Cart 0

The Coming Smart Home Shakeout

Mike Wolf HomeKit Insteon Iris Nest Quirky Vera Weave WeMo Wink


I hate to be the bearer of bad news, but I think we're in for a little turbulence in the smart home market.

Not because the market isn't growing. It is. It's just not growing in a way that can make every investor, startup and big tech company happy. 

This isn't completely unexpected. Markets - especially new consumer technology markets as they are searching for defining use-cases, form factors and hero products - take time to figure themselves out.

The smart home industry is trying to figure itself out.

In the meantime, some investing in the space are disappointed in their early results. Companies like Best Buy, Lowe's and others that have jumped into this market with gusto aren't always seeing the type of demand they want for the products given the amount of shelf space they've allocated.

The early success has come in a few product categories like cameras, thermostats, maybe a few door locks. In other words, product categories consumers get immediately. Sales of smart home "systems" that include hubs and multiple devices have been selling more tepidly.This is a market education and messaging issue, as consumers still don't fully get the concept of the smart home and certainly aren't convinced they need to plop down hard earned cash for one.

But let's not blame the consumer. They can't be expected to understand the smart home while the smart home industry is still trying to figure itself out.

It reminds me of the prehistoric days of the video streaming market in 2004 when we in the industry knew at some point consumers would stream video and other great content to their TVs and around the home, but the consumers didn't yet know it. Startups were taking early stabs at creating new categories like the media adapter (nostalgia link: here's me writing about one for Network World), while others like Microsoft tried to build media streaming systems around their existing strengths and ultimately failed. 

But the comparison isn't perfect, because unlike whole-home video streaming, the smart home has been around in some form or another for 30-40 years.  This early market of X-10 and other tech led to a more modern generation of DIY smart home products, brands such as INSTEON and then Mi Casa Verde, businesses built upon the hard work of their founders, who through grit and determination managed to create a market and community around their products and ecosystems. Other companies like Belkin entered the market with WeMo, finding success with an approach built around Wi-Fi. And then we saw a rush of upstart efforts like SmartThings, Revolv, Wink, Iris and Staples Connect, each with different but similar approaches.

All the while, consumers weren't paying all that much attention. When they did decide to buy a product we in the industry consider a "smart home" system, the consumer thought they were buying a network camera to watch their dog or a connected thermostat to maybe save a little money. 


In the meantime, we have new efforts like HomeKit and Google's Weave/Brillo that hold some promise. We have obvious demand for products like smart home security systems because, well, consumers understand home security.

In other words, the industry is slowly figuring itself out, doing the hard, grinding work it takes to develop underlying technology that can lead to new services that consumers eventually will "get" and maybe find indispensible someday. But in the meantime, you have companies like Wink, who we recently learned seems on the brink, beleaguered by a combination of near blinding audacity of its parent company Quirky, product recalls and softer than expected demand for things called hubs. And Wink is probably the tip of the iceberg. I think there may be other companies or divisions like Wink, wholly invested in product strategies that might not be the resonating with the market, that we'll likely learn about soon enough.

The good news is we'll get there. We have some hero products that are seeing strong demand, we have big service providers investing tens of millions of dollars in market creation, and Apple and Google are doing what they do. We have innovative startups still innovating, in horizontal categories like interfaces, cloud rules engines and more, while there are also some exciting stuff going on in product categories like water, yards, smart kitchen and more. 

Wikipedia defines a market shakeout as "a term used in business and economics to describe the consolidation of an industry or sector, in which businesses are eliminated or acquired through competition." 

It goes on to say that "shakeouts can often occur after an industry has experienced a period of rapid growth in demand followed by overexpansion by manufacturers."

I think we'll see more of both of these, rapid growth and consolidation. Rapid growth in hero categories and, eventually, fuller smart home "systems" as the market figures out what those should look like as the consumer tells them what they like. Consolidation too, as companies who have developed technology either don't find enough of a market themselves or need to fall into the hands of someone with deeper pockets who think they can develop the market. 

Either way, buckle up. It's going to be an exciting but bumpy ride.

Subscribe to the Smart Home Weekly newsletter to get it in your inbox. 

Check out the Smart Kitchen Summit, NextMarket's first event and one and only event about the future of the connected kitchen.  

Older Post Newer Post

  • Yuval lachman on

    Great post, I truly enjoyed reading it, and i think is one of the most accurate, I have read lately.

    Thank you

  • Brian Diercks on

    I think it will be hard to convince consumers things like wireless cameras are smart home. They’re wireless cameras. Often we in the industry use our terms, which mean nothing to consumers. Same with IoT.

  • Victor on

    I think you’re right. Lots of products flooding the market, many without any clear differentiation. The market will eventually settle down and consumers will buy into the smart home vision, but it will take a little while to get there.

Leave a comment

Please note, comments must be approved before they are published