Is virtual reality poised to convert into real sales?

Such companies as Facebook Inc. and Alphabet Inc. have already made big bets on virtual reality, which has yet to see mass adoption despite multiple planned productlaunches. But with shipments scheduled to start this month for Facebook's Oculus Rift—the headset intended to usher in a new era of virtual reality computing—one Wall Street firm is asking if virtual reality's moment has "finally arrived?"

Deutsche Bank AG analysts led by Ross Sandler draw a parallel to early sales of smartphones by companies that include Apple Inc.


"We think the VR [virtual reality] ecosystem is in its '2007-smartphone' moment in terms of the adoption cycle," the analysts write in a 68-page note published on Thursday. "It took four to five years for smartphones to reach 100 million users in the U.S., we expect a slower adoption curve for VR, but still strong enough for an enormous market."

Deutsche Bank

The risk, however, is that the next two years could bring about a period when people actually turn negative on the space due to a high rate of hardware sales without the accompanying content needed to be truly "wowed." They draw a parallel once again with the launch of Apple's iPhone in 2007 and the extra time it took for popular apps from Snapchat Inc., Facebook, or Uber Technologies Inc. to be launched and help build a user following and drive sales.

"After all the hardware adoption in 2016 and into 2017, media outlets and analysts may start asking 'well where is the killer app?' and 'why are all these VR systems collecting dust,'" the analysts say. "There is a fairly high probability that the 'Gap of Disappointment' may be a theme for the Consumer Electronics Show and Mobile World Congress in 2017." 

Despite such concerns, the Deutsche analysts describe themselves as "hugely bullish" on the field.


Last month, Goldman Sachs Group Inc. sent out a note calling for slower adoption of virtual reality technology, but the possibility is that virtual and augmented reality (AR) will become an $80 billion market within 10 years.

Courtesy: Bloomberg Business 

"We continue to believe that VR/AR is poised to be the next computing platform. And like the transition from desktop to mobile, it will be disruptive. … The first half of 2016 will see the most significant progress on VR/AR ever," Goldman said at the time.