OEMs formerly concentrated on selling tangible things, but this model is no longer viable for IoT products. The incorporation of connection and cloud software in IoT devices incurs recurring costs for OEMs. As enterprises and customers want more connected devices and data, top product leaders and executives must design successful monetization strategies for their IoT goods or services in order to cover costs and grow their business.

While connectivity adds technical and operational complexity to physical objects, it also opens up countless options for recurring revenue and long-term customer connections by providing important data.

In the ever-changing world of technology, the Internet of Things (IoT) has emerged as a disruptive force, affecting industries, enterprises, and everyday life. At its foundation, IoT is about linking physical items, devices, and sensors to the digital world, resulting in a massive network of interconnected data streams. However, below the technical complexities lies a dramatic shift in how humans perceive and use information.

Understanding the Value of IoT Data

1. The Data Deluge:

The proliferation of connected devices has led to an unprecedented surge in data generation. From smart sensors in industrial machinery to wearable fitness trackers, every interaction with the digital realm produces valuable information. This deluge of data presents both opportunities and challenges. Entrepreneurs must recognize that the sheer volume of IoT data is overwhelming, but within it lies untapped potential.

Imagine a fleet management company that monitors thousands of trucks equipped with GPS trackers. Each truck generates real-time data on location, speed, fuel consumption, and engine health. Aggregating this data provides insights into optimal routes, maintenance schedules, and fuel efficiency.

2. Data Variety and Velocity:

IoT data isn’t monolithic; it comes in diverse formats—structured, semi-structured, and unstructured. Traditional databases struggle to handle this variety. Moreover, IoT data arrives at breakneck speeds. real-time decision-making demands rapid ingestion, processing, and analysis.

A smart home ecosystem collects data from smart thermostats, security cameras, and energy meters. The thermostat data is structured (temperature readings), the camera footage is unstructured (images), and the energy meter data may be semi-structured (time-series readings). Entrepreneurs must build systems that accommodate this diversity.

3. Contextual Relevance:

The value of IoT data lies not only in its raw form but also in its context. Contextualization transforms data into actionable insights. Understanding where, when, and how the data was generated enhances its relevance.

A wearable fitness tracker records your heart rate during exercise. Knowing that you were jogging in the park (context) allows the entrepreneur to recommend personalized workout routines or suggest nearby health food stores.

4. Data Ownership and privacy:

IoT data ownership is a complex web involving device manufacturers, users, and service providers. Entrepreneurs must navigate legal and ethical considerations. Privacy concerns loom large, especially when personal data is involved.

A smart refrigerator tracks your eating habits and shares them with a grocery delivery service. Balancing convenience (customized shopping lists) with privacy (not revealing sensitive health conditions) requires thoughtful design.

5. Data Monetization models:

Entrepreneurs can monetize IoT data through various models:

– Subscription-based: Offering premium services based on data insights (e.g., personalized health recommendations).

– Data marketplaces: Creating platforms where organizations buy and sell IoT data.

– Value-added services: Enhancing existing products (e.g., predictive maintenance for industrial equipment).

An agricultural startup aggregates soil moisture data from IoT-enabled sensors across farms. They sell this data to insurance companies for risk assessment and to seed manufacturers for precision planting recommendations.

6. Security and Trust:

The value of IoT data diminishes if it’s compromised. Entrepreneurs must prioritize security, ensuring data integrity, confidentiality, and authenticity. building trust with users is essential for sustained success.

A connected car manufacturer encrypts vehicle telemetry data to prevent unauthorized access. Users trust the brand because their data is safeguarded.

Read Also: Data Privacy and Monetization: Balancing Act

Understanding the nuances of IoT data—its volume, variety, context, ownership, and monetization—is pivotal for entrepreneurial success. By harnessing this data intelligently, entrepreneurs can create innovative solutions, drive efficiency, and unlock new revenue streams.

Challenges of IoT Monetization

Complex IoT sales and support models can make monetizing IoT products a challenge.

