Most IoT developers aren’t in it for the money

Developers aren’t necessarily like you and me. You may choose to spend your free time making bird houses or watching Friends reruns. Developers, meanwhile, are trying to get Windows 95 to run on an Apple Watch (and succeeding).

This need to tinker is especially pronounced within the IoT developer set. According to new research from VisionMobile, analyzing survey data from over 4,400 IoT developers, there are eight segments of IoT developers, and just a third of these developers are professionally involved in IoT projects, compared to 50 to 70% in other markets. What this means, in practice, is that most IoT developers are just in it for fun and learning, and don’t have any interest in making you money.

This seems like bitter medicine for those IoT platform companies that hope to corral a body of developers to extend their hardware or service. Indeed, as Stijn Schuermans notes, “Key players in every IoT market build their strategy around developers who can extend the product beyond what it was when it left the factory.”

Just because IoT developers aren’t overwhelmingly motivated by cash doesn’t mean they can’t deliver huge benefits to those that are. It’s just a matter of harnessing different motivations to build up value that makes a platform enticing.

Fun-loving hobbyists

Just like the prince in Monty Python’s Holy Grail, some developers just want to sing. According to VisionMobile’s recently released IoT Developer Segmentation report, many, indeed most, IoT developers are in it for fun, learning, and personal development. A full 22% of IoT developers have zero interest in making money, either for you or for them, and another 21% of IoT developers are “simply exploring the technology without any specific use case in mind.”

Interestingly, “Fun-loving Hobbyists (~1/3 of IoT developers) and Explorers looking for opportunities and learning (~1/3) form the overwhelming majority of IoT developers in 2016, a much higher number than in other sectors like mobile or cloud development.” IoT, it seems, is heavily driven by developers looking to take Raspberry Pi and other hardware into insanely cool new ground. The percentage of IoT developers that are hoping to collect a paycheck has remained static, and relatively small, for some time.

Even for the money grubbers among the IoT developer set, creativity and a sense of belonging to a developer community weigh more heavily in their motivations than simply cash.

IoT-dog millionaire?

Which is not to say that there is no money to be made in IoT, or that its fun-loving developers can’t be helpful to those seeking to build businesses. Attracting these developers early turns out to be very important, too: though roughly a third of IoT developers start out unaffiliated with any particular vertical, after three years of experience writing IoT code, that number plummets to under 10%. That same population starts off with limited understanding of how to profit from IoT (29% of developers) to just 10% within three years.

As VisionMobile’s report uncovers, though nearly two-thirds of IoT developers are Hobbyists and Explorers – developers not focused on cash but rather personal exploration – these same developers will “influenc[e] the evolution of IoT technology going forward, by making certain technologies more popular than others, and by taking those technologies into their professional lives at a later stage.” Not surprisingly, the report continues, “the Internet of Things is still a young, emerging market, where the excitement and fun of new technology is more important than money or business success in a not yet fully developed market.”

In sum, there is a land grab for IoT developers today, or should be, but it’s not about delivering developer cash. The cash will come,1 but today platform providers need to be thinking about how to provide opportunities for developers to explore this still nascent market.

In practice, those platforms that want to entice IoT developers must make their tooling approachable and the documentation clear enough to allow casual development. Raspberry Pi is a classic example of a developer platform that hits all the right notes in terms of giving developers an easy, cheap-to-use playground to experiment upon.

Those that can appeal to the fun side of IoT developers today will find it should translate into their business motivations tomorrow.

Consumer IoT channels continue to struggle

Many people recognize that the IoT is not actually new. For years, industries have become increasingly sophisticated in the way they collect and use data from systems and devices. 

In the B2B space, the IoT market is already well advanced. The majority of new commercial buildings are ‘smart’; systems are connected to make buildings safer, more energy efficient, easier to manage and the cost of operation is significantly reduced. Even in agriculture, IoT is well advanced. John Deere uses connectivity on their fleet of combined harvesters to remotely monitor and maintain machinery as well as provide real-time analysis of the quality of the grain in each part of the field and use the data to create a tailored plan for fertilizer. 

However, the B2C channels are lagging when it comes to exploiting IoT. They are struggling to adapt to the tidal wave of change as the technology used so successfully in commercial IoT applications leaks into the mass consumer market. This is disappointing because the infrastructure for growth is in place; broadband and smartphones are ubiquitous, the technology is now simple and affordable, and the value propositions are often compelling. 

Startups have stirred up the consumer space but the reality is that the big channels such as retail, service providers, utilities, insurance companies and health have yet to see real mass market success.  Many channels have been slow to see the opportunity, and fog surrounding standards and interoperability are often quoted as reasons for being hesitant with investment. This is affecting the speed of growth which is disappointing because, in reality, the real issue affecting the proliferation of smart home products in the consumer space is not interoperability or standards, it’s the business models. 

Kevin Meagher

The initial wave of innovation in the smart home space has been what could be considered Point to Point (P2P) devices; a single device managed through an app. Nest is the most obvious example. They used IoT and connectivity to reinvent the thermostat and rapidly stole market share from the traditional manufacturers. They secured a mind-boggling exit and instantly created a business model that many other startups are trying to emulate.

Unfortunately, there is a fundamental flaw in the P2P business model and the recent rumblings with Nest is proof that the business model has its limitations. In a connected world, consumers do not want to stand on the doorstep and open the door with one app, control the thermostat with another, trigger light switches with another, and so on. 

Consumer-facing industries need to recognize that the killer app in the smart home space is a single app. Consumers want an app through which they can monitor and control all the devices in the home to receive a wider bundle of value-added services from channel partners. In the B2B IoT applications, industries worked together to deliver comprehensive system solutions to companies like John Deere and farmers. Unfortunately, in the consumer space, none of the traditional players are organized or structured to act as aggregators. Indeed, in many cases, they are competitors and want to herd consumers in a particular direction with their preferred business models. 

Who will be the consumer IoT aggregator?

So who will step up to the plate and act as an aggregator to deliver a truly connected experience to consumers?

Service providers such as Comcast and others were the first to try. They created ‘curated’ smart home systems by sourcing a set of devices to give customers a broader smart home experience with a range of products and services—all managed through a single app. Unfortunately, many consumers are wary of monthly fees and long term commitment typically secured from the traditional security monitoring is attractive to service providers. Apple, Google, and Microsoft are pressing forward with their own agendas but they are largely focused on delivering infrastructure solutions so none of them are really offering to act as aggregators for the consumer.

Some major players in consumer channels are making bets and stepping up to act as aggregators for the customer. Retailers such as Lowe’s and Amazon offer more ‘open’ platforms that support a broader set of devices and they are working to bundle value-added services using freemium business models. These ‘open’ DIY systems are starting to gain traction and they could ultimately displace P2P and overtake curated. 

However, there are new channels that could also be big winners. Utilities are a sleeping giant in the smart home, but the dynamics of their market suggest they are unlikely to ever wake up to the opportunity. Insurance companies are more interesting. They are suddenly showing strong interest in bundling smart home solutions with their policies and they could become a strong channel. The opportunity to mitigate risk, improve consumer engagement, offer new value-added services to generate new revenues are a significant motivator as their markets become more competitive and revenues are squeezed.

Clearly, the jury is out on the winners in the IoT B2C channels, but the opportunity is huge so those who find the right business model could ultimately be the biggest winners in IoT.

The author is Senior Vice President of Business Development for ROC-Connect