Consumer insights report commissioned by the Internet of Things Consortium. IDC fielded this study in November 2014.

1. The Internet of Things
Consortium (IoTC)
Research Presentation
JANUARY 2015

2. Table of Contents
 Research Background & Methodology
 What does “Smart Home” mean?
 Dimensionalizing the Smart Home Market & Opportunity
 Identifying the Market Barriers
 Defining the Core Target Market for Smart Homes
 Understanding How Consumers Research & Purchase Smart Home Products
 Future Smart Home Opportunities
 Summary
 Appendix
2

3. Research Background & Methodology
 1,005 U.S. consumers, aged 18 and older, were surveyed about their
attitudes towards Smart Home product purchases
 Survey fielded in November 2014
 Research conducted by International Data Corporation
 Study commissioned by the Internet of Things Consortium (IoTC)
Sponsoring Members:
3

4. What does “Smart Home” mean?
 The terms “Smart Home” and “Automated Home” or “Internet of Things”
are often used interchangeably, though there may not be universal
agreement to the meanings nor differences of the various terms
 For this research study, Smart Home is defined in the consumer survey as
follows:
4
Smart home solutions refers to being able to control
home settings and security through electronic
devices such as smartphones, tablets, and PCs.
“
”

5. Dimensionalizing
the Smart Home
Market &
Opportunity
5

6. The interest in Smart Home solutions is
wide and far-reaching
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1 2 3 4 5 6 7 8 9 10
Interest in Adopting Smart Home
Solutions
 65% of those surveyed are moderately
or extremely interested in Smart Home
Solutions
 Projected to the US 18+ population,
that equates to a potential market size
of roughly 157 million Americans*
Not at all
interested
Extremely
interested
*Based on 2013 US Census figuresQ1. What is your level of interest in adopting smart home solutions? Smart home solutions refers
to being able to control home settings and security through electronic devices such as
smartphones, tablets, and PCs. (Scale of 1-10)
6

7. This interest is driven by energy
efficiency and home security
64%
60%
48%
41%
Improving
Energy
Efficiency
Improving
Home Security
Creating
Convenience
Improving Well-
Being
Appeal of Smart Home Benefits
(Top 3 Box: ≥8)
 Improving energy efficiency as well as
improving home security are the two
most appealing benefits to consumers
 The promise of better energy
efficiency and home security is what
fuels the most interest in Smart Home
solutions
Q2. How appealing are the following benefits of a smart home in your mind? (Scale of 1-10)
7

8. Current Smart Home device ownership
remains fairly low
Smart Home Device % who own
Home security system 19%
Set top box for your TV 18%
Smart thermostat 12%
Smart light bulb 9%
Wearable fitness device 8%
Smart watch 7%
Smart washer/dryer 7%
Internet connected security camera 7%
Smart refrigerator 6%
Smart power outlet 5%
Smart locks 5%
Smart sprinklers 4%
Connected health monitor 4%
Google Glass 3%
 Outside of core computing devices
(PC, phone, tablet) and connected
TVs, Smart Home device ownership is
still in the early adoption stages with
the most popular ones being home
security systems (19%) and smart
thermostats (12%)
 There is tremendous opportunity for
the Smart Home solutions industry to
broaden consumer adoption
Excludes PC, Tablet, Smartphone, Smart/Connected TV
8

9. Early Smart Home adopters are finding
high utility
90%
89%
79%
73%
69%
68%
66%
63%
62%
61%
60%
60%
57%
56%
52%
50%
43%
41%
% WHO USE AT LEAST DAILY  With but a couple of exceptions, all
the devices listed were being used by
the majority of their owners at least
once a day
 Data suggests that theses devices
have, for the most part, replaced their
“dumb” counterparts in the home
 The high frequency of Smart Home
device usage by their early adopters
implies the products are more than
mere fads and can have sustained
longevity
9

10. Identifying the
Market Barriers
10

11. Concerns around data privacy, cost,
and hacking are most prevalent
55%
51% 51%
39%
32%
29% 29%
Data Privacy Hacking Cost Brand
Unfamiliarity
Setup
Difficulty
Too
Complicated
Where to
Purchase
Concerns Related to Smart Homes
(Top 3 Box: ≥8)
 Easing consumers’ fears
around data privacy,
hacking and cost are the
most significant hurdles the
market has to overcome to
broaden its appeal to more
Americans
Q3. How concerned are you about each of the following as related to smart homes? (Scale of 1-10)
11

