INDUSTRY NEWS

Virtual Reality or Cost per Experience

"I've learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel." - Maya Angelou

How digital media forever changed the advertising landscape, virtual reality will forever change not only advertising but how brands interact with consumers in general, how we purchase products and services, how we experience branded and user-generated content.

With Google finally onboard, VR is now officially one more battlefield between Google and Facebook (until eventually Apple joins in) and everywhere these two technology giants go to the head-to-head competition, the rate of innovation development gets tremendously faster, benefitting all related partners and end users. Looks like Google is doing it's best to catch up with the lost time from when the only VR effort was Cardboard, which was more of a side project trying to show that basic VR experiences are easy to create than a full feature VR headset. It provided a really great experience for those to whom it was the first VR exposure and Android VR apps offering increased significantly during the last two years. There are clear indications that Google will use YouTube as a backbone for storing all VR (or, at least for now, 360 video) content. Both Google and Facebook looks at VR as a new computing platform that might change how we communicate and run day-to-day tasks forever. Mark Zuckerberg's yesterday's on-stage appearance in Mobile World Congress 2016 reveals the scale of Facebook's true ambitions for VR-based communication.

"Pretty soon we're going to live in a world where everyone has the power to share and experience whole scenes as if you're just there, right there in person." - Mark Zuckerberg

Virtual Reality term was first mentioned in 1938 by Antonin Artaud and since then captured the imagination of many generations. There were many isolated attempts to develop VR experiences and introduce it as a new standard of gaming (Sega, Atari etc.) however, none of these succeeded. Now, it finally feels like in the next few years VR is destined to become (or, at least, gain some serious momentum) the next standard computing platform to communicate, consume content and run a business. This time, too many serious players (Apple, Sony, HTC, Oculus/Facebook, Google, Microsoft) develop VR platforms for it to flop again.

360 videos

How digital media forever changed the advertising landscape, virtual reality will forever change not only advertising but how brands interact with consumers in general, how we purchase products and services, how we experience branded and user-generated content.

We already see VR-like experiences starting to gain ground with 360 videos occupying more and more Facebook newsfeed inventory. Content marketing was the biggest movement in digital marketing for the past several years and it has become a backbone for all marketing activities from media planning to CRM, e-commerce to offline sales. 360 videos will be the biggest trend in content marketing for years to come. Eventually it might become the new standard of branded communication and just like social media standards emerged after years of experimenting, it will take time to experiment and see what works and what not.

Most major brands are already running 360 videos experiments on Facebook and YouTube. 360 is the first step in making people familiar with easy accessible VR-like experiences. It doesn't require any additional tech, so there're no limits to content distribution and consumption. High smartphones penetration guarantees that most users will access and engage with 360 videos without significant limitations. Both, YouTube and Facebook will make video content the basis of Virtual Reality revolution. On it's recent CES keynote YouTube laid down plans to make YouTube much more interactive and 360 based. Now that Google has someone to lead its VR efforts, it is very likely that YouTube will be used to feed the entire Google VR ecosystem (however it will play out) with 360/VR content. Facebook also makes continuous efforts to make 360 easily accessible with initiatives like spherical videos size optimization.

One of our clients recently completed one of the first digital video campaigns simultaneously running 360 and regular TV ad versions on YouTube (Facebook currently runs a beta program for 360 video ads with selected US advertisers, so on Facebook we tracked only organic views data). Even though VR development added 40% of additional costs to video production, 360 video had 3X times higher average watch time as well as engagement rate. 

Campaign data clearly showed that 360 provided incredible brand exposure and significantly higher user engagement. YouTube didn't apply any pricing differentiation for regular and 360 video. Of course, it wouldn't use price discrimination since it is an auction-based channel, but how would you price user experience anyway? Our campaign numbers show that 360 videos create experiences, not views. Just like Nick Woodman told on the recent YouTube CES keynote: "After watching 360 video it's hard to know if you watched it or lived it". 360 video is a totally different kind of beast that will change digital video ads forever and changes will be more rapid after Facebook rolls out 360 video ads globally and YouTube gets momentum with its 360 activities.

Another important contributor to 360 growth will be rapidly decreasing production costs with regular users soon being able to record high definition 360 videos. Nikon recently released 360-degree action camera KeyMission 360 test footage that looks pretty damn good. Samsung also revealed Samsung Gear 360 camera, which could be a hit between mainstream users.

New ad formats

360 video is only the first step to VR-based advertising which without major technical boundaries will grow rapidly, but to go beyond videos to a really non-linear branded VR experiences we need to reach a tipping point of personal VR accessories adoption. Samsung (in partnership with Oculus) this time was the first mover with the introduction of Gear VR and it looks like it was an instant success.

Real VR experiences are based on non-linear environments and to make it advertising standard best practices have to emerge. The main question is where to store VR content? Currently, the default choice is apps but all media companies will push marketers to store VR content on their platforms. Facebook will definitely encourage storing VR content on the social network. Most likely VR ads will be a part of the newly launched Canvas ads. This way Facebook will be able to lock in more advertising dollars since VR ads created on Canvas won't be used on other platforms without establishing a universal VR creation format first or, at least, having significant costs to replicate the same content on other platforms. Google most likely will either incorporate VR experiences straight into the AdWords platform, which most likely stream content from YouTube or will use a recently acquired app streaming technology. It will be very interesting to see VR ads being accessible on a self-serve basis and how these formats will be packaged for the universal usage.

The whole purpose of advertising is to reach and connect with consumers to sell products or services. The connection is created with emotional messaging that should resonate with consumers. Even having millions of digital channels where users can engage with brands, branded content is still something that is "out there" and product is "here". With VR all boundaries disappear and everything becomes real. A great example of this could be phobias treatment with VR experiences. Again, most purchases are motivated by "observed emotional value" rather than functional benefits and exactly because of it VR could significantly change how brands interact with consumers.

What if the emotional value brands create with VR content one day will be bigger than thėir physical products or services provide? How will economics shift then? What if you will buy products only to get brand sponsored experiences in VR? What if you could gift incredible VR trip to The Alps for your friend who can't go on a trip with you? Will sponsored experiences be bought on a CPE basis? Will brands one day sponsor your virtual world? These might be very deep questions, but we need to ask them to guide our efforts when the VR revolution begins.

Commercial implications

Imagine the possibilities for branded communication when you'll invite users not to watch your video or read your blog, but to actually get access to the whole new world.

First, VR will significantly increase digital advertising/content marketing efficiency for products that need a physical demo before the final purchase, like cars, furniture, big box electronics, real estate. Many brands will use A/B testing to discover actual conversion rate increase between users exposed to VR product demos.

Services heavily dependent on customers physical comfort will significantly benefit from VR content: hospitality, airlines, travel. Imagine Hilton giving VR experience of every room in the hotel for people to choose the best room, British Airways providing VR experience of the trip you'll book from the UK to the USA or Thomas Cook providing VR preview for the trip to Hawaii your are planning next summer.

VR will be extensively used not only to make purchase decisions easier but to actually enrich experiences of the products or services you just bought. Imagine purchasing to a skiing trip to Swiss Alps with additional bonus VR content exploring local tracks options or GM providing VR-enhanced instructions to change some broken auto parts.

I'm very excited about the immersive video and VR opportunities for storytelling, content creation, and branded communication. It's just the beginning and maybe the most interesting time when the rules are not set, many brands are experiment and platforms trying to attract or create immersive content. VR impact for entertainment, business, and communication will be more significant than anyone might imagine.