Mass appeal may be an understatement. San Francisco-based Niantic’s Pokémon GO augmented reality app launched in July to the sounds of Nintendo’s share price skyrocketing and car horns blaring, as people descended into streets, parks and malls in the name of capturing throngs of superimposed pocket critters.

The app quickly became the most successful mobile launch in history, according to SuperData research, and surpassed US$250 million in revenue across iOS and Google Play within its first few weeks. The game didn’t just let people discover a Bulbasaur basking in the sunlight—it familiarized casual gamers with augmented reality and the ease in which it can be infused into their lives. Gone are preconceived perceptions of AR as being reserved for the goggle-wearing crowd. It’s as accessible as the tap of an iPhone, and poised to become more mainstream—and high-tech—thanks to the rise of AR startups and innovative kid-friendly products.

These companies are vying for a piece of an AR market that, when combined with virtual reality, is expected to reach US$162 billion by 2020. The demand for fresh and innovative content is also reaching new heights, with SVOD giant Amazon recently revealing additional plans to produce original VR and AR material for its Prime members through a job posting for a mixed-reality development executive. Facebook’s search for its own film and TV content lead within its Oculus VR/AR unit also made headlines in the wake of Pokémon GO‘s launch.

“After many years of talking about AR, it feels like it’s actually happening,” says Ariella Lehrer, CEO of L.A.-based Legacy Interactive and Legacy Games. “Pokémon GO came along at exactly the right time. I was getting pretty bored with kids apps. There are so many copycats, the discovery problems are serious, and the monetization model is tough. Suffice it to say, I was getting disenchanted. Then along came a breath of fresh air.”

Lehrer, who holds a Ph.D. in cognitive psychology, has been in the business of creating kids interactive products for more than three decades. Like many in her field, she views Pokémon GO as a teaser—the app itself uses a camera and GPS to overlay digital images on real-life backgrounds, but it doesn’t scan and process its surrounding environment, so virtual characters can’t be realistically placed.

“The Pokémon character is tied to your phone. It doesn’t know there is a park bench next to it. In AR—serious AR—the character would know there is a nearby place for sitting,” Lehrer says. Tech utilized in Google’s Project Tango, which features three cameras and corresponding software that effectively exploits all of them, is taking things to a new level with its processor that allows it to work a real-world room.

“We need our tech to be a little smarter, and for that we need better hardware,” she says. “Next up is letting consumers stand in an indoor space and have a device know what’s where. How can we push the envelope and make AR better?”

“Instead of phones glued to kids’ hands, you’ll see AR children’s books and games.”

– Aaron Burch, TouchStone Research

Lehrer is already answering her own question. Her company is currently developing Crayola Color Blaster for the Google Tango platform. The premium zombie-themed app, which launches on Halloween, lets users chase—and be chased by—virtual 3D characters. “This is exciting to me as a longtime designer of kids products, as it’s the evolution of play patterns. Kids are moving around the whole time; they can’t stand in one place,” says Lehrer. She adds that more Crayola-branded AR games for Google Tango are in the pipeline at Legacy, with the next product set to debut on Valentine’s Day 2017.

“I love the fact that physical elements are involved. We are all ready for these things to be more social and more active—two issues with kids mobile products today,” Lehrer says. Physical benefits of mobile AR aside, there are, presumably, financial ones.

“There has been a lot of investment in AR and VR over the years, but it looks like the oversized expectations weren’t always being realized, and now things are being reinvigorated,” Lehrer says. “There may be money in this after all.”

With US$3 million spent on in-app purchases per day, Pokémon GO is a prime example of AR monetization in motion. Granted, the game launched with brand recognition in place, thanks to its Nintendo-published gaming predecessors and giant databases at hand, but the marketing and advertising worlds have also shown the opportunities that can abound in location-based servicing. (While its prior video games have benefited from the success of Pokémon GO, Nintendo did not play a part in developing the app. Nintendo owns a third of Japan-based The Pokémon Company, which licenses the IP to third-party developers like Niantic.)

For example, a recent survey from Baltimore marketing agency MGH found nearly 60% of smartphone users who downloaded Pokémon GO were likely to enter a business offering Pokémon-branded discounts to players, and 38% were likely to purchase a themed product.