1. A complex value chain

The IoT value chain isn’t made up only of buyers and sellers. Some companies may sell IoT solutions directly to consumers or other businesses. In contrast, other organizations leverage retailers or dealers that may want to layer on value-added service offerings for their customers. Managing these various relationships adds complexity to business operations and can make data usage calculations, reporting, and billing or invoicing a frustrating endeavor. 

2. Usage-based pricing

Monetizing your IoT solution through subscription-based billing offers the potential for recurring revenue based on cellular data consumption. However, determining the appropriate pricing model can be challenging. Tailored monetization strategies are required to balance profitability, customer satisfaction, and market competitiveness. 

Subscription billing also presents the challenge of adjusting pricing for free trials or upgrades. But the right billing platform simplifies these complexities through automated subscription billing and user-friendly SIM management tools to enable efficient data usage tracking, accurate billing, and a seamless customer experience.

3. Revenue recognition

IoT monetization introduces complexities in revenue recognition, especially when revenue streams are diversified. For instance, revenue may be generated through device sales, ongoing subscriptions, or ad hoc value-added services. Each revenue stream may have different recognition criteria, making it challenging to accurately track and allocate revenue.

Compliance with accounting standards and revenue recognition guidelines is crucial, and you must recognize deferred income at the right time to avoid legal ramifications. You’ll want to be sure you have a platform partner who understands and can support the financial implications of IoT monetization.

4. Ongoing costs for OEMs

IoT devices must maintain an active network connection, and in the case of cellular devices, this comes with additional ongoing costs to access and use the network infrastructure for the life of the product. The cost structure for these services can vary, and it is typically based on factors such as the amount of data consumed, the number of devices connected, where devices are being deployed, and the type of connectivity technology, such as 5G, CatM1, or NB-IoT.

Additionally, ongoing services like cloud infrastructure also require ongoing expenses to support data storage and computing requirements. OEMs must consider these factors when determining how to monetize their IoT solutions.

If you are faced with some of these challenges, below are some solutions you can implement to help you better monietize your IoT data.

IoT subscription billing

Your business model needs to support your billing model and be flexible enough to grow with the industry. While there are many different business models for an IoT company, including pay-for-usage and outcome-based, using a subscription model allows you to create a recurring revenue stream and positions you to take advantage of new opportunities as cellular data needs increase. Subscriptions offer a win-win for your business and customers because they’re easy to understand and drive revenue. 

Subscriptions provide analytics to give you a deeper understanding of potential business risks and opportunities. With a subscription model, you can offer flexible, customized options that make it easy for potential customers to get the precise solution they need. This flexibility gives you a competitive advantage. And creating subscription packages tailored specifically for the types of customers you serve demonstrates that you understand your customers and their goals.

Subscription and connectivity management platforms

Monetizing your IoT solution effectively requires a subscription billing system and a connectivity management tool. The subscription platform enables you to create subscription tiers, bill customers in a recurring fashion (monthly, annually, etc.), monitor subscription performance, and notify customers when their data runs low or when it’s time to renew. 

The connectivity management platform (CMP) allows you to manage deployments through different carriers by activating or deactivating SIMs or moving devices between plans. The CMP tells you how much data usage has occurred so you can bill your customers accordingly. 

To effectively manage connectivity, data, and device deployments, subscription billing and connectivity management platforms are crucial.

IoT Monetization Strategies

These five IoT monetization tactics will help you maximize recurring revenue while also providing your company with the agility to readily enter new markets, adapt quickly to customer requests, and outmaneuver your competitors.

1. Package cellular data services into prepaid subscription offerings

Packaging cellular data services into prepaid subscriptions can earn your business more revenue upfront while mitigating your risks. By offering your customers the convenience of topping up on data mid-billing cycle if their data allotment runs out, you can also make more revenue while improving your overall customer experience.

Additionally, subscriptions also give you the ability to optimize cash flow by offering a small percentage discount at different pricing tiers. For example, you can encourage annual subscriptions by offering a 10% discount over the month-to-month rate to guarantee a year’s worth of service.

2. Lower upfront hardware costs to expand your Total Addressable Market (TAM) 

As an IoT Solution provider, if you can get your customers to commit to an annual or multi-year subscription, you may be incentivized to lower upfront hardware pricing in return for the subscription. This can expand your overall customer base.

