The car is well on its way to becoming themost sophisticated mobile device in theInternet of Things (IoT), or, to use a phrase
Posted Oct 20, 2015 by Brendan OBrien (@brendan0606)
The Cloud-Connected Car Drives IoT Monetization
Brendan OBrienCRUNCH NETWORK CONTRIBUTOR
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thats more to the point, the Monetization ofThings (MoT). Linked to the cloud by way ofwireless technologies, smart chips, onboardcomputers and mobile apps, connected
vehicles are driving new business models and disrupting old ones. Heres a look at someof the key monetization opportunities emerging from their wake right now, as well assome not far down the road.
The cloud-connected car of the future is here today and growing in number. Its atrend fueled in large part by consumer demand. In a 2014 report by McKinsey &Company, more than a quarter of car buyers said that Internet connectivity is moreimportant than features such as engine power and fuel efficiency. In the next five years,the number of connected cars may exceed a quarter of a billion worldwide, according toestimates by Gartner.
Not only are connected cars catching on fast, their connections are also gaining speed.Automakers have already made 4G wireless connectivity available in some new cars,and the feature may well become standard in most models by 2020. The combination ofWi-Fi and IoT technology paves the way for a bevy of rich services for drivers andpassengers alike, such as enhanced navigation, real-time traffic and parkinginformation, streaming infotainment and integration between dashboards,smartphones and wearable devices such as health trackers and smart watches.
New Monetization Sources
Connected cars are changing the way we get from Point A to Point B. In the process,theyre opening new realms of monetization for carmakers, service providers and manyother travel-related industries. Revenues from connected car services are expected totop $40 billion (U.S.) in the next five years, according to a July 2015 report from SNSResearch. Many of those proceeds will involve a range of flexible billing options,including traditional up-front payments, subscriptions and consumption-basedrecurring payment schemes.
Data plans will account for a portion of those revenues. Theyll be billed the same as anysmartphone plan today, or as simple add-ons to existing plans. However, they representa significant source of new income for telcos and other service providers.
Additional revenues will come fromenhanced editions of subscription
Brendan OBrien is co-founder of cloudbilling provider Aria Systems.
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Technology innovations will continue
services, like SYNC from Ford andEnForm from Lexus, that carmakershave been offering for some time.New cloud-powered versions ofthese digital services provide value-added features, such as always-on access toemergency services and roadside assistance, teen-driver monitoring and advancedvoice control.
Subscription offerings like these enhance the driving experience for consumers. Andthey give automakers a ready source of ongoing revenue above and beyond the initialpurchase price, while allowing them to deepen customer relationships and enhancecustomer lifetime value (CLV).
A Very Big Market Indeed
The market for cloud-based car services is potentially enormous, and extends farbeyond new models. Theyre also available to more than 150 million cars built since1996. Thats the year onboard diagnostic (OBD) ports, which are located on or nearsteering columns, became mandatory in most cars made in the U.S. and Canada. Thissummer, Verizon launched hum, its new aftermarket subscription service. For $14.99 itbrings a host of cloud-connected services, including accident notification, systemdiagnostics and stolen vehicle locator services to any older car with an OBD port.
ODB ports are in fact becoming the entry point for a rapidly growing number of cloud-connected mobile apps designed specifically for cars. While many are free, some, likethe fleet monitoring app FleetLeed, offer a potentially lucrative source of ongoing datamonetization for service providers.
Smart Connected Cars As Active Agents
Todays new connected cars are able to interact with the world around them and withother cloud-based systems using such IoT innovations as proximity sensors andpredictive intelligence. For example, certain Mercedes-Benz models introduced this yearcan link directly to Nest, the IoT-powered smart home system, to remotely activate ahomes temperature controls prior to arrival.
The potential for connected cars todo even more for us is far-reaching.
to profoundly influence how we price and pay for cars.
Connected vehicles are driving new
Theyll soon be able to check us intohotels, notify people when wererunning late, confirm appointments,make dinner reservations, order
movie tickets, even pay for gas and parking all on their own and without intervention.Enhanced services such as these will likely entail subscription- or usage-based billingmechanisms.
Disruptive Forces In Play
From a monetization standpoint, three disruptive trends, made possible in part throughIoT innovations, have the potential to dramatically upend business models for personaltransportation.
Car Sharing. Real-time access to car availability and mobile connectivity are acceleratingthe adoption of car-sharing, which customers pay for on a consumption basis. By 2030,as many as 650 million people worldwide could be using some form of car or ridesharing, according to projections by ABI Research. Joining ride-sharing pioneers likeUber, rental car agencies and corporate fleet operations are getting in on the trend. Soare most major automakers. They see it as a smart way to augment traditional sales asthe concept grows in popularity.
Pay-Per-Use. One downside of car sharing is that if you want a particular car, you maybe out of luck. With a new pricing plan introduced in 2014 by Citroen in Europe, you canown the car you want, but on a pay-per-use basis. Your monthly cost is pegged to howmuch you actually drive. In other words, the car is priced, and billed, like a smartphone.It could become a popular alternative to car sharing for low mileage or occasionaldrivers, especially in the worlds burgeoning urban centers.
Direct-To-Consumer Sales. Tesla Motors sells its line of IoT-infused, all-electric vehiclesdirectly to its customers, a taboo thats been in place for more than 100 years in the U.S.In response, some states, pressured by powerful dealership lobbies, have banned thepractice. The Federal Trade Commission (FTC), on the other hand, is in favor of it. Directselling could be a profound game changer, requiring carmakers to build closercustomer ties over time. With direct links to cars by way of IoT, they now have a primevenue for doing just that. Theyll be able to proactively engage customers by deliveringupgrades, maintenance services, new features and incentives for upcoming modelsstraight to every dashboard.
business models and disrupting oldones.
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The Road Ahead
Technology innovations will continue to profoundly influence how we price and payfor cars, in-vehicle digital services, auto insurance and related goods and services.Fully autonomous vehicles are perhaps less than 10 years down the road. In the not sodistant future, entire transportation grids will be run intelligently from the cloud. Theresno telling where such innovations will lead. One thing we know for sure, however, is thatbusinesses will need to monetize with greater agility if they wish to cash in on thecompelling revenue opportunities from the Internet of Cars.
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