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How will we measure the internet of things?

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In writing about the plethora of startups, devices and strategies that companies large and small are throwing at the internet of things, I’ve been thinking about market size. Cisco says it will generate $14.4 trillion in profits by 2022. GE says it will add $10 trillion to $15 trillion in GDP by 2030. These numbers are hard to be believed. For example the federal government only brought in $2.45 trillion in tax revenue in 2012.

But there’s also the question of how to measure the market or the value. Do we count the devices themselves? The dollars spent on platforms and services that tie connected devices together? What about subscriptions to wireless networks? In GE’s case it’s counting dollars saved by implementing better data gathering systems. But the whole idea of trying to measure what is fundamentally a technological shift as a market baffles me.

There’s no question the internet of things is going to be big, but to separate the reality from the hype its worth looking for hard data. If not at market size or potential profits, then let’s just try to see where people are in terms of interest in the products. For example, check out these numbers from a March Yankee Group survey of about 2,300 people.


That seems like a relatively small percent of the population planning on buying a new connected device in the next six months. And the numbers are somewhat odd, in that I don’t think even 5 percent of users are planning to buy a new smart meter –something utilities tend to provide. So I’m taking this data with a grain of salt, but I am looking for good ways to think about the market size and understand how rapidly people and companies are adopting connected devices into their homes and business processes.

This is a real trend, but it’s clear we’re still at the beginning of the massively hyped shift that will lead to real value creation. I just don’t know how to measure how much.

15 Responses to “How will we measure the internet of things?”

  1. Roy P

    Connected devices must be connected to a platform to extract value. Someone must build and operate this platform. They will get paid by those extracting value from the devices. Simple as that.

    Right now the model is home security providers getting paid by consumers. Tomorrow it will be connected home providers getting paid by external stakeholders, such as Google, Rheem, Wells Fargo, and Xcel Energy.

    Companies will pay real money for home intelligence, much like they have for market intelligence from Google. Knowing that a furnace is faulty is quite valuable to an HVAC manufacturer. Knowing that there are no squatters in a foreclosed property is quite valuable to a bank. Knowing the thermodynamic efficiency of your home is quite valuable to the electric utility.

    In the end, these stakeholders will pay for the Internet of Things, not the consumer.

  2. maduka bandara

    Great post! Couple of things…lot of the comments and this post is focused on the consumer M2M products.Consumer M2M market is not quite there yet, M2M enterprise solutions are the mass behind paving the way to consumer M2M solutions.

    The market size can be looked at in 2 different ways. For the M2M solution provider, it’s the revenuers or profits that can be gained by implementing M2M solutions in a particular vertical. For M2M customer/service reviver, it’s the quantifiable cumulative of resources that is saved and quantifiable increased productivity on business processes.

    Most of the numbers in this post are M2M solutions that will increase the standard of living of a consumer. Not that non of them have potential to save money, They are less ROI oriented. more convenience oriented.

    Businesses are staring to believe the cost saving power of M2M, consumers don’t yet. I don’t. I am with them as the infrastructure to take the consumer M2M platform to the next level is still not there yet.

  3. James Pasquale

    The Internet of Things has a lot of different meanings to a lot of different people. As a result of this one way to take a measurement could be everything with an Identity will have an API to it including transient things like potholes (picos) to glasses of beverages that have been consumed or not. At the same time everything with an API will have an identity to regardless of its persistence.

    If this becomes the defacto it’ll be trillions of nodes and zettabytes of data.

  4. I enjoyed the read: a good mix of hope rooted in pragmatic thinking, something that can be difficult when talking about things that can get really “pie in the sky,” like the “internet of things.” I’m actually doing a story on the concept and it is, as you’ve said, not quite yet living up to the hype.

    When listening to Peter Diamandis talk about about the planet’s central nervous system, one walks away with the vision of 2020 looking something like Tron meets Minority Report: our cars will all know our names and the address to our favorite, while ordering extra milk while in conversation with the refrigerator.

  5. Irene Sandler

    You’re comparing projections from companies involved primarily in B2B value creation with numbers from the consumer space.