An example of this model has been proven in the smartphone industry, where customers don’t think twice about committing to a multi-year contract for a discounted smartphone device. The net result of this model can result in greater profitability than relying primarily on initial hardware sales, as Zipit customers have seen. Subscriptions allow you to monetize what matters most to customers– insights, and capabilities, not the device. 

3. Measure and monitor data usage and subscription data

Monitoring subscription data helps you identify high-performing subscription tiers to optimize future offerings. These insights also reveal bottlenecks and improve demand forecasts for more strategic decision-making. In a post-paid billing model, tracking and analyzing data usage by device, customer, and carrier is essential for accurate billing and cost management. 

To effectively manage your business, you must be able to track churn rate, gross margins, total revenue, number of active devices, amount of cellular data consumed per device, and other important metrics efficiently. Without these insights, you’re forced to make business decisions without foundational information to guarantee the best course of action.

4. Use a billing platform designed for IoT products

A billing platform designed specifically for IoT monetization significantly reduces the workload involved in billing. 

Your IoT billing platform should do the following: 

• Support usage-based billing
• Allow for custom package creation with tiered subscriptions
• Ensure billing compliance 
• Manage carrier functions (activating the device, monitoring data usage, and deactivating the device when the subscription is stopped or suspended)
• Automate billing calculations 
• Send customer and team notifications (alerts to customers when they near the end of their data limit and notifications to team members when a customer cancels their subscription)

5. Simplify the customer experience

For any subscription-based service, providing customers with self-service account management capabilities and the ability to upgrade or change subscriptions on demand is crucial. Enabling customers to activate devices and purchase additional cellular data seamlessly, without manual intervention from the business, enhances the customer experience. Implementing an intuitive customer portal simplifies customer service, streamlines your operations, and improves customer satisfaction.

Simplifying user experience requires a deep understanding of your target customers and their pain points. Tailoring the pricing model accordingly allows you to address their needs and ensure long-term success.

Identifying Monetization Opportunities in IoT Data

This field provides entrepreneurs with numerous opportunities to use the massive volume of data created by IoT devices. Businesses can increase revenue and improve operations by evaluating and extracting valuable insights from this data.

1. Understanding Data Patterns: One approach to identifying monetization opportunities is to analyze data patterns within IoT datasets. By examining trends, correlations, and anomalies, entrepreneurs can gain valuable insights into consumer behavior, market trends, and operational efficiencies. For example, a smart home company can analyze energy consumption patterns to offer personalized energy-saving solutions to customers.

2. Predictive analytics: Leveraging predictive analytics techniques can help entrepreneurs identify monetization opportunities in IoT data. By using machine learning algorithms, businesses can forecast future trends, customer preferences, and demand patterns. This enables them to optimize their product offerings, target specific customer segments, and make data-driven business decisions.

3. Data-driven services: Another way to monetize IoT data is by offering data-driven services. For instance, a healthcare provider can leverage patient health data collected from wearable devices to offer personalized wellness programs or remote monitoring services. By providing valuable insights and actionable recommendations based on the data, businesses can create additional revenue streams.

4. Partnerships and Collaborations: Entrepreneurs can explore partnerships and collaborations to unlock monetization opportunities in IoT data. By sharing anonymized and aggregated data with relevant stakeholders, businesses can create valuable insights and solutions that benefit multiple parties. For example, a smart city initiative can collaborate with transportation companies to optimize traffic flow based on real-time data from connected vehicles.

5. Data Monetization Platforms: entrepreneurs can also consider building data monetization platforms that connect data providers with potential buyers. These platforms facilitate the exchange of IoT data for various purposes, such as research, product development, or targeted advertising. By providing a secure and transparent marketplace, businesses can unlock the value of their IoT data and generate revenue.

Conclusion

Identifying monetization potential in IoT data necessitates a complete approach that includes understanding data trends, applying predictive analytics, providing data-driven services, forming partnerships, and utilizing data monetization platforms. Entrepreneurs can unleash new revenue streams, drive innovation, and create value by leveraging the power of IoT data in the quickly changing Internet of Things world.