12. Privacy concerns are intertwined with
concerns around hacking and security
66% 64% 64% 64% 61% 60%
54% 52%
Not
knowing
who has
data
access
Hacking
financial
accounts
Invasion of
privacy
Using data
to break
into home
Using data
illegally
Knowing
where data
is stored
"Big Brother" Using data
for
marketing
Data Privacy Concerns
(Top 3 Box: ≥8)
 Digging deeper into Data
Privacy (cited as #1 concern)
reveals a mix of privacy and
cyber security fears
 All of the concerns surveyed
scored >50% (more than half
of consumers were very or
extremely concerned),
indicating that privacy and
security worries pose
considerable challenges for
the Smart Home industry
Q11. How concerned are you about each of the following ways your user habits (the data) may be known
and shared? (Scale of 1-10)
12

13. But some are more willing to forego
privacy concerns for product benefits
17%
32%
18%
18 - 24 25 - 44 45+
AGE
 Amongst those who list privacy as
their top concern, 25-44 year olds,
males, households with kids, and
those familiar with IoT are more
likely to be willing to sacrifice such
concerns for certain product
benefits
 These traits line up well with those
of our core target audience
30%
13%
MALE FEMALE
GENDER
34%
15%
WITH KIDS WITHOUT
KIDS
CHILDREN IN HH
11% 23%
65%
100%
N O D ON 'T
K N OW
M E AN I N G
K N OW A
LI T T LE
K N OW
M E AN I N G
IOT FAMILIARITY
Q3a. You indicated that concern that your private data may be shared with or without your knowledge is
your biggest concern (from the above list) that is preventing you from adopting a smart home device, are
there any particular situations that are more important to you than your privacy concerns? (Yes respondents)
Those willing to forego privacy concerns by segment
13

14. And younger consumers are less
sensitive to cost benefits75%
72%
63%
63%
72%
69%
68%
65%
81%
80%
74%
70%
85%
84%
79%
79%GOOD VALUE
FOR PRICE
NO MONTHLY
FEES
LOWERS HOME
MAINTENANCE
COSTS
LOWERS HOME
INSURANCE
COSTS
IMPORTANCE OF COST-RELATED
PRODUCT ATTRIBUTES BY AGE
(TOP 3 BOX: ≥8)
18-24 25-44 45-64 65+
 Though concerns around cost rank
high for all age groups, younger
consumers attach lesser importance
to cost-related product benefits
 Younger consumers think less about
cost when considering Smart Home
product attributes and may be willing
to spend more to receive desired
benefits
Q5. How important are each of the following attributes that you would want in a smart home device? (Scale
of 1-10)
14

15. Defining the
Core Target
Market for Smart
Homes
15

16. The Core Target is younger, male,
affluent, with children and urban
53% 49%
31%
19%
18 - 24 25 - 44 45 - 64 65+
Age
 The demographic traits which
exhibit the greatest interest
and potential for Smart Home
solutions and technology are:
 Younger age segments (18-
44)
 Male
 Higher HHI ($100K+)
 With children in the HH
 Living in an urban area
44%
33%
Male Female
Gender
55%
30%
With Kids Without Kids
Children in HH
High Level of Interest in Smart Home by Demographic (Top 3 Box: ≥8)
32%
39%
56%
<$49,999 $50K -
$99,999
$100K+
Household Income
49%
37%
29%
Urban Suburban Rurual
Residential Area
Q1. What is your level of interest in adopting smart home solutions? Smart home solutions refers to being able to control home settings and
security through electronic devices such as smartphones, tablets, and PCs. (Scale of 1-10)
16

17. These demographic traits reappear
throughout study results
 The same set of demographic
segments universally and consistently
demonstrate greater interest in Smart
Home technology throughout study
results, including when looking at:
 Ownership of Smart Home devices
(with exception of the PC)
 Familiarity with IoT
 Those currently engaged in or are
interested in home network activities
 Interest in “What If” future scenarios for
Smart Homes (except for gender)
17

