as enhanced outdoor billboards and printed posters, physical products and in-store materials to activate videos, e-coupon offers, competitions and 3D animations relevant to local retailers and end- user preferences . Aurasma claims that more than 8,000 commercial partners have been attracted to its platform since June 2011 while the Aurasma app has been downloaded to more than 4mn unique devices.

Analysts suggest that the total AR market - which would see revenue derived from mul tiple channels, including point-of-sale, advertising and incremental sales - could be worth as much as US$600bn by 2016 , by which time more than 1bn devices and 50-60mn cars will be AR-enabled ( source: Semico Research ). With BMI forecasting annual smartph one shipments to rise from 611mn in 2012 to 1.49b n by 2016 and tablet PC shipments set to rise from 110mn to 225 mn over the same period, it is clear that there is considerable potential fo r early investors such as Telefó nica to benefit from AR.

However, monetising AR servi ces will be difficult at best. Advertisers have, so far, found it difficult to create and offer advertising in ways that recipients would find only minimally intrusive or irritating on displays that are already very small and where space and interaction times are at a premium. Collab orating with Telefó nica Digital - which is working with the Mozilla Foundation to develop a next generation mobile operating system and has developed over-the-top (OTT) services and applications ranging in scope from mobile payments to mobile internet telephony - should improve AR ' s chances of s uccessfully penetrating agencies' future mobile advertising strategies and lead to increased click-through rates for key brands , which in turn will lead to increased advertising commissions for Telefónica and its partners.

Telefonica Digital - Key Developments, 2009-2012
Date Activity
Source: Telefónica Digital
Nov 2009 Creation of Verticals organisation. Launch of GiffGaff (UK pay - as - you - go MVNO). Launch of O2 More (personalised mobile marketing service).
Dec 2009 Purchase of Jajah (international mobile VoIP).
Aug 2010 Purchase of Tuenti (youth-focused social networking platform).
Feb 2011 Launch of BlueVia (app development platform) .
June 2011 Launch of Wayra Spain & Latin America businesses (investment and business start-up unit) .
Sep 2011 Creation of Telefónica Digital.
Nov 2011 Launch of Side by Side for O2 Health.
Dec 2011 Content distribution agreement with Sony Pictures for Latin America.
Jan 2012 Launch of 48 (SIM-only MVNO) . Investment in Joyent (application virtualisation and cloud services) . Agreement with Feedhenry to support business applications strategies.
Feb 2012 M2M deal with OnStar. Partnership with Mozilla Foundation to develop new smartphone OS based on Firefox.
March 2012 Launch of Help@Hand for O2 Health. Investment in Boku (mobile payments) .
April 2012 Launch of Wanda (mobile payments JV with Mastercard) . Partnership with EA Games for smartphone games, Launch of O2 Wallet.
May 2012 Launch of Wayra across Europe. Launch of TU services.
July 2012 Carrier billing agreements with Facebook, Google, Microsoft and Research In Motion ( BlackBerry ). Telefónica , KPN, NTT, Telstra, Rogers, Vimpelcom and SingTel announce global M2M partnership.
Aug 2012 Telefónica and Arduino present a device with M2M capabilities.
Sep 2012 Joint investment with la Caixa in addFleet (urban mobility M2M). Partnership with Aurasma.
This article is tagged to:
Sector: Telecommunications
Geography: Global, United Kingdom

Access all of our latest analysis, data and forecasts - request a trial