After 20 years of business reporting, I feel like I’ve seen…not everything, but an awful lot. Then on Wednesday afternoon, Wink, the smart home hub owned by Will.i.am’s investment firm, posted a blog and sent a notification to app users that next week it would shift to a subscription model, charging $4.99 a month for continued access.
I was stunned by the short notice, surprised by the reasonable subscription fee, completely shocked by the inclusion of literally every Wink service as part of that paid subscription, and bemused by the fact that someone at Wink was apparently still on the job given its history of radio silence and not paying employees.
But after some consideration, I’m glad that Wink is making this Hail Mary pass for continued viability. I’m also OK with Automatic shutting down and PetNet’s dismaying slide into a defunct company with little-to-no communication. I’m even glad that Sonos pissed off a good chunk of its users by killing off some of its older gear with such relative insouciance.
There’s nothing like time and a pending economic downturn to expose what truly matters, and for most businesses, that’s going to be making money. It may be making money by gathering data and delivering insights, or it may be making money by selling hardware, but so far there’s no solid business model that lets a company sell a piece of hardware and support it in the cloud indefinitely with software updates.
So in the coming months, I expect we’ll see more panic sales and a bunch of panic shutdowns for companies and their investors that are just now figuring out the economics of IoT. I have been predicting this for a while, but COVID-19 is like an oncoming train that will force this day of reckoning.
I’m surprisingly OK with all of it. After years of trying to get companies to build distributed platforms, use open standards, set expectation dates for their devices, put money into escrow, and other practices that would lead to consumers who purchased their products having an orderly shutdown (or even no shutdown), I’m ready for that train to clear out the initial crop of connected device makers that failed to provide much value or build sustainable business models.
On the vendor side, I encouraged companies to think about use cases and the benefits of putting a chip into a device, and begged them to look at the real costs. Which is why a crockpot controlled by my phone didn’t seem like a huge value-add, but an oven that had pre-programmed recipes to cook my food sure did. And while the next few months of shutdowns will leave a sour taste in the mouths of many consumers, I think it will clear the way for a better designed and more valuable crop of companies.
The first crop of smart home devices simply wasn’t designed for today’s world of increasing threats, modern architectures, and consumer demands. Kent Dickson, the co-founder and CEO of IoT cloud provider Yonomi, calls this the “first-mover disadvantage.” Companies that released products in the early days often built on AWS or Azure and didn’t have the advantage of serverless computing. On the chip side, they may not have had access to security features that matter today. And even integration strategies have changed.
The result has been the end of many smaller companies. But it has also forced many bigger companies to change direction. For example, last year, citing security reasons, Google had to transition its Nest devices off the Nest platform and onto the Google Home platform. Google’s challenge was that it needed to change the way partners accessed data for a world with more integrations.
But for many businesses, the challenge is in the cloud — or more specifically, in the cost of supporting a device’s connection to the cloud. Connected devices need a place to connect to in order to initiate software updates and data transfers, and to communicate with other devices that it can’t reach on the local network. That requires a connection to a computer somewhere, which costs money.
In the earliest days of the smart home, companies built their own data centers or threw data into Amazon Web Services. Those decisions could cost a company $1 a year per device on the low end and $10 a year per device on the high end. So if you purchased a Nest thermostat when it launched in 2011 and kept it on your wall, that device would have cost Google between $9 and $90 to run for the last nine years. Sure, the Nest thermostat was $250 and the cloud costs may be on the low end, but there are also cheaper devices like the $50 WeMo outlet. Mine, also from 2011, still works.
Moreover, none of that covered what was needed to pay software developers to implement and update integrations, or to do security updates, or to cover any of the other costs associated with running a smart home device company. Devices built today aren’t as expensive to operate, says Dickson; cloud costs range from just 20 cents to $1. At Yonomi, Dickson’s team encourages companies to think about how long their products might operate and how much that will mean in cloud charges. He recommends most companies build that into the price of the product rather than charge a subscription.
“There has to be a sustainable business model in here somewhere,” he says.
As a consumer advocate, I would like to see companies make those calculations a bit more public, so users don’t get emails on a Wednesday afternoon telling them they have a week to start paying for a subscription on a device they thought they already paid for. In Wink’s case, I paid around $100 in October 2016 for the second-generation hub that I used until the end of 2018 when Wink started getting unreliable.
Wink used to be both mine and Kevin’s hub of choice for people dipping their toe into the smart home because it worked with almost everything out there and was really intuitive to use. It also offered a lot of value for the smart home super user who bought a bunch of devices from different platforms.
And I’ll probably pay the $4.99 subscription fee to see if it gets me the original Wink service, though I’m not sure how many others will. But rather than resent the switch in business models, I’m going to embrace what I believe is just another step in the maturation of the overall smart home industry.