Virtual Reality (VR) and Augmented Reality (AR) have achieved considerable success as marketing tools, with even greater growth predicted for the future. While the costs, customer access to devices, and limited content limit the current reach of VR and AR, there is every reason to believe these barriers will shortly fall if past is indeed prologue. Marketers moving into this space, however, should observe several timeless marketing principles to avoid the unwelcome prospect of a regulatory investigation.
The greatest area of VR and AR growth will likely come with customized shopping experiences. From cars to home furnishings to clothing, the opportunities for enhanced shopping are virtually limitless. But of course, as with all legal newsletters, visions of wonder must necessarily be tempered with a dose of legal caution. These ideas of consumer marketing experiences necessarily imply that the marketer has some detailed knowledge of the consumer. Take, for example, clothing. To provide the best experience for consumers, more than just a photo of the consumer, the marketer will want the consumer's current hairstyle and measurements, rather than merely viewing a recent photo. Over time, a marketer could develop a sense of the consumer's health (are waistbands expanding, staying the same, implausibly contracting?), and sense of style. Combined with purchase history, this could provide the marketer with a detailed picture of a consumer that few outside of their family would possess. Has the marketer secured permission in privacy policies to maximize the use of this data? Further, this data could be of great value when shared with third parties, and marketers have to make sure they have properly secured the necessary consumer approvals. And of course, with great data comes the need for great data security, so marketers need to make sure that these consumer profiles are properly protected.
In addition to the privacy concerns regarding personalized shopping experiences, the time honored issue of accuracy in advertising must be considered. For example, companies have been called to task for using photoshopped images of models in their advertising. These same concerns would be no less applicable if virtual versions of slimmed down consumers were used in a merchant's clothing ad. The same can be said for simulating car acceleration and styling, for the size and color of furniture in homes or even a simulation of a vacation get-away. Advertising must fully and accurately represent the items as offered. As advertising claims must be substantiated, there can be little doubt that VR and AR issues will arise in that timeless area of FTC and consumer protection enforcement—weight loss.
VR and AR can also allow for more subtle advertising. Study after study has shown that consumers grow less and less patient with advertisements that interrupt with a call to action. For example, one study showed that the following levels of negative sentiment were generated by each form of advertisement: telemarketing, 94%; pop-up ads, 88%; and auto playing online video, 79%. By comparison, the following sponsored ads, by medium, generated these levels of negative sentiment: Twitter, 30%; Facebook, 28%; and LinkedIn, 19%.
If subtle ads suit the tastes of modern audiences, VR and AR potentially offer one of the most effective means of marketing. In the near term, sponsored advertising provides content creators the chance to team up with marketers to generate a curated world, perfectly suited to a brand's message. However, if there is any chance that consumers will view these sponsored stories as independent editorial content, then disclosures may be necessary. As we have discussed before, marketer's invite regulatory scrutiny when their ads too closely resemble objective commentary, unless they are product placements in entertainment that are not likely to affect a consumer's decision to view the programming and where no product claims are made. But when confronting the dilemma of to disclose or not to disclose, augmented disclosures are the best option.
Of course the experience with the Pokémon GO craze of last summer presents a perfect combination of privacy concerns and subtle advertising. From a privacy perspective, there was much ado about the purported tracking and data mining practices of the app. While much of it was ill-founded and overblown, the reputational issues were considerable. Marketers interested in similar apps must not only ensure that their data habits are consumer-friendly, but they must also ensure that the brand is seen as consumer-friendly. As to subtle advertising, Pokémon GO provided great opportunities for local merchants to increase their exposure and business from participants in the game. Again, the interplay between a merchant and a similar AR game app like Pokémon GO can rapidly go from a perfect win-win situation to a disturbing "creep" factor. As with privacy, consumers must know and trust what the marketers behind the app are doing.
Over the next few years, VR and AR will be hitting their stride in popular culture. The topics addressed above—truth in advertising, disclosure of sponsored content and the use and security of data—are just a microcosm of the different consumer protection and regulatory issues that will confront this burgeoning industry. It should be noted, however, that the core aspects of consumer protection law were enacted over 100 years ago and through every phase of the digital revolution, the general principles against engaging in deceptive or unfair conduct have proven remarkably effective and adaptive to the myriad of different advertising mediums that have come to the fore. While the manner and method of advertising may have changed, the regulatory guidelines remain the same—provide adequate disclosures and effectively protect consumer data and you likely escape any unwelcome regulatory entanglements.