IoT Enabled Product As A Service Business Model

Internet of Things logo By Wilgengebroed on Flickr [CC BY 2.0 (], via Wikimedia Commons

Do you remember when the only monthly expenses you had for your home, besides the essential utilities, was just paying for cable and telephone services at home and everything you bought for your house was a standalone product and not connected to your Wi-Fi?

Yes, having smart devices being connected to Wi-Fi and your phone made things quite convenient, but also more expensive in the long run. Instead of just buying that $200 smart doorbell for a one time cost, now you have to pay a monthly service fee to keep using the majority of the features. If you don’t pay the monthly fee, you just overpaid by 99% for a doorbell.

The Internet of Things (IoT) has enabled companies to start a new business model. Most investors within the past several years has been looking for companies who not only sell product but also have a monthly revenue stream for the consistent income.

As a point of reference, IoT products consist of smart devices in your home. For example, security cameras that connect to your wifi that allows you to view and manage from an app on your smartphone. The Ring Video Doorbell, Amazon Echo/Alexa, HomePod, Nest Learning Thermostat, smart door locks, home automation products and so forth.

Basically, at this point, you can say that any product that is connected to wifi that can be used and managed by an app or voice controlled is part of the IoT.

With IoT products, everything is connected. The device is connected by wifi to the internet and then the servers that manage them. The app on your phone is connected to the server and is thus then able to be managed by you.

The app on your phone doesn’t connected directly to the device in your home, it’s all connected centrally at the server that the company manages. This allows those companies to charge you a monthly fee since it does cost the company money to manage and maintain those services.

For some devices, there is no monthly fee. For example, there is no monthly fee for the Nest Learning Thermostat. However, they do collect information from you. Much of this information is superficial. They’ll collect information about your locale and your usage but nothing personal and based on this data, they can refine and develop better products to suit your most people’s needs.

So, while there is no service fee for using the Nest Learning Thermostat, they are still getting something from you that helps their company in the long run. Just remember this, nothing is absolutely FREE. There’s always a catch.

Then you have security products such as the Ring Video Doorbell and Arlo Security Cameras. Arlo provides free 7 day recordings for up to 5 cameras. If you want to record more than 5 cameras or retain recordings for longer than 7 days, you’ll need to pay a service fee.

Ring doesn’t give you a free option. After the first 30 day trial period, you have to pay a monthly service fee to continue using the security camera features of the product. Otherwise, it’s just an ultra-expensive $150+ handicapped doorbell.

Long gone are the days where your only monthly home expenses, aside from your utilities, were your home phone, cable and internet service. In addition to that, now you have to pay for smart phones for everybody in your household, monthly service fees on smart devices in your home and much higher internet fees. Add on Netflix and other streaming services and also Amazon Prime, things add up.

Basic home internet services used to start around $15 a month. Now I pay over $60 a month and that’s the basic service! It’s no wonder most households are paycheck to paycheck when there is so much monthly service fees now compared to a decade ago.

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