• by Gavin O'Malley , Staff Writer @mp_gavin, May 10, 2018

While child privacy issues remain a major obstacle -- and rightly so -- “smart” toys are poised for serious growth over the next several years.

In just short five years, the market for smart toys -- and the software on which they run -- will be worth $18 billion.

That’s according to a fresh forecast from Juniper Research, which estimates the market to be currently worth about $6 billion.

The projecting tripling of the market will mostly be driven by the increasing popularity of smartphone-connected toys and related in-app purchases, which are projected to grow by 69% annually over the next five years.

Of the two, in-app purchases will become the main driver for growth -- with content revenues reaching 25% of the total industry by 2023, according to Juniper.

Among other smart toys to watch, Merge’s augmented reality “Cube” illustrates the potential of the smartphone working alongside an established platform for successful content distribution.

Unfortunately for purists, the growth of smart toys coincides with the stagnation of the console based "Toys to Life" sector.

In response to this broader trend, vendors should incorporate smartphones into their proposition to drive new innovative games, Juniper suggests.

Meanwhile, privacy issues will continue to loom large for anyone investing in the market.

Among other related warning signs, the recent prosecution for VTech’s breach of data security clearly demonstrated the Federal Trade Commission's increasing willingness to issue data-protection violations.  

In Europe, the new GDPR (General Data Protection Regulation) rules will further expose vendors to big fines.

Yet Juniper sees the increased focus on security as an opportunity.

For example, vendors that can foster a safe reputation will have a selling point with which to separate themselves in a crowded marketplace.

Also of note, Juniper found that as connected toys become more affordable, educational toys will increasingly find a place in school curricula.

Learning-kit maker Osmo, for instance, has already found its way into 25,000 schools.

More broadly, Juniper forecasts that this particular market will be worth more than $1.5 billion by 2023.