"Digital is going to boost the business of beauty," Agon said in an interview in Paris. "We think it's going to change everything."
Retail and consumer-products companies are under pressure to innovate amid subdued consumer spending, according to Andrew Cosgrove, an analyst at Ernst & Young LLP. Giving shoppers the opportunity to play with products virtually can make them more likely to buy, he said.
"You're getting a great affinity with the brand and the product before you've got the physical one in your hand," Cosgrove said. "It's any time, anywhere."
The world's largest cosmetics maker has a market value of about $95 billion.
The Internet has already changed the way people shop for cosmetics, turning video bloggers into arbiters of what sells, according to Geraldine Cohen, chief executive officer of Paris- based online retailer TheBeautyst. YouTube videos mentioning a beauty brand have been viewed more than 3 billion times, software company Pixability estimates.
Even so, it's hard for people to discover new products for themselves, said Cohen. The 75-plus hours of beauty-related content uploaded daily to YouTube is packed with opinions that are often conflicting or irrelevant, so shoppers must visit stores to find what works for them, she said.
"It's a headache," which helps explains why less than 10 percent of makeup sales in France are made online, Cohen said. Yet the Web offers companies "a huge opportunity to connect with consumers in a more personalized way."
L'Oreal in March named its first chief digital officer and in 2012 set up a digital incubator with offices in San Francisco and New Jersey. The unit developed Makeup Genius, partnering with software maker Image Metrics, which provided facial- animation technology for Academy Award-winning movie "The Curious Case of Benjamin Button."
The application lets users try on L'Oreal makeup, experiment with curated looks, share images on social media, and order online. The company says it's the first of many technology projects it's developing, though it declined to share details of any others.
Makeup Genius, which also allows users to scan products in- store and test their look via the app, is designed to complement rather than replace trips to the drugstore, according to Guive Balooch, who leads 15 researchers at L'Oreal's incubator.
"It's important to have something that can enrich both," Balooch said.
With sufficient focus on its digital business, L'Oreal could boost online revenue by as much as 40 percent annually, Berenberg Bank says. The company currently gets at most 3 percent of its sales from e-commerce, versus about 5 percent at New York-based Estee Lauder Cos., Berenberg estimates.
L'Oreal's offering beats rival applications, which require the user to upload photos and often aren't as accurate in rendering the look of various products, says Vivienne Rudd, a beauty analyst at researcher Mintel. Earlier apps are "relatively blunt swords," she said. "With some of them you end up looking like a painted doll."
Makeup Genius lets customers be more experimental with cosmetics, widening what they might buy, said Rudd, who expects L'Oreal to develop similar applications for skincare and haircare.
The technology is "going to boost women's confidence in the breadth of things they can wear and assure them they are making the right color or style choices," Rudd said.
While the virtual makeup in L'Oreal's app doesn't always work flawlessly "some of the lipsticks and eyeshadow look awful" the application has a "wow" factor, said Sanni Sorma, a makeup artist in Paris and London. She suggests it will be most popular with younger girls glued to their mobile phones for Snapchats, selfies and shopping.
"It's a really fun thing to play with," Sorma said. "Even if it's not leading to sales directly, it's building brand loyalty."