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2016-06-10 09:08:49
Connected homes will take longer to materialise than expected
Jun 11th 2016 | SAN FRANCISCO
THE fanfare has gone on for years. Analysts have repeatedly predicted that the internet of things , which adds sensors and internet capability to everyday physical objects, could transform the lives of individuals as dramatically as the spread of the mobile internet. Providers have focused on the home, touting products such as coffee pots that turn on when the alarm clock rings, lighting and blinds that adjust to the time of day, and fridges that send an alert when the milk runs out. But so far consumers have been largely resistant to making their homes smart .
That s not for want of trying by tech firms, which have poured cash into their efforts to connect everyday objects to the internet. In 2014 Google made the biggest statement of intent so far, spending $3.2 billion to acquire Nest, a smart thermostat-maker, and $550m to buy Dropcam, which makes home-security cameras. Nest absorbed Dropcam; it is now one of the best-known smart-home brands. But it is also a warning about how long it will take for such gadgets to enter the mainstream.
Nest has undoubtedly disappointed Google. It sold just 1.3m smart thermostats in 2015, and only 2.5m in total over the past few years, according to Strategy Analytics, a research firm. For a couple of years the firm has mainly tweaked existing products rather than introducing new ones. That may explain why Tony Fadell, Nest s founder and boss, stepped down on June 3rd to take an advisory role at Google s parent company, Alphabet (see article). Mr Fadell, a former executive at Apple and designer of the iPod, failed to bring his magic touch to the smart home.
Nest s problems are symptomatic. Only 6% of American households have a smart-home device, including internet-connected appliances, home-monitoring systems, speakers or lighting, according to Frank Gillett of Forrester, a research firm. Breakneck growth is not expected; by 2021 the number will be just over 15% (see chart). Too few consumers are convinced that the internet has a role to play in every corner of their lives. A survey conducted in Britain by PricewaterhouseCoopers, a consulting firm, found that 72% of people have no plans to adopt smart-home technology in the next two to five years and that they are unwilling to pay for it. Last year consumers globally spent around $60 billion on hardware and services for the smart home, a fraction of the total outlay on domestic gadgets.
There are several reasons for muted enthusiasm. Businesses have an incentive to embrace the internet of things: there are cost savings to be had from embedding sensors in equipment and factories, analysing the data thus produced and improving efficiency. A lot of smart devices for the home, in contrast, remain fun but not essential , says Adam Sager of Canary, a startup that makes cameras that lets people monitor what is happening in their house.
Many smart gadgets are still too expensive. One of Samsung s smart fridges, with cameras within that check for rotting food and enable consumers to see what they are short of while shopping (through an app on their phone), sells for a cool $5,000. People who can afford that probably don t do their own shopping. Appliances such as fridges are also ones that households replace infrequently: that slows the take-up of new devices.
The technology is not perfect yet, either. The smartphone, the link between the customer and smart-home device, has raised consumers expectations, explains Jamie Siminoff, the boss of Ring, a startup that makes a doorbell that can be answered remotely. Smartphones have trained users to expect a level of quality and seamless ease of use that smart-home devices struggle to replicate. And a lack of standardisation means that gadgets from different firms cannot communicate with each other.
There are exceptions. Devices that are easy to install and offer obvious benefits are gaining in popularity, such as motion sensors that send alerts when windows and doors are opened and cameras to monitor activity. Some devices, such as smart smoke detectors, are in homes because insurance companies offer financial incentives for using them. The smart-home sector is vibrant with startups and big firms betting that the hesitancy is temporary. But consumer apathy has forced firms to rethink how they might woo customers.
Perhaps the biggest surprise is that Amazon, which failed miserably in its ambition to develop a smartphone, is showing the way. Amazon Echo is a smart speaker that can recognise and respond to voice commands. It shares information about the weather and sports scores, plays music and turns lights on and off. The device, which costs around $180, is not yet a big seller. Amazon does not release sales figures, but Strategy Analytics estimates that fewer than 1m Echos have been sold since it was released in November 2014. Yet the Echo is the talk of Silicon Valley.
Talk to your appliance
An interface that relies on voice commands could overcome one of the drawbacks of the piecemeal approach to the smart home, by becoming the standard integrator of all the other bits of smart kit. Echo is open to outside developers, who can come up with all manner of devices and services that hook up with it. Echo s success may have come as a surprise, but competitors have cottoned on that it may be a crucial piece of equipment. Google has announced plans to build a stand-alone hub like Echo, called Google Home, which will also rely on voice commands.
Apple is also expected to announce new smart-home capabilities: there are rumours it could launch a stand-alone hub in the Echo vein at its annual developers conference on June 13th. Its smart-home platform, called HomeKit, has been a failure so far. That Apple, despite its large base of affluent acolytes, has not yet cracked the smart home is a sign of its difficulty, points out Geoff Blaber at CCS Insight, which tracks mobile-industry trends.
Each tech giant has a different reason for trying to overcome the indifference of consumers, and to embed itself more deeply in the home. The Echo can help Amazon learn how people spend their time, and make it easier for them to spend money too by suggesting things they might buy. Google, whose main business is advertising, also wants to draw from a fresh well of data; by learning as much about users as possible, it can target them with appropriate ads. Apple, with a track record of simplifying and creating ecosystems where others before it could not, wants its devices to be the gateway through which people go to organise their lives.
If the tech giants retain their ambition to sit at the centre of the smart home, uncertainty prevails over where the profits lie. It remains unclear what the economic model for the smart home will be, says Andy Hobsbawm of Evrythng, an internet-of-things platform. Some firms will try to make enough profit just from hardware. Others will try to sell services, such as archiving security videos, as well as devices, and charge a fee. The products that fill houses are diverse, personal and durable. That should give plenty of companies a shot at lodging themselves in the home but only when consumers decide to put out the welcome mat.