Augmented Reality: The Coming Reality

Once existing only in the realm of science fiction, augmented reality is becoming . . . a reality. It is making its way into popular media as apps for smartphones, like the iPhone, and tablet PCs begin using augmented reality to overlay contextual graphics and other information onto real-life images and objects using these devices in an interactive fashion.

The industry was rather tiny and was really just a collection of smartphone apps which generated only a few million dollars in revenues in 2010. But now, by reaching out to the media and advertising companies, the augmented reality industry is on the verge of becoming a real business and estimated to be worth perhaps $600 billion by 2016. Semiconductor research firm Semico Research say that more than 864 million mobile devices will be equipped with augmented reality by 2014 and more than 103 million vehicles could have some form of the technology embedded in them by 2020.

Investors can see that the industry is for real by the number of large companies which have moved into the sector. Take Intel (Nasdaq: INTC), for example. It has invested $14 million into a Dutch company, Layar, through its venture capital arm. Layar has the world's most used consumer augmented reality application, a reality browser that helps find services nearby on anything from restaurants to real estate to networking opportunities. Its app has been downloaded more than 20 million times, has 3 million active users and is actually making money.

Intel is also looking to add augmented reality features to its chips, as have some of its competitors including Qualcomm (Nasdaq: QCOM). The company's Vuforia platform allows developers to plug augmented reality into their applications. Its latest version of Vuforia now has cloud recognition. So now when you hold your device's camera over an image, it connects to the web and rifles through a database of more than one million images.

This week saw news from Europe on this front too with mobile telecommunications giant Telefonica S.A. ADR (NYSE: TEF) selecting Aurisma and its technology as its partner to expand its mobile advertising worldwide. Aurisma is the augmented reality business now owned by Hewlett Packard (NYSE: HPQ) after its acquisition of British firm Autonomy. Telefonica will use Aurisma technology across its operations in 25 countries (and 300 million consumers), starting with the United Kingdom. Financial terms were not disclosed but it is believed that this is the biggest-ever deal between a telecoms company and an augmented reality company.

Telefonica believes that augmented reality may be the solution to the main problem that mobile advertisers face . . . users are less tolerant of traditional internet-style ads on their smart devices. This fact has held back the sector with mobile advertising accounting for less than 1 percent of total advertising spending in the United States. Telefonica plans to build the technology into its mobile advertising platform, alongside location-based advertising services and mobile coupons.

Google (Nasdaq: GOOG) and Amazon.com are also investing in their own in-house augmented reality projects, but they are considered long shots in this industry. Google's project, for instance, is called Project Glass and its goal is to develop a head-mounted display which would allow the hands-free displaying of information currently available to owners of smart devices and also interaction with the internet through voice commands.

The tentative leader for now in augmented reality seem to be Hewlett Packard with Aurisma and its TEF deal, but it is still very early days with lots of start-ups in the sector which could surprise.   This article originally appeared on the Motley Fool Blog Network. Make sure to read all of my articles for the Motley Fool at http://beta.fool.com/tdalmoe/