Cull: to reduce the population of (a wild animal) by selective slaughter
As an early adopter of technology, I sometimes feel like I get to live in the future. Or as William Gibson said “The future is already here, it’s just not evenly distributed”. There are a lot of benefits to be gained from this, but there are also risks. One of the biggest risks is
How long is the product you choose going to be around?
I was an early adopter in the first wave of IoT devices, from wearables to home convenience devices, I dipped my toes in the pool early. Most of these platforms were Kickstarter projects and I’ve been generally happy with most of them, at least the ones that were actually delivered. ( That’s a story for another time…).
But in the last six months, the market seems to have decided that there are just too many of these small companies.
The Death Bells are Ringing
In the last year, I’ve noticed that there’s starting to be a trend. Many of the early platforms that I invested in seem to be disappearing. Some have been bought off and killed. Remember the Pebble watches which was acquired by Fitbit? I’ve got an original and a Pebble time that are now little more than short-term battery traditional watches.
Some are just dying on the vine.
The latest victim? The Sense sleep monitor system by Hello. This was a Kickstarter project that really helped to define a new category. When the project was launched in 2013, there was nothing else like it in the market, at least nothing that I’m aware of. Like most Kickstarter projects, they shipped later than their Aug 2014 estimate, but when it arrived it was definitely worth the wait.
This device had multiple sensors including light, sound, humidity, VoC ( air quality ), and temperature. It also had remote bluetooth motion sensors that attached to your pillows to track body movement while you sleep. The basic idea is that you sleep 1/3 of your life. Shouldn’t we make sure we are doing it right? The combination of the sensor data combined with sleep research will help users understand why they feel good or bad in the morning. How to create the optimal conditions in your bedroom etc… Obviously I’m not a sleep expert, but I can say that sense has improved the quality of my sleep since I started using it.
Just last week, we all received some sad news that Hello, the company behind the Sense product is shutting down.
Although there are some people who believe that Sense was just a faulty product, I think there is something deeper going on here. This shows a fundamental flaw with the business models that some of the early IoT and wearables players came to market with. There is a very simple business principle that somehow they seemed to completely miss.
If you want to survive as a business, you’re incoming cash must be more than you’re outgoing case.
Pebble and Sense, and several other wearable and IoT products in the market right now were built on a single-purchase model. You buy the product and you get unlimited right to use that product. This is the consumers preferred model. When I spend my money on something, I want to own it. I want to be able to use it, and I don’t want to have to pay for it again and again. At least this is the simple version of the thought process.
Spending some time watching various devices become little more than expensive bricks has made me re-examine that thought process though.
Why I’m looking for Subscription models now
Yup. That’s right. You heard me.
I want to find companies that are actively looking to provide value funded through a subscription model of some kind. Companies like Nest and Ring who are providing cloud storage for security cameras are a great example of this in action.
Looking at the failing companies; the one thing in common that I’m starting to see in common with these different devices is that they tend to make a whole bunch of money up front. ( $10M+ for the initial Pebble Kickstarter project. One of the largest ever on that platform! ). But they tend to be niche products that have a limited target audience, and when that target market has been saturated…. No more money comes in and they’re left having to continue to pay for the “cloud” infrastructure required to keep their products going.
Looking at Sense and Pebble, both of these platforms sold with a hardware model. They have a product offering where your devices connect to cloud-based infrastructure, whether that’s AWS based or other is irrelevant. What most consumers don’t realize is that cloud-based infrastructure has a reoccurring monthly cost to it. This also doesn’t include the cost of ongoing platform development, whether that’s adding new features, creating a better user-experience, or just upgrading to stay current with the newest versions of Apple iOS or Android that are shipping on current devices.
This is fine as long as you continue to sell new hardware product, but as the number of new users start to trend down and your costs stay the same… we start to see what’s happening in the market right now.
Are Subscription models that only way?
Absolutely not. There are other companies, like Dlink, iHome or iDevices that have a fairly broad portfolio of products and are continuously creating new products. These helps to ensure they have a healthy income stream as individual product segments become saturated. They can afford to continue to fund app development and the infrastructure required to host them as they are spreading that cost over many devices.
More Deaths in the future
There have been some notable passings, such as Pebble and Sense, but I don’t think they are going to be the last by any stretch of the imagination. 2017 and 2018 are going to be a hard year on early adopters as we start to look at the mirrors, watches, and gadgets blink eternally as they have no home in the cloud to call back to. Hoping that many of the new IoT players start to realize that having a good technology idea isn’t enough if you want to survive. Strange that I’m now looking at business models in a consumer product purchasing decision. I guess this just goes to show how educated the consumer is truly becoming.
As I invest in my SmartHome products, I look for companies who are established with multiple streams of revenue. Companies like Lutron or Philipps. In some cases, like the Soma Smart Blinds, I really don’t have another option. I’ll probably buy them, but I’m not expecting to these to last the long term. I wish Soma the best of luck, but I don’t see a subscription model and it’s not like shades are something you replace every year.
Bottom line is enjoy your first generation wearables now. They might not be around for that much longer.