The State of the Smart Home Market by John Feland


John Feland, CEO and founder of Argus Isights, an analytics firm specializing in consumer sentiment analysis, spoke on June 10th at Intertrust headquarters. Building on his earlier work at IDEO and Stanford, Feland founded Argus to use analytics from social data and product reviews to clarify consumer sentiment and help companies better understand market and product trends. Argus was started in 2008, just as the iPhone was beginning its climb to market dominance. Feland shared how Argus’ data showed that the iPhone would be a consumer hit in the face of companies like Nokia who were convinced the iPhone wasn’t going to happen. “We saw the threat of the iPhone coming to the market was enough to scare off Treo users,” said Feland.

For this discussion, Feland shared some of Argus’ insights on the consumer smart home market. First, the good news (based on data from March 2015-2016) was that consumer sentiment around smart home products climbed more quickly than those around laptops and tablets (these two actually went down), smartphones, and wearables. Among the different product categories, doorbell cameras and motion detectors are gaining mainstream acceptance, but the biggest winner has been the voice controlled Amazon Echo smart home hub device (Feland’s advice: “Go get one”). On the downside, smart lights, smart locks and smart switches showed increased consumer frustration.

Feland dug deeper into what causes consumer frustration with smart home devices. One major issue is the difficulty of setting up the devices: Getting the devices onto the Wi-Fi network is a particularly challenging barrier.

Mind the App Gap

One of the more surprisingly frustrating points that consumers find with smart home products are the smartphone apps associated with the devices. Calling this the “app gap,” Feland pointed out that smart home device smartphone apps were consistently rated lower than the devices themselves. Feland called out the Philips Hue lighting app as a prime example of this gap. He said it was a particular challenge to Philips’ business model since it would be difficult for Philips to sell enough light bulbs to cover their customer support costs arising from the app.

Consumer delight in smart home devices is positive while the same can’t be said about the app

Consumer delight in smart home devices is positive while the same can’t be said about the app

More concern over security than privacy

Issues around security and privacy for smart home devices have been a topic in the tech press for some time now. Feland found that consumers were also showing concern about these two topics, but that of the two, security was the greater concern. Argus’ data showed there are more tweets about security than brand. “It seems that people are more concerned about their goodies getting taken than being seen,” said Feland.

Another area of concern that Feland singled out was the fail mode of many smart home devices. According to Feland, many smart home device manufacturers don’t pay enough attention to what happens when their products fail. He brought up a couple of different incidents indicating the cost to consumers of this sort of neglect. In one case, a lightbulb in a smart home network failed and the constant messages from the device notifying that this had happened brought the home network down. The other one happened to Nest Thermostat owners in the middle of a cold spell in the East Coast. Many Nest devices couldn’t reach the home network and drained their batteries trying to do so. The heating then turned off, leading pipes to burst for those homeowners who had set the temperature to keep that from happening. “Many of these devices still need a good limp home mode,” said Feland.

Security concerns trump privacy amongst consumer

Security concerns trump privacy amongst consumer

Not surprisingly, Feland believes the smart home market still hasn’t found the killer app and is still in the “pre-iPhone” stage of the market. One of the areas he is hopeful for is to bring more intelligence into the home. Most of the devices being sold now are stand-alone. More intelligence is needed to help the devices connect to each other and perform relatively complicated tasks. One encouraging trend in this area he identified was Amazon’s decision to open up Alexa, the voice-controlled artificial intelligence application powering the Echo and other Amazon devices, to third-party developers. “Amazon started off with a community garden, not a walled garden…. Amazon is now a smart home provider,” noted Feland.

Argus’ and other researchers’ insights into the smart home market show that the typical home is a deceptively difficult environment and the tech industry still has quite a way to go in really meeting consumer needs. There is still plenty of room for innovation in the market, but market players need to be very sensitive to the needs and vulnerabilities of their customers.