    But The Internet of Things value is less about the consumer market and more about how businesses operate. Take the Internet 1.0: it was the B2B applications that created more lasting value (think digitized supply chain) than the B2C applications (think

    It’s not solely about the devices. It’s about lowering costs through automation or increasing efficiency, or both.

    • Irene, that’s an excellent point, and clearly GE and Cisco are measuring the gains from implementing connected sensors and analyzing that data, while others view the market as the number of hubs, sensors and services sold. Hence my post :)

      That being said, I am still skeptical about those numbers, although I’m a total believer in the value of the internet of things.

  6. mendial

    Really interesting post and comments. I do agree with them. It is important to well understantd where the benefit to the consumer is, and why the consumer is gonna buy them. Then the potential is huge.

  7. Chris

    The chart you show has an even more interesting aspect : numbers are not only “low”, but also “close” to each other. IOW, no clear winner, but lots of indecision and fragmentation.

  8. Henry Gong

    Agree with Agustin, smart xxx doesn’t mean a lot to a consumer, end user or maybe even an enterprise. If someone asked me whether you accept a smart TV, my answer goes to “No”, who can tell me what does smart TV really is. So probably it is not good to measure market size this way.
    My thought is that M2M means a service, so we can ask “Do you want to measure your electrcity consumption by appliance?”, if yes, then you need a smart meter/smart socket. “Do you want to cut your heating or cooling bill?”, if yes you need a smart thermostat.
    But no idea about the number.

  9. reelyActive

    Glad you addressed this question Stacey. As an Internet of Things startup, we routinely get asked about market size and the best we can do is quote the spread of predictions (as you did in your opening paragraph) and the fact that many feel it’s the next big thing. Does that please everyone? Of course not!

    But before we can answer that question, we need to agree about which Internet of Things we’re talking about. Is it the connected-consumer-goods IoT that’s getting all the attention these days? I think most would argue that’s hype and worth nowhere near GE and Cisco’s tens-of-trillions predictions. Is it the enterprise and industrial IoT? Is it smart cities and public infrastructure? Is it “everything”?

    What’s the app economy worth today? Who would have predicted that before the advent of the iPhone? What’s the Internet worth today? Who would have predicted that before Web 2.0? Perhaps the best prediction we can make regarding the IoT is that it has the potential to be even bigger. Which in turn begs the question of when and how?

  10. Hello, I think the measure should have two components:

    Industrial Internet: Where I prefer GE’s approach because it is an actual measure of the created value. If we calculated this for every industry (healthcare, oil, manufacturing, retail…), then a good estimate could be found. Other metrics like amount of devices or data are also important but still provide just an indirect measure of the value.

    Consumer markets: As you pointed out, adoption is still in early phase here. I think when IoT goes mainstream, average adopters won’t know exactly what a “connected device” is, but just buy products because of the perceived benefits (i.e. my mom loves her FitBit but she doesn’t know it’s a connected device). This is why it’s hard to measure the market as a % of people interested in connected devices. I would rather take the average household spending in consumer electronics, and then an estimated % of connected products within that expenditure.

  11. I don’t think people beyond early adaptors are generally interested in new tech for tech’s sake. So planning or intent doesn’t mean much at this stage. It’s a bit like asking who’s planning to buy a new type of sewage or water facilities for their home. On the other hand most of us will be buying connected devices as the connectedness will be part of the infrastructure. Not as a USP, but as part of their general functionality.

  12. paul martin

    I am not so sure its a shift, simply progress. The hype is to help people at the point of purchase to pay the Apple premium and stump up the extra. Automation has been around for ever so trying to quantify a purchase as an IOT one or simply because all laptops have wifi is difficult. However, I doubt many people will domestically go for all the extra tech cost in hard times. Thomson way back in mid 80’s France had a chart called the Domotique cliff; there are only so many early adopters.

    • Paul, you make a good point about “only so many early adopters.”

      I recall that the first estimates of telephone and computer demand was modest — but just look back at the history and you’ll see that “strategic foresight” has benefited those that were prepared, once the market moved past the first wave of use cases.

      The real raw potential of the internet my yet be ahead — for all of us. Granted, time will tell.

      Stacey mentions the Cisco research at the beginning of this story — you’ll find more details about their findings here