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Smart Home Service Revenue will Reach $100B by 2020

Although the fundamental ideas of applied automation in a residential setting were conceived long ago, progress to a technology-rich 'smart' home have remained somewhat elusive. Nonetheless, market development should improve as vendors utilize more effective product adoption strategies.

By definition, a Smart Home is one that is designed to deliver or distribute a number of digital services within and outside the home environment, through a range of networked devices.

According to the latest worldwide market study by Juniper Research, consumer spend on Smart Home services -- including entertainment, health, energy and home automation -- will reach $100 billion by 2020. That's well over twice the estimated spend for 2015, at $43 billion.

Entertainment services, such as Netflix and Spotify, are playing a key role in boosting the Smart Home market size -- driven by a universal appeal, and the relatively low cost of these services.

However, emerging Smart Home segments, such as home automation, are expected to gain momentum, driven by falling hardware costs and increased consumer awareness of the benefits.

The Juniper study found that numerous whole-home automation subscription services have struggled to address the mass-market. Therefore, incremental unit-by-unit purchases, to personalize the home, are now viewed as the most likely entry point into the market.

Even so, their research found that vendors such as SmartThings and Nest have successfully added subscription services to their hardware sales in order to generate the perception of lifetime value.

"Enabling services to generate recurring revenue on top of Smart Home hardware will be crucial for realizing the projected long-term success of this market," said Steffen Sorrell, senior analyst at Juniper Research. "However, tapping the developer community to innovate and address the wider market remains an issue."

That being said, the research forecasts that the number of connected appliances in Smart Homes will rise to over 20 million by 2020. But the market will continue to be characterized by high prices and a low perceived value in device connectivity.

Other key findings from the study include:

  • Voice control and other 'hands free' mechanisms will become the principle interface between users and devices in the Smart Home.
  • The use of wearable devices to passively supply 'quantified self' data to control Smart Home devices is likely to emerge as a key use-case by 2020.

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