If all we had to judge a company by is their customer list, you would have thought Icontrol had it made. Not only do they count the largest home security provider in the US in ADT as a customer, they also power the bulk of the cable industry's smart home and security efforts. And that's even before we get to their recent legal win in 2015 against Alarm.com, which helped validate their claim to some fairly substantial IP in remote/cloud management of smart home systems.
Comcast buys half of long time smart home platform provider Icontrol
So with all of this going for them, why was the company just bought and split up by Comcast and Alarm.com? (You can find the Alarm.com announcement here and Comcast's here, each which has interesting details. You can also find my previous analysis of the potential deal here).
Like most things as complicated as a three-party acquisition, there isn't just one simple answer. That said, this deal speaks to some universal truths in the consumer IoT and smart home space I believe contributed to this outcome:
Being a platform in consumer technology markets is hard to sustain
One of the hard truths about the IoT market is its hard to be a platform provider. There are lots of them and competition is getting fierce. Companies like Amazon Alexa and Nest have managed to build sizable customer bases, but that's in part because they gained traction with the end-users.
Which brings us to our next point:
Being a B2B platform provider in consumer IoT is doubly hard
While it's hard to gain traction in the crowded IoT and smart home platform space, it's twice as hard as a B2B play. Even when companies like Icontrol and Greenwave get big wins in the space, unless their client - i.e., the company that faces the consumer - helps to build their brand, the consumer never knows anything about the platform provider.
Why is this important? Because unlike with B2C platforms where end user growth begets more end user growth and consumers clamor for the technology, no one clamors for a system provided by a white label platform provider.
The best you can hope for if you are the behind-the-scenes platform is to follow an (Insert-your-name-here) Inside strategy that allows you to also build brand awareness, something Intel and Dolby have long done. While they're not a full home platform, Innit - a smart kitchen platform play - looks to have structured a favorable deal with Whirlpool which will feature an "Innit powered" strategy that could help build consumer awareness by virtue of the partnership with the world's largest appliance maker.
The consumer-facing service provider takes home the lion's share of revenue
While I don't know the exact splits of revenue Icontrol took home from their partners for each monthly subscriber, I would hazard to guess it was below 10% - possibly well below - of monthly recurring revenue. Alarm.com certainly commands higher monthly splits of the monthly recurring revenue (maybe part of the reason they were the acquirer and not the acquiree), in large part because their hybrid model features Alarm.com as the primary consumer-facing service brand for the thousands of local security dealers they work with, while also working with large national security providers such as Monitronics to augment their core security offerings with cloud-based home security and smart home services. And as for companies like Comcast or ADT, they've built billion dollar business on the back of Icontrol's platform, but Icontrol doesn't see anywhere near that.
If you own the consumer, you own most of the dollars.
While these consumer IoT and smart home macro-"truths" helped lead to the deal today, I also think Icontrol has some very specific competitive issues such as their technology being fairly antiquated compared to more modern offerings from their competition, uncertainty around ADT's long-term strategy under its new ownership, and Comcast's desire to build out more of its own platform that clouded Icontrol's future (you can read my thoughts on these issues here).
It will also be interesting to see what becomes of the ongoing lawsuit with Zonoff, who Icontrol sued not long after rumors of an ADT-Zonoff partnership began to circulate.
Bottom line, this deal has big implications for all parties involved and the broader industry, and marks the beginning of what is likely a broader shake out of B2B consumer IoT platforms over the next 12 to 24 months.
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