Research Report

AUGMENTED REALITY IN THE APP-BASED GAME INDSUTRY ALEXA TREUBERT THE UNIVERSITY OF ARIZONA

Introduction When considering proposals for a new app-based game, it is crucial to keep in mind the ever changing technology of the world we live in today. Augmented reality is a growing field that has massive potential in the gaming industry, and could be a strong contender when considering future investments for a new app. From this research, you will be able to analyze the key fundamental business aspects of augmented reality, and see the earning potential that AR has for our company. Below is a summary of what augmented reality is, the relevant industries, target markets, competitors, and price points of this given industry. What is Augmented Reality The first step to understanding how augmented reality could be useful in an app-based game is understanding what it is. Augmented reality is technology that combines computer-generated images within the real world. A good way to think of this is by breaking down the term; a user’s reality, that being the real world, is augmented, or enhanced, by technology. AR is being used in many ways other than gaming, ranging from military, retailers, and healthcare protocols. However, as of right now, AR is mainly used in technology, which plays to our company’s advantage. AR is still generally a newer concept, and has not been labeled as common in apps now. Users are able to immerse themselves in their real environment, while using technology that our company could provide, making it an enthralling experience for the users, and a smart business venture for our company. Relevant Industries Due to the massive success of the augmented reality field, it is no surprise that other industries took major interest in the endless possibilities, as well. One major industry that has taken up augmented reality to improve their business is retail. Atieh Pushneh (2018) argued the limitless possibilities that AR has in the retail industry, such as the “Magic Mirror”, where customers can virtually try on their clothes rather than actually putting them on. This technology could save money by reducing shoplifting, and improve the cleanliness of clothes prior to purchase. By no longer needing to try on delicate items or swimsuits, the quality of the clothes purchased increases. Pushneh also discussed how AR can increase the usefulness of online shopping, by increasing traffic for stores, and decreasing the amount of returns. Despite not being related to the gaming industry, Pushneh’s research showed how AR can gain user popularity in settings outside of a smartphone, which would in turn gain popularity for AR in apps. Augmented reality is also being used in other industries such as military, and healthcare. For example, Wang et al. (2017) described how AR is being used in the Microsoft HoloLens for medical training, and that trainees have the ability to practice applicable skills in an actual emergency environment. While simulating situations that the medical staff will actually deal with day to day virtually, it improves the quality of healthcare when they will be presented with the problems in a real world setting. As the demand for AR rises in other industries, it has a similar trend in demand for app-based games, which our company can provide before it is a common amenity. However, like mentioned above, AR is primarily being used in the game industry and is now being adopted by major companies such as Apple and Microsoft, who intend to grow their revenues through the new technology.

Target Market When looking at the demographic of who would be interested in AR, you have to take into account many different factors. One of the advantages of this industry is that there is not one demographic set in stone for our product. Gregory Kipper and Joseph Rampolla (2013) report the demographics of “exergames” which combines exercise and augmented reality into an app-based game. The demographics of these games primarily focus on kids and teens with access to smartphones and the understanding to use the app. However, AR also has an advantage in healthcare, specifically for those suffering from mental health issues. There is a target market for those with depression that wish to experience the outside world and experiences, but are not in the stages of doing so in their current mental state. Augmented reality has many versatile uses that could be played to our advantage. With such a wide variety of industries using the technology, this opens the doors for people of all kinds to use the apps. Rather than our users being forced to exit their comfortable environment, they can exercise and enter a world of virtual reality right through their phone and in a familiar setting. When looking at the demographics of a potential app, it is helpful to be able to look at success stories of games in the past. One prime example of a successful augmented reality app was Pokémon Go which was released on July 6th, 2016. In a journal done by Amrit K Kamboj and Someshelkar G. Krishna (2017), a study of Pokémon Go demonstrated how the app helped solve part of the obesity epidemic by getting people up and active. One of the most interesting parts of their research, and the focus of this section, was how unorthodox the demographic was compared to other games; it was very broad. “In our experience, we have seen countless individuals, spanning across demographic variations in age, gender, and body habitus, walking outdoors using this application.” This is extremely important to look at and acknowledge, because it shows how successful an app can be if it is not limiting itself to only one demographic, which we would not be doing. The buying habit of the apps in the game industry tends to vary. Customers have a habit of leaping towards the newest technology, which is a perk of using AR. This could be observed with the buying habits of Apple users; the key reason why Apple has been so popular for as long as it has been is because it always has the newest technology. By getting in front of the curve and using augmented reality before it is popular, that will draw in the buyers who habitually buy the newest technology. Competitors With augmented reality becoming such a game-changer in the smartphone app industry, it is natural for there to be a lot of competition in this genre. After Pokémon Go’s massive success, other companies looked into similar games. After looking at blog completed by Zack’s Equity Research (2016), the revenue generated by Pokémon Go was staggering. The whole purpose of Pokemon Go was to collect different pokemon which would be strategically placed in different locations on a map that users must follow. Since users needed to collect pokemon from various locations, stores were able to buy rare pokemon and place them in their stores, which in turn generated more traffic and revenue for small-business owners. With over $440 million in revenue within the first 2 months of being released, and averaging at $4 million globally per day, the success speaks for itself. However, there have been a flurry of similar apps released, such as

