The home
automation market size is around $8.8 billion. What’s more Google purchased Nest,
and whole home automation market is blasting now. Here’s an overview of some
business models to capture the opportunity.
If
we think about the homes that have a broadband connection today as the total
addressable market for home automation, the home automation market size turns
out to be around $8.8 billion at $100 spent per home or $880 billion at $10,000
for example in the U.S. If we are a little more conservative and say that only
those broadband subscribers who use smartphones are targets, the range turns
out to be about $5.63 – $563 billion. In order to capture this opportunity a
number of business models have come into play. While these are not new business
models, it is interesting to see how this opportunity is being captured.
The Free approach: Here home builders are
embracing the the art of negative margin by giving away connected devices for
free as part of home sales. In doing so home builders appear progressive and
invested in home innovation with the goal of attracting more buyers.
Building block sales: There is money to be made by
providing the building blocks for IoT, be it sensors, hardware platforms or
software. For example, Wulian selles ZigBee products , include the hardware and
software.
Piecemeal: Here the manufacturer
concentrates on one or a few devices e.g. Nest or August. Each manufacturer has
its own app that lets you remotely and intelligently control devices.
Integration: The piecemeal approach lends itself to
the rise of integration platforms. Hardware integration platforms such as
Revolv and Staples sell hubs that can understand various protocols that home
automation devices use. They additionally provide a smartphone app that can
control various devices through the same app.
Subscriptions: Here cable providers such as
Comcast network operators such as AT&T and some home improvement
stores such as Lowes subsidize the cost of hardware or give it away for free in
exchange for monthly subscription to monitor homes for security or setting up
custom home automation rules as an example. This approach enables them to
attract customers who may otherwise be unable to invest in automating their
homes.
DIY: Before IoT became more mainstream,
the rich and the famous built fascinating homes using custom service providers
that build connectivity into the
home. This business model will
continue to exist but will account for a smaller percentage of the home
automation market over time as IoT devices mature, become cheaper, easier to
install and use.
The
promise of double digit sales growth is attracting a number of players, big and
small, to the home automation market. As competition heats up and prices
decline, business models will evolve. But we will continue to see a wide
spectrum of models in use as different players target different segments of the
market. In fact players may adopt more than one business model to capture
bigger pieces of the pie.
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