How to make money from the Internet of Things

Investments continue apace in the Internet of Things (IoT), but how easy is it to make money from this phenomenon?

This week saw Ericsson open an IoT Accelerator, which is a suite of software and services designed to help IoT companies connect with each other and monetize their solutions.

Services such as this are part of an ecosystem designed to grow the IoT, but companies launching connected products need to think carefully about how they operate in the cloud. The obvious way is to simply sell hardware, such as connected thermostats and mobile door locks. The smarter way is to create recurring services that can use the hardware devices to keep customers paying a regular fee.

This strategy can create high-margin services, more predictable revenue streams, and better customer relationships because providers of recurring services can ‘touch’ customers more regularly than those that only hear from buyers where hardware needs maintaining or refreshing.

What kinds of services can companies offer? We’ve already seen the likes of FitBit monetize the IoT in this way. It offers a premium membership service that enhances the activity tracker data that it reports back to its users and compares their health data to a baseline filtered by their age group.

Some have tried similar ventures in a business environment. Kyocera has developed wearable health monitoring devices that companies can use for their employees. The devices transmit regular data on employee activity, using gamification techniques such as rankings and points to encourage healthier activity. The company is targeting the offer at employees and health insurers.

In its report on IoT monetization, Capgemini envisions recurring service revenues like these as just one way of making money in an IoT world. Selling revenue gleaned from IoT services is another, more advanced model. It highlights Michelin Solutions, which feeds big data analytics systems with data gathered from sensors in customer vehicles. This can give customers valuable insights without infringing on the privacy of any one customer.

At the top of Capgemini’s revenue pyramid, though, is ecosystem building. Companies with sufficient market leverage such as Samsung can create their own IoT platforms, enabling them to make product and service revenues from consumers while also bolstering their customer appeal by encouraging other vendors to connect with their platform.

Samsung just launched Artik, a cloud-based platform for its IoT partners, which takes in data from connected devices and allows application developers to access it using standard protocols like REST and Websockets. The idea is to let product and application developers connect to the data and take action on it, making it possible for different devices to work together. Perhaps the IP camera in your house might turn the connected LED lights on when it senses and intruder and make them turn red, for example.

The service will include secure device authentication and privacy management tools for users, and of course Samsung gets its own revenue from the system, charging for access on a per-device, per-month basis.

As the IoT gains traction, companies will need to partner and integrate their devices to offer new services to customers. These new services are the basis for an IoT stack that will help turn the concept from a balkanized sea of devices into something more coherent that will range across different vendors’ offerings. The stack will include everything from developer to analytics tools, and billing services to help with the sharp end of that monetization process.

As more companies build out these kinds of services, the fun begins, as we wait and see how the various IoT partners innovate with it.