18. Understanding
How Consumers
Research &
Purchase Smart
Home Products
18

19. Word of Mouth is the most important
info source for researching purchases
54%
43%
27% 27%
15% 13% 11% 11% 6% 5%
0%
10%
20%
30%
40%
50%
60%
Information sources for Smart Home
& device shoppers
 Word of mouth endorsements are the most
cited source of information when researching
for Smart Home and device purchases
 For those familiar with IoT, word of mouth is
significantly less important as they may be
the ones providing such shopping advice to
others
 Retail store employees rank as the second
most important source of information,
underscoring importance for device
manufacturers of educating retail sales
associates
 Though TV is where much of larger ad budgets
go, online ads rank equally with TV as an info
source Smart Home shoppers rely on.
Q7. When you are purchasing items such as smartphones, home automation systems, security systems,
tablet, computers, etc. where do you get information to help you with your purchase decisions? Select all
that apply.
19

20. E-commerce is on par with physical
retail for sales of Smart Home devices
 Online sales and retail store sales are
at parity as top sales channel for Smart
Home devices
 For the core computing devices with
highest ownership, PCs, smartphones
and tablets, retail sales remains top
channel
 For the less ubiquitous devices in this
category, their products may not
benefit from wide distribution with
physical retailers so online sales
channels are vital
0%
10%
20%
30%
40%
50%
60%
70%
80%
Purchase channel by device
Retail Store Online Other
Q6b. You indicated you own the following devices. Where did you purchase each of these devices?
20

21. Smart home shoppers have a slight
preference for DIY solutions
33%
38%
29%
“Smart Home in a Box” vs. DIY
Single package
solution
Individual
components and
customize my own
Not sure
 38% of consumers would prefer to
build their own DIY Smart Home setup
vs. 33% who would prefer a packaged
“Smart Home in a Box” solution
 Those who prefer to customize their
own Smart Home are likely to be:
 Younger (18-44)
 More familiar with IoT (have heard of it
and know at least a little about it)
 Urban and Rural (vs. Suburban)
Q10. If it were available, would you prefer to purchase a “smart home in a box” solution – that
is a solution that contained home remote controllers, devices, etc that came as a package
solution or would you rather purchase individual components (such as smart lights, smart TV,
smart locks, smart appliances, smart sprinklers, etc.) separately and build out a more
personalized system?
21

22. Future Smart
Home
Opportunities
22

23. Imagining the near future of Smart
Homes guides product development
Receive recommendations on ways to reduce costs / drive efficiency based
on personal smart home data
44%
Transfer shows / content that you are viewing to another device without
disruption in viewing
37%
Control home appliances via voice 37%
Receive incentives to pay less for home services by watching
advertisements on connected home devices
37%
Access virtual healthcare services and recommendations based on
personal data recorded from devices
35%
Television shows or video games that you watch/play in-home would
become full entertainment experiences
34%
Traditional appliances would be activated by information that
entertainment/media/news companies provide
33%
Receive information and discounts on sporting events from sports viewing
behavior at home
28%
Change home preferences/device settings based on information from your
social networks
28%
Purchase items from unique connected devices 27%
 Survey respondents were asked to
consider various scenarios for what
Smart Home technology can offer 1 or
2 years from now
 The scenarios that emerged as the
most interesting and/or useful reflect
ongoing trends in technology and
media, but also provide an insightful
glimpse into opportunities for smart
home product development in the
near future
 Highlighted in following slides are the
Top 4 scenarios
Q20. 1 to 2 years from now, connected home devices may soon allow you to experience situations that aren’t currently possible
today. How interesting/useful would the following scenarios be to you if they were options you could choose? (Scale of 1-10)
Most interesting/useful potential Smart Home scenarios (Top 3 Box: ≥8)
23

24. Reducing costs based on personal
smart home data (Ranked 1st)
 Reinforcing data previously seen, for many Americans the
promise of home automation now and in the immediate
future is about utilizing technology to attain efficiencies and
cost savings
 With heating/cooling and lighting making up largest sources
of energy consumption for US households, early solutions
have focused in these areas
24
Current Examples
Perhaps the most popular example of this, the Nest Learning Thermostat automatically
adjusts your home temperatures based on personal preferences it remembers over
time, while also saving on heating and cooling costs when away from home.
Similar cost-saving applications include smart lighting systems that turn on/off based
on usage history, motion detectors, or programmed settings. Some Smart Homes have
installed power meters that track and analyze energy usage of different appliances
and equipment to recommend savings opportunities.
U.S. Residential Electricity Consumption
Heating & cooling Lighting
Refrigeration TV & related
Laundry equipment Computers & related
Cooking Other
 Future smart home products may
focus on conserving energy costs
around other household needs such as
refrigeration, TV viewing, and laundry
Source: US Energy Information Administration, Estimated U.S.
Residential Electricity Consumption by End Use, 2012