Walking Dead, Jurassic World, and treasure-hunting spinoffs that could all be considered competition in our future game. Another massive competitor in the augmented reality app-based game industry is a game called geocaching. Using AR technology, users use GPS to locate different sites set by other geocachers, where you will find trinkets or something to sign showing that you have been to that spot before. In the Journal of Sustainable Tourism, Boys, DuBreuil, and Groover (2017). describe the potential of geocaching and how interacting with a user’s environment generate traffic within the game industry, while educating participants about agricultural sites in local areas. When looking at the marketing strategies of the competitors, it makes sense that they focus on the advantages that AR brings. One of the most appealing marketing aspects of Pokémon Go and geocaching is not the fundamentals of the game, but the experience of being immersed in a new environment. Whether they are catching Pikachu’s or signing notebooks, Ross Cranford (2016) points out how the entire marketing aspect of AR games has been about making connections between a user and its environment. Whether this is locally, or around the world, you are able to build connections online, and outside of the house, which is an innovative aspect to this technology. Price Points When looking at how to price our new game, it is important to understand where the main source of revenue will come from; traffic. Without any user traffic, there is no money to be made in the game industry at all. Mark Rollins (2011) in his textbook, Marketing the Free Application, discusses the advantages of releasing an app for free, and then requiring users to pay for certain capabilities or upgrades. This is applicable to AR app-based games, because once a user is drawn in by the interaction with their surroundings, they are more likely to upgrade to the paid version so they are able to unlock more items. A good example of this would be an augmented reality treasure hunting game; you would allow the user to hunt for a certain amount of items within a certain mile radius, and then require them to buy a pass for statewide, country wide, or worldwide. Another option is having in-app game purchases for tokens and lives, rather than requiring payment right off the bat. With more traffic, comes a greater reputation, and more earning potential. Using Pokémon as an example, rather than requiring users to pay an initial 99 cents to use the game, that would gain revenue from optional upgrades and from stores buying Pokémon at their locations. So, despite it being nerve wracking to release a free app, the opportunity cost outweighs the negatives. As it has already been established above, there is public interest in this industry. Whether it is for the younger, high tech generation, the adventuring adult, or even those with mental health and social anxiety issues, there are advantages AR provides for every kind of person. There will always be hype surrounding the release of new technology, and with Pokémon Go now having gone out of popularity, this would be the perfect opportunity to open the door to a new and innovative game from our company.

Conclusion Our company has the opportunity to use augmented reality before it is an everyday commodity. Due to its growing field and massive potential, this could be a perfect genre for our new appbased game. From the research provided on the relevant industries, target markets, competitors, and price points, the executive team should be able to draw conclusions on how AR is a smart move for our next business venture.

References

Boys, K. A., DuBreuil White, K., & Groover, G. (2017). Fostering rural and agricultural tourism: exploring the potential of geocaching. Journal of Sustainable Tourism, 25(10), 14741493. doi:10.1080/09669582.2017.1291646 Cranford, R. (2016). 'Pokemon go' and social marketing. Arkansas Business, 33(30), 23. Retrieved from http://ezproxy.library.arizona.edu/login?url=https://search-proquestcom.ezproxy3.library.arizona.edu/docview/1810255881?accountid=8360 Kamboj, A. K. (2017). Pokémon GO: An innovative smartphone gaming application with health benefits. Retrieved April 21, 2018, from https://doi.org/10.1016/j.pcd.2017.03.008 Kipper, G., & Rampolla, J. (2013). An Emerging Technologies Guide to AR (C. Katsaropoulus, Ed.). Retrieved April 21,2018, from http://proquest.safaribooksonline.com.ezproxy3.library.arizona.edu/book/gis/9781597497 336/ch Poushneh, A. (2-18, March). Augmented reality in retail: A trade-off between user's control of access to personal information and augmentation quality. Retrieved April 21, 2018, from https://www-sciencedirectcom.ezproxy3.library.arizona.edu/science/article/pii/S0969698917305969 Rollins, M. (2011). Marketing the Free Application n: The Business of Android Apps Development. Apress. Retrieved April 21, 2018, from https://link-springercom.ezproxy1.library.arizona.edu/chapter/10.1007/978-1-4302-3943-7_6 Wang, S., Parsons, M., Stone-McLean, J., Rogers, P., Boyd, S., Hoover, K., . . . Smith, A. (2017). Augmented reality as a telemedicine platform for remote procedural training. Sensors, 17(10), 2294. doi:http://dx.doi.org.ezproxy3.library.arizona.edu/10.3390/s17102294 Zack's investment research: Videogame stock roundup: SINA to distribute weibo stock, pokemon go generates $440M in revenues (2016). Chatham: Newstex. Retrieved from http://ezproxy.library.arizona.edu/login?url=https://search-proquestcom.ezproxy3.library.arizona.edu/docview/1816149928?accountid=8360