Telefónica steps into augmented reality Telefónica, the Spanish mobile phone operator, is making a big investment in augmented reality, lending mainstream credibility to the emerging technology and suggesting a new way to deliver advertising to hard-to-reach mobile phone users. The company, which owns O2 in the UK, is on Monday unveiling a partnership with Aurasma, the augmented reality business owned by Hewlett-Packard, which would potentially roll out the technology to 300m consumers worldwide. Advertising companies are still struggling to discover how best to reach users of mobile phones who are much less tolerant of traditional internet-style ads on their small handset screens. The mobile internet still accounts for less than 1 per cent of total advertising spend in the US. Augmented reality has been mooted as one possible solution. Smartphones with this kind of technology can recognise and respond to images. Held in front of a print ad, for example, the phone can take shoppers directly to that retailer's website to make a purchase. "Augmented reality has the potential to fundamentally change advertising, transforming current static formats and introducing new levels of interactivity," said Shaun Gregory, Global Director of Advertising at Telefónica Digital. Companies from Universal and Unilever to Tesco and KFC have all experimented with augmented reality advertising campaigns over the past two years, but the Telefónica deal would be one of the largest projects seen so far in the developing sector. Telefónica would build the technology into its mobile advertising offering, alongside location-based advertising services and mobile coupons. Since its launch in 2011, Aurasma's technology has been used by about 4m people, but Matt Mills, Head of Global Partnerships at Aurasma, said the Telefónica deal would multiply those numbers by a hundred. The first roll-out would be in the UK under Telefónica's O2 brand. Although in its infancy today, analysts expect the augmented reality market to be worth $600bn by 2016. Analysts at Semico Research, a semiconductor research company, say that more than 864m mobile devices will be equipped with augmented reality technology by 2014, and more than 103m cars could have some form of the technology embedded by 2020. Google and Amazon are investing in their own in-house augmented reality projects, and a number of start-ups, including Blippar in the UK and Netherlands-based Layar, have entered the market. Aurasma, which has been one of the pioneers of augmented reality technology, is part of Autonomy, the UK software company created by Mike Lynch and sold to HP last year. Should augmented reality take off, many industry observers expect Aurasma to be spun out of the broader HP business. Before Autonomy was sold to HP, the company had already begun tax preparations for becoming a separate entity.