Navigant Research Blog

IoT Device Manufacturers Cut Prices, Making the Smart Home More Affordable

— November 7, 2016

Home Energy ManagementThe cost of setting up a smart home with Internet of Things (IoT) devices is an expensive endeavor, even with recent increased adoption among consumers. Average selling prices for basic IoT devices are steep; in North America, smart thermostats cost about $220, smart lighting networks cost $103, security-home management systems cost $300, and smart plugs cost about $53, according to Navigant Research’s Market Data: Internet of Things for Residential Customers report. These devices are expensive on an individual basis compared to their dumb counterparts, let alone when purchased together as a connected home bundle.

However, there is recent evidence of increasing affordability, as seen from the launch of the new ecobee3 lite smart thermostat. The company has ditched room sensor support and dropped $80 from the price tag of its flagship product. This makes ecobee’s newest offering a more affordable option compared to those from competitors such as Nest, which sells its smart thermostat for $249, and Honeywell’s second generation Lyric thermostat, which runs $199. This recent trend of undercutting the competition on price is not exclusive to the smart thermostat market. Google recently announced that its Home offering, a voice-activated Wi-Fi speaker hub, will be released to the market at a price $50 cheaper than Amazon’s Echo.

Competition Breeds Accessibility

Undercutting competing smart devices may not be the case across the board, as Google also recently announced its Pixel smartphone at a price equivalent to the new iPhone 7 from Apple, surprising industry specialists who expected the Pixel to be priced lower than both Apple and Samsung offerings. Nonetheless, the decline in prices of connected home hardware is expected to perpetuate as industry players try to grasp hold of market share and become leaders in this space. This level of competition is making the smart home concept more accessible and affordable to consumers. Price cuts are pushing the market that much closer to a mainstream reality instead of a futuristic dream.

What this means for the energy industry is increased adoption of energy management devices and greater engagement among consumers. Devices such as smart thermostats are increasingly being bundled as connected home solutions, and as these solutions become more affordable and mainstream, energy management is expected to see increased uptake. Consumers are now finding energy management devices available through connected home solutions framed as security, entertainment, automation, or telecommunications offerings. Utilities can take advantage of this shift in the market by partnering with vendors incorporating energy devices into their connected home solutions, and by using these devices to better engage customers with energy efficiency and demand response programs.

See Navigant Research’s recently published Market Data: Home Energy Management report for more information on the nexus of energy management and the connected home.


Smart Home Market Plugs through Awareness Gaps and Hacks

— October 4, 2016

Home Energy ManagementConsumers have an awareness gap when it comes to understanding smart home/Internet of Things (IoT) capabilities. That’s the upshot of a recent survey by Bosch, which sampled more than 6,000 consumers in the United States and Western Europe.

This is one of those good news/not so encouraging news situations for industry stakeholders. On the one hand, two-thirds of the survey respondents were aware of smart home technology that can automatically turn off the lights when you walk out the front door. However, less than a quarter of those same respondents (22%) are aware that with enabled services, an oven can suggest recipes—though I’m not sure such oven technology is a big driver of adoption. (Foodies might disagree.)

Interestingly, saving energy was the most appealing aspect of living in a smart home, with 69% of all respondents, regardless of country, saying this was an attractive benefit. Spanish (71%), British (72%), and French (75%) respondents were particularly keen on saving energy.

Overall, French respondents were the most confident about what smart home technology can do compared to those from the United Kingdom, United States, or Austria. Respondents from Germany and Spain were the least confident about smart home technology. Not surprisingly, awareness of smart home technology decreased with age, with those in the 25-to-34 age bracket the most likely to understand the current state of what is possible.

The highest barrier to adoption of smart home technology was price, according to respondents, with 60% saying this was holding them back from embracing smart home IoT-type products.

Smart Home Hacks

Perhaps more concerning to the industry is another disturbing report about hacking of devices. According to several accounts, hackers recently hijacked as many as a million Chinese-made security cameras, digital video recorders, and other devices to mount a massive distributed denial of service (DDoS) attack. Among those infected were French web hosting provider OVH and the website of well-known American security researcher Brian Krebs. The attack on Krebs’ site was so crippling that network provider Akamai had to cancel his account because too many resources were being used in trying to defend it. Krebs himself concluded wisely, “We need to address this as a clear and present threat not just to censorship but to critical infrastructure.”

That was one of the clear message from Navigant Research’s recent webinar, The IoT Transformation of Buildings. Security against hacks must be priority number one in the connected IoT world we now inhabit, and those in the energy sector must continue to demand this protection as a priority from technology suppliers and ensure that security is paramount in all of their deployments.


