PepsiCo's Gatorade recently launched its first virtual reality video ad that drops baseball fans right into the position of slugger Bryce Harper as he works a 3-2 count in the bottom of the 9th and waits on a 90-plus MPH fastball.
The roughly 3 1/2-minute video shot with GoPro cameras is cool even without a VR headset. But more importantly, it's an early sign of what's to come in video advertising, as digital ad behemoths such as Google and Facebook (NASDAQ:FB) dive deeper into VR and augmented-reality projects.
This is not the first endeavor into VR for PepsiCo, which earlier this year began a series of VR ads for its Mountain Dew soft drink, looking to capture the attention of those interested in extreme sports. But while PepsiCo has been one of the first to experiment with these ads, beverage companies aren't the ones that truly have the most to gain from the advancing technology.
Cars, homes, and more
VR ads will be able to put prospective car buyers into the driver's seat of a luxury sports sedan before they ever make a trip to the dealership -- Volvo has already dipped its toes into virtual reality. The technology will also put home shoppers into the kitchens, bathrooms, and backyards of properties. And what better way to buy tickets to a concert or sporting event than putting yourself right into a seat for a show or a game beforehand to see, hear, and feel the experience firsthand?
Make no mistake: While advancing technology is a noble goal, advertising opportunities are part of why big tech players like Google and Facebook have been making acquisitions in the space and looking to quickly build out their VR platforms. As more advertisers find ways to use VR to better capture the attention of prospective consumers, these two companies would seem to be in a strong position to capitalize -- at least as things now stand.
How they're investing
Google has been making investments in VR on a number of fronts. It has developed YouTube 360 that enables the VR experience for those who have the technology to view the ads. It has also been working on making that technology available through Google Cardboard, the inexpensive, headset-style smartphone cradle and app that lets users view VR video on their mobile devices.
Facebook has been grabbing headlines since it bought VR headset maker Oculus last year for $2 billion. But it has also quietly been working to develop virtual reality technologies that would reach a larger number of users sooner.
Like YouTube, Facebook is developing 360-degree video technology for existing devices. A standalone video app under development would deliver "spherical" videos to mobile devices, The Wall Street Journal recently reported. With content built using multiple cameras to capture different angles, the app would allow users to tilt their phones for different perspectives of the same scene.
The kings of digital ads are not without threats
Also important, both companies are building commanding positions in digital and mobile advertising -- go-to platforms for businesses looking to reach customers via the web. Their positions don't look to be significantly weakening as those markets grow substantially over the coming years. Research firm eMarketer sees Google losing share but growing ad revenue by 29% to $26.7 billion by 2017 and holding some 35% of the market. Facebook, meanwhile, is expected to continue taking share in mobile ads and digital ads as a whole, earning $12 billion by 2017 -- a fifth of the entire market.
It's reasonable to assume those strong market positions will hold up as technology advances, and more video ads become immersive. But there are many smaller players looking to make headway in the VR video market as well. VRideo is a example. The small start-up has high hopes, aiming to become the YouTube of VR video. It already claims some 300 content creators on its platform.
VRideo or another player in the nascent field could prove to be a serious disruptor.
Positioning for the future
With so few people owning VR headsets to enjoy the truly immersive experience, the Harper ad may be far from a home run for Gatorade or the YouTube 360 platform.
But it's a sign of what video advertising has in store for us in the years to come. VR technology will provide deeper and richer experiences in ways that we can't even imagine with the technology still in its infancy. Facebook and Google are positioning themselves to capitalize.
John-Erik Koslosky owns shares of Facebook and Google (A shares). The Motley Fool owns shares of and recommends Facebook, Google (A shares), Google (C shares), GoPro, and PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.