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Last week, Jeff Bezos called the Amazon Echo connected speaker and smart home hub Amazon’s ‘fourth pillar product,’ joining the e-commerce giant’s retail marketplace, Amazon Prime, and AWS.
This was followed by an announcement from Amazon that the Echo has over 1,000 “skills,” which are integrations with different apps to perform different tasks like turning off smart lights or ordering an Uber.
So how successful is the Echo?
We estimate the Echo has an installed base of 1.6 million — this is the number of people who have bought the Echo. This estimate is much lower than Consumer Intelligence Research Partners’ (CIRP) estimates, which peg the installed base at 3 million. However, our estimates are closely tied to Alexa app downloads, which is a crucial component for the Echo purchaser to download in order to set up the Amazon Echo.
The Alexa App has been downloaded 1.9 million times since it was released in 2014, according to Priori data. However, we estimate 1.15 app downloads for every Echo installed because in some households will have multiple smartphone users for a single Echo.
Further, consumers can uninstall and re-download the app, so there can be double counting of an Echo for an app download. In addition, our 1.15 estimate accounts for when there is more than one Echo per household and instances when users set up their Echo using a compatible web browser, which we believe makes up a small portion of the overall user base.
There are still several challenges for the Echo, however, because the U.S. smart home market has yet to truly take off. Quirky’s announcement that it was filing chapter 11 bankruptcy — and selling off its smart home business, Wink — highlights this well.
At its current state, we believe the smart home market is stuck in the ‘chasm’ of the technology adoption curve, in which it is struggling to surpass the early-adopter phase and move to the mass-market phase of adoption.
There are many barriers preventing mass-market smart home adoption: high device prices, limited consumer demand and long device replacement cycles. However, the largest barrier is the technological fragmentation of the smart home ecosystem, in which consumers need multiple networking devices, apps and more to build and run their smart home.
John Greenough, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on the U.S. smart home market that analyzes current consumer demand for the smart home and barriers to widespread adoption. It also analyzes and determines areas of growth and ways to overcome barriers.
Here are some key takeaways from the report:
- Smart home devices are becoming more prevalent throughout the US. We define a smart home device as any stand-alone object found in the home that is connected to the internet, can be either monitored or controlled from a remote location, and has a noncomputing primary function. Multiple smart home devices within a single home form the basis of a smart home ecosystem.
- Currently, the US smart home market as a whole is in the “chasm” of the tech adoption curve. The chasm is the crucial stage between the early-adopter phase and the mass-market phase, in which manufacturers need to prove a need for their devices.
- High prices, coupled with limited consumer demand and long device replacement cycles, are three of the four top barriers preventing the smart home market from moving from the early-adopter stage to the mass-market stage. For example, mass-market consumers will likely wait until their device is broken to replace it. Then they will compare a nonconnected and connected product to see if the benefits make up for the price differential.
- The largest barrier is technological fragmentation within the connected home ecosystem. Currently, there are many networks, standards, and devices being used to connect the smart home, creating interoperability problems and making it confusing for the consumer to set up and control multiple devices. Until interoperability is solved, consumers will have difficulty choosing smart home devices and systems.
- “Closed ecosystems” are the short-term solution to technological fragmentation. Closed ecosystems are composed of devices that are compatible with each other and which can be controlled through a single point.
In full, the report:
- Analyzes the demand of US consumers, based off of survey results
- Forecasts out smart home device growth until 2020
- Determines the current leaders in the market
- Explains how the connected home ecosystem works
- Examines how Apple and Google will play a major role in the development of the smart home
- Some of the companies mentioned in this report include Apple, Google, Nest, August, ADT, Comcast, ATT, Time Warner Cable, Lowe’s, and Honeywell.
To get your copy of this invaluable guide, choose one of these options:
- Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. START A MEMBERSHIP
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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the smart home market.
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