Internet Of Things (IoT) Monetization

To understand the monetization opportunities for Internet of Things, we first need to identify the real value it creates for its users. With all the the networking technology, sensors and communication technology, the single biggest value Internet of Things creates is user data. Everything IoT has to offer builds around the data generated by the IoT sensors - whether its a smart product or just intelligent alerts. Monetizing the Internet of Things will essentially revolve around harnessing this value generated by IoT in ways most relevant to customers and ways best feasible for the businesses given the resources.

Why we talk of feasibility and resources here is because making money from IoT does not only involve creation of smart connected things. The real value, as we discussed above, lies in best harnessing the data which is coming at unprecedented volume and velocity. Here are some examples from a recent Cisco whitepaper which give a sense of the volume and velocity of data generated by "things" we deal with here:
  • A jet engine generates 1TB of data per flight.
  • A large refinery generates 1TB of raw data per day
  • As cars get smarter, the number of sensors is projected to reach as many as 200 per car.
  • Sensors of all types will generate immense amounts of data. In fact, analysts estimate that by 2020, 40 percent of all data will come from sensors.
Given this background lets now delve deeper into what are some of the ways IoT can be and is being monetized. We will focus here on 2 fundamental drivers of monetization - unlocking new revenue streams and building better and long lasting customer relationships

Monetizing IoT with new IoT products: Unlocking new revenue streams 
There are numerous organizations in the market which have gone ahead and built highly sophisticated products or appliances for consumers. Here are a few examples which are inspiring:

  • Self adjusting thermostat from Nest which learns what temperature you like and builds a schedule around yours. 
  • Anki Drive robotic Supercars with their own unique weapon systems and the technology to intelligently think for themselves on the battlefield.
  • Wearable fitness devices
Of course this looks to be the most attractive and rewarding way of riding the IoT wave, it often involves more investment moth of resources as well as time.

Monetizing IoT with new IoT services: Unlocking new revenue streams 
If the data generated by the connected things generate creates incremental value for your customers, then it can be monetized with value added IoT services. For example, the geo location technology itself can be used to offer simple but useful monitoring services like keeping a check on teen drivers or locating your pets. The value of these solutions is not in the product but the services around it. The advantage with this kind of monetization option is that the barrier to entry for such applications is low due to simplicity of technology and low cost of chips that can make them work.

Monetizing IoT by adding IoT data value over existing products or services: Building mutually profitable and lasting customer relationships and improving Customer's Lifetime Value
Adding value with IoT data over existing products and services could be one of the fastest way to monetize IoT with incremental revenues. Here are some examples:
  • An industrial equipment manufacturer can improve machine performance and prevent unplanned downtime using built in sensors monitoring machine performance in real time. This not only reduces servicing cost at manufacturer's end (through preventive maintenance and better diagnosis) but also ensures continuity at user's end ensuring improved and lasting customer relationship
  • Auto insurance companies like Progressive and Allianz France use telematics to create value for their customers. Progressive’s drivers can monitor their performance data online, while Allianz sends the performance data to its customers' smartphones. The information gives customers insights to improve their driving habits and lower their fuel and maintenance costs and also reduce their premiums by becoming better drivers. Auto insurers like Progressive are also accommodating their cost-conscious customers by offering them new pay-as-you-drive policies where rates are based on the miles actually driven. Mileage is tracked and sent to the insurance carrier through a small IoT-connected dashboard plug-in. Consumption-based policies such as these can lower premiums by as much as 50 percent – a powerful incentive for insurance customers to stay put. These provide opportunities to create new (potentially profitable) pricing models for businesses and better cost structures for customers.
These are examples of how IoT helps build deeper and lasting relationships and helps improves customer's lifetime value (CLV). Another important point here is that you do not have to leave your core offering go inventing these systems from scratch. In fact, the services listed here piggyback on technology already built into cars. All these companies are focussed at is harvesting data that cars already generate (plugging into car's diagnostic ports) and packaging it in a way that's valuable to their customers. In addition, you may even consider finding a strategic partner. For example, Allianz France teamed up with a global GPS specialist like TomTom to materialize added value.

Here is an interesting infographic by Aria Systems which helps put light on how companies are already monetizing Internet Of Things

10 Cool Companies That Are Already Monetizing IOT
Courtesy of: Aria Systems