While Asia could dominate augmented reality, virtual reality, and mixed reality (or “spatial computing”) revenue over the next 5 years, Europe might drive significantly more of the rest of global augmented reality market and virtual reality market revenue than North America in the same timeframe. So despite the early stage XR market having a way to go before it truly scales, in the long run companies from Silicon Valley to Shanghai could find significant users and revenue in the spatial computing markets of Europe.

‘How can you govern a country which has 246 varieties of cheese?’

French President Charles de Gaulle was reported as saying about France, “How can you govern a country which has 246 varieties of cheese?” He might as well have been talking about the challenges of doing business across the European region with over 40 countries with varied cultures, languages, economic conditions and regulatory regimes (not to mention Brexit on the horizon).

The largest single country markets for XR outside Europe could be China, USA, Japan, South Korea and India by 2023, with Russia, Germany, UK, France and Italy leading the charge for Europe. While those five countries could drive around three quarters of European spatial computing revenue, the long tail of other European countries could each contribute a significant amount to growth in the region.

A tale of three regions

Above: Sources: Digi-Capital AR/VR Analytics Platform and Augmented/Virtual Reality Report Q4 2019

Grouping all countries by region, Asia could see 51% of the global XR market by 2023. In spite of Silicon Valley being the source of many innovations across spatial computing, long term European revenue could account for 25% of the global XR market with 17% coming from North America. So while the USA is the second largest single country market after China, North America as a whole might become the third largest region in the world for AR/VR revenue after Europe.


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Show me the money

In terms of installed base, AR’s geographic distribution is broadly similar to smartphone distribution, and VR’s distribution is roughly similar to the games market. So it is not surprising that the key XR economic drivers of hardware sales, ecommerce sales, adspend, enterprise software/services, in-app purchases, premium app sales, location based entertainment, and video could end up along similar regional lines to those markets in the long run. Number of users and unit economics tend to dominate how money flows globally.

In that context the long term potential of XR in Europe is helped by both its large consumer population and a long history of industrial innovation — particularly in the German-speaking DACH region.

Tim Merel is Managing Director of AR/VR adviser Digi-Capital. He will be discussing this and more in his presentation at AWE Europe in Munich on October 18th 2019.

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