Yes, I said that wrong. It used to be “give ’em the razor, sell ’em the blades.” But at least in the home internet of things (IoT) marketplace, several companies are changing and have changed that model. I am a “member” of the Dollar Shave Club. They sold me my first razor, but then have given me 3 new razors because the first one broke. I get 4 new razors every month for $6. I am also an owner and huge fan of Luma, the home WiFi router provider, based in Atlanta, who has brought home WiFi setup, configuration, maintenance, and monitoring to your phone. My next in home purchase will be a Google Nest. Here’s how Luma and Nest are selling razors and blades.
For some background on Luma, see these two previous posts here and here. I love Luma. Yes, at install, it is more expensive than your average piece of crap home WiFi router, but it’s worth it. I have 3 Lumas in my home, and no WiFi dead spots. None. At last glance – from my iPhone as I’m writing this – we have 34 active devices on the network. That’s TVs, game consoles, PCs, Macs, iPhones, iPads, printers, network storage devices, etc., etc. Everything always works, except when I want to “Pause the Internet”, which I can do from my iPhone. Then nothing works, and the teenagers have to speak.
Now Luma has introduced Luma Guardian. They’ve sold me the razors, and now they are going to sell me the blades. Guardian is software as a service (SaaS) that actively protects my home network and all the devices on that network from viruses, intrusion, spam, and reduced speeds from Charter or Comcast or whoever you pay for internet access. Luma Guardian is $5/month. Not really a big deal, right?
Wrong. Luma Guardian is the device maker’s way of earning recurring revenue. How often have you purchased a new home WiFi router? Maybe every 3-5 years since 2005-ish? So Linksys or Netgear or Asus or whoever has received less than $100 from you 3, maybe 4 times. Luma is going to get $60/year (probably more as they roll out new software updates) from households every year for years to come.
Luma started with a great device that’s easy to configure, does what it’s supposed to do, and delivers the service you expect. Now they’re delivering more services in the form of software through those devices into your home.
Nest, acquired by Google for $3 billion in 2014, lets you change the temperature in your home using your phone. The Nest device is pleasing to the eye, unlike any other previous thermostat ever. Is that it? No. Nest started with a simple method of letting consumers take simple control over the biggest energy hog in their homes: HVAC. From their own marketing, Nest says you can save $140/year just by using Nest. Your experience may vary. So you get your money back in a little over a year (if you buy your Nest from your power company, like Georgia Power).
Google is taking Nest much further. They sell us the razor (Nest devices) and then sell other interested parties the data. What data, you ask? Good question. When you buy your Nest from Georgia Power (or equivalent), you get that $100 discount when you agree to “enroll” or “sign up” for GP’s energy program to let GP see just a little more about your aggregate energy usage. So, Georgia Power is paying ($100/device) to get energy usage data that is more robust than the data they get from the power they deliver to the outside of your home.
Furthermore, Google is positioning Nest as THE central interface for accessing, monitoring, and controlling other devices in your “smart home” through their “Works With Nest” program. “Works with Nest” means “someone made a device that you can control with the Nest smartphone app, so that device maker did not have to get into the software business and compete against Google.” I know, long translation, but you get the gist of it. You might make a killer electronic door lock, but you’ll never out-software Google.
You already know. Roku is on your TV. Alexa hears (and records!) your voice, as does Google Home and as will Apple HomePod. Amazon Dash will soon “know” what you need to order based on algorithms that learn your habits over time…kinda like the Nest learns your home temperature needs over time.
That “time” for Nest is about a week. Yes, this is big data, machine learning, and Artificial Intelligence entering our homes at an alarming, but very convenient rate.