25. Transferring shows from one screen to
another while viewing (Tied – 2nd)
 With the proliferation of screens in the household, TV and
video viewing is no longer confined to the living room
25
Current Examples
Pay TV providers such as Comcast, Verizon, and DIRECTV offer multi-room viewing
where you can start a program on one TV and finish viewing on another via their DVRs
Google’s Chromecast and Apple’s AirPlay allow users to transfer video viewing from a
smartphone or tablet to their TV
 Future opportunities would be to
broaden such technology beyond TVs
and core computing devices and into
emerging smart home device categories
with screens (i.e. refrigerators and other
appliances)

26. Controlling home appliances via
voice (Tied – 2nd)
 The increasing popularity of Siri and Google Now have
brought voice command technology into the mainstream
26
Current Examples
Amazon’s new Echo product, a voice-activated intelligent speaker, is a bold first step
towards taking voice control and assistance technology beyond personal devices like
a smartphone or smart watch and into the living room or household level setting.
Controlled only by voice, the Echo not only plays music but will answer basic queries,
give you the weather, news, and more
 Incorporating voice control into the Smart
Home for simple commands and
functionality will likely be what many
device makers will pursue independently
 For those seeking to turn the Smart Home
into more capable and intelligent voice
assistants, it may require complex
integration with popular OS providers like
Apple (Siri), Android (Google Now) or
Microsoft (Cortana)

27. Receiving incentives to pay less by
viewing ads on devices (Tied – 2nd)
 There is a surprisingly high tolerance for ads
and marketing if it reduces Smart Home costs
 Current ad opportunities, beyond core
computing devices and TVs, are minimal on
Smart Home devices
 Likely limited by the lack of screen real estate
with many of these devices
27
 The larger opportunity may rest in the mining of Smart
Home usage data and patterns to build consumer
profiles and power more targeted ads and marketing
efforts
 Smart home device makers will need to carefully
weigh such ad revenue opportunities with data
privacy concerns
Food or supermarket brands
looking to make recipe and
product suggestions based on
the contents of your smart
refrigerator
Detergent brands interested
in targeting ads to
households that are more
frequent users of their smart
washers and dryers
Potential
Smart
Home Ad
Targeting
Scenarios

28. In the near future, the Smartphone will
be the new Universal Remote
 There is strong evidence that the smartphone is the central
device for controlling Smart Home technology:
 57% would be very or extremely interested in using a phone to
control their automated home (ranked 1st out of 6 devices)
 23% of people would consider a total Smart Home solution only if
they could control it with their smartphone
 Using a smartphone to control other Smart Home devices ranked
2nd (tied, out of 11) for the most common or most desired home
network activities
 48% of people find the Smart Home benefit of managing things
with a smartphone very or extremely appealing (ranked 3rd out of
6 benefits)
 45% of people would find smart locks to be helpful if they could
manage access via a smartphone
28

29. Summary &
Conclusions
29

30. Smart Home products are poised to
take off but not without some obstacles
 Smart Home products are still in early adoption stages but early adopters are finding heavy use for
such products. With a potential market of 157 million Americans, the future shines bright for the industry
 The interest in Smart Home is driven by benefits of improved energy efficiency/cost savings and home
security, but there are strong concerns around privacy, hacking, and cost
 Costs may come down and improve over time with technology, but stronger cyber security
precautions and greater privacy controls are crucial to growth of the industry
 Smart Home device makers should start with word-of-mouth marketing to the core target of males 18-
44, HHI $100K+, children in HH, and urban
 Online sales and physical store sales channels deserve equal focus
 Driving energy efficiency, transferring TV/video content across screens, voice command technology,
and incentivized advertising are four strong potential areas for future Smart Home development
 Device makers need to design with smartphone compatibility and control in mind
30

31. Greg Kahn
greg@gkdigitalmedia.com
@GKmediaBUZZ