Quick pivot: No matter what one thinks of Elon Musk and his companies, it is worth noting his bold plan to colonize Mars, which he announced on September 27. There is an energy angle to this, too, as Musk’s Dragon spacecraft will utilize two solar arrays for producing power. Two YouTube videos help explain what this is all about. There might be plenty of good reasons to be skeptical of Musk’s vision and plan. But for the moment, let’s give him credit for being a trailblazer, explorer, and dreamer. We need big thinkers like him, even if we have doubts about their ideas.


Competition Heats Up in the Smart Home Space

— September 27, 2016

Computer and TabletThe Google Home has been an idea looming in the distance since Sundar Pichai introduced the product at Google’s I/O conference earlier this year. Rumor has it that the product will finally make its official debut at an event in October 2016, where it is expected to be formally announced alongside a variety of other new hardware. The Google Home is a Wi-Fi connected smart home speaker that answers questions, plays music requests, and controls a user’s home Internet of Things devices by summoning Google Assistant, a component of Google’s Allo messaging app, through voice recognition.

Google Home is the company’s answer to Amazon’s Echo, which is reportedly already in the hands of some 3 million users. The Amazon Echo has done surprisingly well since its unveiling in 2014, which begs the question: How will Google do it better? For starters, the Google Home will reportedly be priced at $129, which is $40 less than Amazon’s Echo and a match to Amazon’s lower-end Tap product. Google is also trying to one-up its competitor by offering customizable bases in different colors and materials to match the user’s style and décor. The company also hopes to be better at controlling other smart home devices, starting with Nest and Google Cast-enabled devices.

Competitors Abound

Amazon and Google are not the only companies battling for smart home device market share. Apple is moving forward with the development of its own smart home device based on the Siri voice assistant, transitioning the product from the R&D phase to prototyping. The release of the Amazon Echo was a surprise hit to Apple, which has been working on developing its product for more than 2 years. Apple is reportedly attempting to differentiate itself from Echo and Home with more advanced microphone and speaker technology. If and when Apple makes it to market with this product, it could potentially have an advantage due to the company’s investment in the Apple HomeKit. HomeKit already has a network of third-party connected smart home devices controllable through Siri, though the product has received less-than-favorable reviews and does not appear to have gained much traction in the market since its launch.

With big name players like Amazon, Google, and Apple vying to lead the smart home device market, the winner will be determined by factors such as interoperability with other devices, the user experience, and basic functionality (i.e., how well does the product actually respond to a user’s voice?). The company that wins will be the one that meets these criteria most effectively. Amazon is already ahead of the game, but Google and Apple both have the potential to succeed. Regardless, competition among these three giants should be a win for consumers who are likely to see better products at more competitive prices.


Departure of Nest CEO Not as Bleak a Picture as Widely Portrayed

— June 14, 2016

Home Thermostat DialNest has been on an upward trajectory since its launch in 2010, and the company now finds itself at an important juncture with the departure of co-founder and CEO Tony Fadell. It is worth noting how the company’s journey began not long ago when it effectively fueled the stagnant thermostat market with its introduction of the Nest Learning Thermostat. As my colleague Neil Strother puts it, “Before Nest came into being, the thermostat was a pretty basic household device, and Nest set a new standard.” The company became an even bigger player in the thermostat space when it was acquired by Google in 2014 for $3.2 billion, Google’s second largest investment behind its acquisition of Motorola for $12.5 billion in 2012. Simply put, Nest has excelled in the connected home space, becoming what many consider to be the top player and star of the market.

Despite years of success, in recent months Nest has been the subject of a myriad of media stories highlighting technology glitches, internal struggles, and lawsuits. In December 2015, the New York Times covered a software glitch that drained the Nest thermostat’s battery and deactivated the device for an unconfirmed number of users, though the company was able to fix the issue for 99.5% of affected customers. In January 2016, it was reported that the Nest was leaking ZIP codes over Wi-Fi, and while this is not the most sensitive information, it may give consumers reason to be concerned about the security of Internet-connected devices. In May 2016, Honeywell and Nest settled their long-standing patent dispute, which began in 2012 when Honeywell sued Nest Labs, stating the company’s thermostats infringed on seven of Honeywell’s patents related to thermostat technologies.

To top off this wave of negative media coverage is the news of Tony Fadell stepping down from his role as CEO. This decision follows months of reports about internal struggles at Nest with regards to Fadell’s management style, though the official reason given for his departure is simply that it’s time to move on. Alphabet, parent company of Google, reports that Fadell will become an advisor to Alphabet.

Although the current media climate and Fadell’s departure seems to cast a bleak shadow over Nest’s future, the reality is that smart thermostat technology is still evolving, and fast-growing companies in this space (such as Nest) experience bumps along the road. It is important to keep a patient perspective, and take negative coverage with a grain of salt, because despite Nest’s issues, it remains a major player and leader in the smart thermostat market, and is likely to remain so for the foreseeable future.


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