“Once we figure out monetization, there will be varying ad-supported AR games, as well as ones with in-app purchases and premiums. Which means we will then be flooded with me-too games,” Lehrer says. “You will see AR experiences when you go to Disneyland. I am confident someone is thinking of that design right now. You will see it implemented in amusement parks, museums and more.”

As far-reaching as Lehrer’s thinking goes, Ed Barton’s AR plans have been driven by his gut. Barton’s UK-based startup Curiscope has launched Virtuali-Tee, an AR app and corresponding wearable t-shirt that lets users view (in quite graphic detail) the inner workings of the human torso through a computer-recognized code.

“We created Curiscope to make learning experiences we wish we had when we were younger,” says Barton. “VR and AR enable us to travel anywhere, so we made an experience that lets you see and teleport inside the body.”
He launched his company last year after a long run in the kids broadcast space. Virtuali-Tee debuted on Kickstarter in March and swiftly reached its US$110,000 funding goal. More than 3,000 apps and corresponding t-shirts were sold at US$30 apiece, and Curiscope began shipping initial items last month. The app, which is available for iOS and Android, will go mainstream before Christmas.

The inner workings of the human body are realized in Curiscope’s flagship app

“The best way to use it is with Google Cardboard, which turns a phone into a VR headset. The objective is to have VR and AR that has everyday use,” Barton says. “You have frontier tech coming out that’s expensive, but it gets exciting when it’s on your existing phone. And when talking about kids, it’s important to make sure tech doesn’t target only the rich.”

The expensive AR hardware to which Barton refers includes Microsoft’s US$3,000 HoloLens, the US$1,000 Meta AR headset, and Magic Leap, which is worth an estimated US$4.5 billion despite having not yet released its headset. The high prices are intended to put actual holograms in front of a user’s face via spatial recognition.

Since AR-specific hardware is in a nascent and costly stage, Barton believes mainstream industry potential won’t kick into high gear for another three to five years. Aaron Burch, president of Connecticut-based Touchstone Research, however, thinks AR mass adoption may arrive slightly sooner.

“We will see mass consumer adoption when these devices are no longer tied to the computer, or aren’t goofy-looking. What will help move things along is when AR headsets look like regular glasses and contact lenses—and they eventually will,” Burch says. “We saw 2016 become the year of VR hype, and 2017 will be the year for VR adoption. You will continue to see mobile AR take off in 2016, and the experiences will pick up in 2017.”

And Burch is confident the kids industry in particular is ready to reap the benefits of an impending AR wave.

“Instead of phones glued to kids’ hands, you’ll see AR children’s books and games. It will let kids learn about environments beyond their own,” he says. “Having things appear as they do in the real world opens the door to new mediums. It’ll have a major impact.”

The education sector has plenty to gain from an AR boom, and Osmo has taken note. The Palo Alto-based company’s suite of seven apps, which teach coding, physics and digital literacy, are currently being used in 15,000 schools worldwide. Osmo’s latest mobile offering, the AR-powered Osmo Monster, pulls kids’ physical real-world drawings onto an iPad using a proprietary mirror-based AR gaming kit that ranges in price from US$79 to US$189.

“Even schools, which are the last ones to come on board from a tech angle, are seeing AR potential within the learning space,” says Osmo’s CEO and co-founder Pramod Sharma, a former Google employee who helped develop the tech used in the company’s physical book-scanning initiative. “AR requires the use of more senses—we focus on the hands, rather than just looking at a screen—which has a strong implication in the learning space.”

In terms of initial success, Sharma says Osmo Monster has been greeted favorably by the press in the wake of Pokémon GO. With regards to sales, parents are buying the product because they want an educational and hands-on digital experience for their kids that taps into the world of animation. It doesn’t hurt that the app, which took more than three years to develop, has been fine-tuned by a former Disney animation engineer and a Stanford University human-computer interaction expert.

But there hasn’t been instant jackpot-like growth à la Pokémon GO just yet for three-month-old Osmo Monster. “I think Pokémon GO offers a baseline example of how successful an AR app can be,” Sharma says. “Now it’s all about content. What can we do with this trend? Content is where it will be big along the AR line.”