Organizations today increasingly use the combination of hardware, software, networking, and analytics that is IoT to gain insights from the data collected through varied and numerous connected points. So far, most companies have used IoT to increase efficiencies and reduce expense. Currently, however, some companies are using IoT to develop subscription services and digital products that are in turn driving new profit streams. A proper business model for monetizing data with the help of IoT products is based around marketing the knowledge obtained from the data extraction of the IoT products to third parties. This can even go as far as to offer the IoT product to as many users as possible, especially when such an offer is free of charge thus creating an attractive data offering for third parties. What all products seem to have in common - is that they always have a benefit for the customer. Similarly, they are also able to offer benefits for third parties at the same time, thanks to the aggregated data.
Data monetization can be implemented, for example, by using cars as “data collectors”. Sensors attached to cars continuously generate a wide variety of information, such as the quality of the road or the weather. This data can be offered for sale to corresponding companies. Another example is weather services, which typically demand a large amount of measurement data to provide precise forecasts. Cars can provide this measurement data via their sensors – which is particularly relevant for weather services in regions where there are hardly any measuring stations. This gives them the opportunity to access significantly more data and thus optimize their weather forecast. This creates a win-win situation: the owners of the cars use their vehicles as a measuring station, disclose measurement data and receive money for it. With the purchase of the data, the weather service can specify its weather forecast – and thus increase customer satisfaction. Data is not just limited to enhancing business efficiency or improving service, it can be used for regular sources of revenue for the businesses as well as for third parties. Organizations today are looking forward to investing in data that helps them better understand their customers and boost their marketing effectiveness.
Resilience, visibility, agility for scalability, and accessibility are going to be the main themes for enterprises operating in the new normal. More decision-makers are realizing the potential of IoT and are more likely to use it to monetize data collection. Many leading businesses on the internet have viewed two main phases in IoT. The first phase–where the focus–is to generate traction and the second phase is focused on monetizing.
What are the ways to enable IoT monetization? Let’s consider a few ways:
Monetize IoT solutions with subscriptions
While perpetual licenses are slowly declining, the number of subscriptions has increased significantly in recent years. Instead of selling their hardware, manufacturers remain owners and offer customers the use of their devices and other services, including maintenance and support. As-a-Service subscriptions are usually offered on an annual basis and are subject to renewal. Subscriptions are particularly becoming widespread as the recurring sales of the models can be planned in the long term.
Monetize IoT solutions by Pay-per-usage
The pay-per-usage model promises what the name says: users only pay for what they actually need when they need it. Usage is recorded over a specified period and measured using a previously agreed metric. A corresponding system or process is implemented for monitoring. The exact costs can then be calculated on this basis. They increase or decrease depending on the resource utilization. Other features of a PPU pricing model include an advance flat rate and the possibility of fees and discounts in the event of over or under-utilization.
Monetize IoT solutions with perpetual licensing
With this pricing model, customers pay once for a product. They can then use it for as long as they like. The maintenance and care of this solution is entirely in the hands of the operator and is usually covered by a maintenance contract. Even if this is no longer continued, the product remains the property of the customer and the rights to use it do not expire. Of course, it can happen that the access to newer versions and support is tied to a different maintenance contract.
Don’t leave a human expert aside
Experts know; machines compute. Machines can learn only what experts teach them. The human eye is superior to any machine in recognizing patterns and only the human brain can assign meaning to patterns. The man/machine loop enables faster, continuous learning and more accurate predictions.
In an ecosystem, the focus is a shared platform by producers of hardware and software, service providers, and other IoT businesses, rather than a service or a product. Such a model allows the platform promoter to gain monetary benefits from end customers as well as other platform users. Platform users are charged for the listing as well as the end customer must give a share when a product is sold to the promoter. A shared platform benefits the participants in multiple ways.
In the era of digital transformation, organizations are facing a scale of change that is unprecedented in human history. The rate at which we are gaining data and metrics about our customers and the actions they take is increasing at an accelerating rate, thus demanding companies to always stay resilient and adaptive. The Internet of Things has the potential to introduce connectivity on new levels in the future world. While numerous agile start-ups are emerging, we are still at the phase where successful monetization is challenging. The rewards of a connected world will certainly be worth the wait, once organizations can gradually start to derive profitable value from the IoT.