According to Cisco, IoT technologies is a $19 trillion opportunity. Small and medium businesses are trying to figure out how they can benefit from this. Monetization of any new technology has always been a challenge.
Learning from Past Digital Monetization
Businesses invest in technology to make a profit in the future. But the path to profitability is not always evident from the start. Every technology has to go through its own struggle to figure out monetization techniques.
Google can serve as an example. When Google started its journey as a search engine, it was collecting user data. But the pathway to using that data wasn’t clear. After a while, Google started Analytics which showed the value of the collected information. It led to AdWords. It helped Google become profitable.
Similarly, the music industry faced its own struggles. In 1999, the industry was at the peak of its success selling CDs to the audience. It made $14 billion that year. But soon the old model collapsed due to the arrival of digital technology. Piracy and peer-to-peer sharing started to decimate the profits. It took a long time for the music industry to start figuring out the digital space. The revenues from the iTunes model where users could download the music they liked came as the first saving grace. Later subscription models became a revenues stream. Today streaming services like Pandora, Spotify and Apple Music account for 75% of the music industry revenue. After adapting to the digital disruption, the industry has seen its revenues grow 17% in 2017.
Smartphone apps had to go through its own struggle. Initially, developers could make enough money through paid apps. Soon, there were too many products on the app stores crowding the marketplace. So businesses started to offer free products to gain customers. But they needed to monetize the new customer base. They reached their goals using in-app purchases, advertising, and subscriptions.
3 Models to Use for IoT Monetization
As you can see from the stories of the past, every new technology monetization has to find its own place in the world.
Intel, GE, Qualcomm, Amazon, IBM, Microsoft and more big-name companies are heavily invested in IoT technologies. New ideas, hardware, and software are pouring into the market. But IoT is still in its infancy. The full effect of the technological changes might take a few years to become visible.
Businesses who want to position themselves today to take advantage of the changes in the future need to find models that can lead to profitability. Here are the three models that can help you:
1. Hardware Driven
Companies are adding value to their regular products by using IoT sensors, cameras, and interconnectivity. Some of the most popular products are smart home technologies like smart light bulbs, electric outlets, garage door openers, door locks, water sprinklers, and fire alarms. These devices can be controlled through a central hub like Amazon Echo or Google Home.
When businesses are adding IoT capabilities to their current products, they are able to sell their products at a higher premium. It’s not only smart home equipment. Any industry dealing with hardware can look into ways to incorporate IoT technology into their product lines. The smart home experimentation proves that customers will pay for the extra features. It is a great way for equipment manufacturers to make money from IoT.
2. Service Driven
The service-driven model is subscription oriented. Businesses who are OEMs (Original Equipment Manufacturers) can build on top of their current hardware. Even non-OEMs can develop services that can help connected devices to function better or provide more value. Then, the developed services can be sold as a subscription. Fitbit uses Fitbit Coach to help customers get personalized health information.
Any industry can create services using IoT devices. Nest Aware uses security cameras and advanced algorithms to detect security threats to your home. It is sold as an add-on to the Nest Cams. Volkswagen’s Car-Net subscription provides maintenance alerts, security scanning, and navigation extras. If you build services to add value, it can help you monetize your available IoT devices that the customers are using.
3. Data Driven
The power behind behemoths like Google and Amazon is data. However, the nature of IoT data is different than data collected from the web. So businesses are still trying to figure out how to use this new found power. There is already progress.
In Los Angeles, data collected from street sensors and cameras are helping computers control more than 4500 traffic signals. It is improving traffic conditions and saving the city time and money.
The city of San Francisco has put in 8,200 parking meters that can change parking prices based on availability. SFPark is also helping the city reduce greenhouse gas emissions. The parking prices have helped San Francisco increase its revenue by $1.9 million.
However, businesses don’t have to create their own services to take advantage of the data. They can collect the information on their customers and sell their information to major data vendors. But if you are selling customer data, make sure you are following privacy laws and regulations.
Bonus Model: Ecosystem
Businesses that have a wide range of IoT products can take advantage of all the models above and create a full ecosystem. It will allow them to provide well-rounded services to their customers. Most large companies are positioning themselves for providing a full-fledged ecosystem like this.
Small and medium businesses might feel like they are not equipped for this model. But they should not sell themselves short. With proper planning and vision, it’s possible to use your products to create a self-sufficient ecosystem. These systems will provide the highest value to your customers and optimize your revenue.
IoT is an exciting opportunity for both entrepreneurs and established businesses. The industry is young. So there are lots of new ideas to explore. Businesses who invest time and money to explore the opportunities will develop the IoT skills and experiences necessary to reap monetary benefits in the future.
If you need help developing an IoT monetization strategy for your small business, our experts at IoTCoreSoft are ready to help. Contact us today.