Home Security Leads the Way to a More Connected, IoT World

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Trends Internet of Things IoT

SubscriptionTrends_2x_Blue.pngThe Internet of Things (IoT) has gotten a lot of buzz lately, for good reason. It’s expected that by 2020, there will be somewhere between 50 and 200 billion IoT-connected devices worldwide, driving $1.7 trillion in spending. But some experts think that the hype is actually understating the full potential. They also note that capturing this potential may be the biggest challenge: businesses will need to understand where the real value of IoT lies and how to take advantage of the monetization opportunities.

Currently, one of the fastest-growing areas of IoT is the smart home, consisting of smart appliances and other devices connected to the cloud and to mobile apps. Smart thermostats are already in 11% of homes, according to a survey last year by The Harris Poll, with another 40% of respondents expressing interest in the devices. In 2014, the smart home industry generated almost $80 billion in revenue. And by 2017, it’s estimated that 90 million people will live in smart homes.

Another indicator of the potential of IoT is who’s investing: Cisco, Samsung, Intel, Qualcomm, Google, Apple, General Electric — the list goes on, with many familiar names along with startups seeking to develop IoT devices, the components that go into them, or the software that supports them.

And now, no less than one of the founders of PayPal and the first outside investor in Facebook, billionaire Peter Thiel, has made a $100-million-dollar investment in smart home company Vivint. What’s unique about Vivint is that rather than selling individual smart home gadgets, the company instead sells a complete smart home system, for a monthly fee. The company offers both their own devices along with third-party devices, such as the Nest home thermostat and Amazon’s voice-enabled “Echo” speakers. Vivint installs the system and provides ongoing maintenance.

But, as reported by Forbes, Vivint, “doesn’t make money selling hardware.” Vivint’s model is a service model, with the customers paying approximately $80 per month for the smart home system that Vivint has installed and will maintain. The company said it doesn’t start breaking even on customers until three to four years after a smart home system gets installed. 

As noted earlier, the challenge in the IoT market may be around how to take advantage of monetization opportunities, and Vivint seems to believe they’ve found the answer and are clearly in it for the long haul. So far, they seem to have found a winning model. The company reportedly made $653 million in revenue for 2015 and has over a million customers (each with an average of ten smart home devices installed), and a valuation of over $2 billion. For comparison, Nest made a reported $340 million in revenue for 2015, or just above 50% of Vivint’s revenue for that year.  

If the subscription-based service model is indeed the future of IoT, what are some of the main requirements for success? Some things to consider are your ability to:

  • Be nimble and flexible in terms of plans, pricing and bundling
  • Bill your subscribers based on usage and accommodate add-on products or services
  • Handle complicated use cases including renewals, upsells, downsells, free trials, etc.
  • Accept a wide variety of payment types
  • Scale quickly

Recurly has a number of very successful IoT customers. Do you want to learn more about how our solution can support your IoT business? Talk to a Recurly expert at (844) 732-8759, or sign up for a demo below.

 

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