With the “Internet of Things” (IoT) era taking off, more of the items in our daily life are becoming connected together. This year, SAP ($SAP) described the Internet of Things as the beginning of “an era of unprecedented change fueled by hyperconnectivity.”
This network of connected devices will include our cars, phones, wallets and many of the objects in our homes. This last domain is currently generating the most excitement.
Discussion of the IoT megatrend by publicly traded companies has exploded over the last few years, and mentions of “smart home” have more than kept pace. In the last 3 years, the percent of discussions mentioning both “IoT” and “smart homes” in close proximity within documents such as filings, press releases, IR presentations and transcripts has dramatically increased.
The fact that many of these IoT conversations are coalescing around the smart home topic demonstrates it is a very real and practical application of the technology.
Growth is Expected to be Explosive
I used AlphaSense to find companies talking about the growth prospects for home automation industry. The estimates are uniformly impressive:
- Logitech ($LOGI) expects the connected home market to increase at a CAGR of 40% for the next 5 years
- Accenture ($ACN) cites a survey that shows that 2/3 of people intend to buy a connected home device before 2019
- Emerson Electric ($EMR) expects the home automation market to reach $11 billion by 2017
- Tower Semiconductor ($TSEM) cited a Transparency Market Research report expecting that the home automation market will reach $16.4 billion by 2019, up from $5.4 billion today
Given the expected growth in market size over the next few years, it should come as little surprise that many different companies are trying to grab a piece of the pie.
Using AlphaSense to scan company documents worldwide, I counted how many businesses are talking about “smart home,” or closely related concepts. I found that in just 4 years, that number has exploded from 1,000 companies in 2010 to nearly 4,000 at the end of 2014. At the current rate, I expect that number to reach nearly 5,000 by December 2015.
Moreover, the increase in attention is not limited to technology companies — many different types of business are getting involved. Since 2010, the utilities, telecom, information technology, consumer and industrials sectors have all posted at least 300% increases in the number of constituent companies discussing smart home products.
Which Companies are Involved?
I used AlphaSense to rank companies by the relevance of their documents to the “smart home” concept, limiting the universe to companies with a market cap over $100 million. The following examples are 3 of the most relevant players:
- ADT ($ADT) – Provider of home security and monitoring systems with recent commentary on the home automation market:
- “While the buzz around the connected home and all the new opportunities is attracting a lot of new players, it is also creating some very exciting new opportunities for ADT.”
- “ADT is the most highly recognized and most valuable brand in the security and home automation space … our demonstrated expertise and established footprint will help us to become a leader in the evolving market for home automation.”
- Control4 ($CTRL) – Sells a product which functions as the “operating system of the home, making connected devices work together.” Their solution provides the ability to integrate music, video, lighting, temperature, security. Last year they had revenue of nearly $150 million, with sales expected to grow 12-15% this year.
- Netgear ($NTGR) – Produces home networking devices and recently launched their Arlo line of smart home devices. Just six months following the release of their first Arlo product, a smart home security camera, they recently stated on an earnings call that they “are up top in market share [in the space] in all three markets — Europe, Asia, as well as North America.”
I conducted all of my research for this article using the search capabilities in AlphaSense. After running a single search across all documents for any mentions of my keywords with applied filters, I downloaded an automated Excel summary that included a count of results by company and sector to create my quantitative analysis. This post required only 3 searches, and each search returned results in seconds. Thanks for reading!