Facebook eyes up the connected home space

Facebook has seemingly taken its first steps towards the connected home market with the launch of Portal.

As it stands, Portal is being marketed simply as a video calling product, though with partnerships with various content streaming channels and a tie-in with Amazon’s Alexa, the future could see Facebook enter the fray as a competitor in the smart home hardware segment.

Two products will be released to start with, Portal and Portal+. Portal will feature a 10-inch 1280 x 800 display, while Portal+ is a larger model with a 15-inch 1920 x 1080 pivoting display. Powered by AI, Facebook claims the smart camera automatically pans and zooms to keep everyone in view, while smart sound features minimize background noise and enhances the voice of whoever is talking. How effective the AI remains to be seen, however now the idea of smart communications products have been normalised in the home it won’t be too long before some pretty impressive products will start hitting the market.

Such a venture could prove to be a very useful gander for the Facebookers, as diversification is going to need to happen sooner or later. With younger demographics searching elsewhere for their social media fix, Snapchat and Facebook-owned Instagram benefiting, pressure will soon start to mount on the advertising business.

Shareholders are used to exceptional year-on-year growth figures, but it wouldn’t be a surprise to see these flatten; people are becoming less engaged by the platform, therefore spending less time exposed to adverts, while recent figures have shown key markets are not boosting total subscription numbers. Sooner or later a threshold will be hit; only so many adverts can be placed in front of users. Perhaps this is where the Portal products can help.

Unlike the other internet giants Facebook hasn’t really done an exceptional job of diversification. It has added more advertising products (i.e. different ways to engage users on the platform), but this isn’t genuine diversification. If the audience for the core product declines, Facebook’s business suffers; it doesn’t matter how many products there are if no-one is one the other side of the screen to see them.

Google or Amazon however have supported their core business with outside bets. Think of the cloud computing businesses they own, or the content platforms, or ventures into the grocery sectors. These are ventures which diversify enough to ensure negative impacts on the core business do not have a significant impact, however, close enough to lean on the brand and expertise.

With the Portal products, Facebook could make a play for the focal point of the smart home. This has a couple of interesting benefits, one of which will be controlling the gateway and therefore access to the consumer. By operating a window to the consumer, the owner of the window can charge access to gaze through. Partnerships are already in place with the likes of Spotify Premium, Pandora, and iHeartRadio, as well as Food Network and Newsy. This is a business model which could certainly be successful should Portal offer scale.

It is a simple, but effective idea. The window owner would also have the opportunity to launch new services and products which be installed as default, offering an entry-point to the data economy, in the same way Google dominates the mobile OS space with Android.

The focal point of the smart home is still an on-going battle, though Amazon and Google do seem to be winning with their smart speakers. The telcos have a chance with the router, though the proactive nature of the internet players is wrestling the ecosystem behind the speakers. However, today’s generations demand screens. Amazon has been trying to launch its own smart device with a built-in screen for months, though a difficult relationship with YouTube has not helped the situation.

Should Facebook be able to launch a video-orientated product, with high-enough specs, deep connections to the smart home ecosystem and smart enough AI applications, it could make a dent in the market. No-one has really produced a product which grips onto the space, and priced at $199 and $349, it isn’t out of the question for the Portal and Portal+.

Unsurprisingly, Facebook has made a point of security. AI applications are stored on the device, meaning data will be processed locally not transferred to the cloud. It’s almost as if Facebook has accepted it has a terrible reputation for data collection and management, and is offering an alternative to trusting the team with your personal information.

The big question is whether people trust the Facebook brand enough to give the business such prominent influence over so many different aspects of their lives. Even with a physical cover for the camera lens, users might be sceptical, though if there is ambition for additional services, there is a lot of work which will need to be done. The brand is not in a very good position when it comes to credibility and trust.

Another area which might prove to be a stickler for the product is that you have to have a Facebook account for it to work. This might not prove to be an issue at all in the long-run, though considering there will be people who don’t have and don’t want a Facebook account, or people who have intentionally deleted theirs as a result of recent scandals, it might be immediately ruling out a number of potential customers.

Connected speakers could refresh smart home euphoria

Enthusiasm for connected devices is on the rise, but it’s taking the buzz away from smart appliances and the smart home category on the whole.

According to research from GfK, products which are geared towards improving connectivity and entertainment are gaining traction in the market, though this is replacing the appetite for smart home appliances which are geared towards efficiency and functionality.

“Take-up of smart home products in the UK continues to rise, with interactive speakers the hot product of the last year,” said Trevor Godman, Divisional Director at GfK. “In contrast however, the level of consumer excitement about smart home as a category has lost momentum somewhat – particularly for smart appliances and smart health products.  As smart home pivots to the mass market, it is essential that manufacturers look at what is holding consumers back and communicate compelling benefits that capture consumers’ imaginations.”

While Godman is taking a rather negative approach to the trends, we do not see it in the same light. The idea of the smart home, and various devices in the kitchen or around the house being connected and programmable is not a new idea. The smart fridge or connected light bulbs have been around for years without stimulating enough momentum for the segment to really take off. A creative spark was needed to engage consumers and offer an attractive proposition, unfortunately, smart energy readers do not offer this. Smart speakers and TVs do however.

For the mass market to embrace new ideas, there needs to be genuine excitement. Being able to switch the light in the living off with your smartphone might be functional and useful occasionally, but the smart speakers capture the imagination of the consumer. These are products consumers would actually want to buy, instead of a central heating system which reacts to the weather outside.

According to the research, the UK smart home market was worth £900 million in 2017, making it the second largest market in Europe. It has also become the fastest growing, increasing by 19% in value from 2016 and 35% by volume. There are now 336 brands offering 3,777 smart home products, while 85% of the UK’s online population now own at least one smart product, and the number owning four or more has grown from 35% last year to 44% this year. The fastest growing segment is smart speakers, though this does seem to be at the expense of other categories.

Manufacturers of smart cookers or connected mirrors might look at these statistics and worry, though GfK suggests consumers who plan to buy a smart device or appliance in the future have their sights set on a wide range of products. The smart home might have failed to deliver over the last couple of years, though the accessibility and entertainment value of smart speakers does seem to open up consumers to new purchases.

The purchase of smart home devices might not be growing across the board, but that isn’t necessarily awful for those who have their eyes on the long-game. Smart speakers are normalising the idea of the connected economy. Once the basic concept has been accepted by the mass market, the opportunity to sell becomes significantly easier as value is more readily realised and accessible.

Philips might preach about the benefits of a smart central heating system, but the frivolous purchases were needed to normalise the segment first. The smartphone ecosystem didn’t explode overnight, there were years of adoption as the touch user interface become second-nature, the same could be said here. Frivolous purchasing is needed before the connected bug can spread throughout the home.

5G could open us up to digital terrorism – GCHQ

Connecting our toothbrush to the internet might sound like a futuristic dreamland, but are we fast becoming the architects of our own downfall.

Writing for the Sunday Times, Head of GCHQ Jeremy Fleming has aired his concerns about the digital economy. Yes, it has the potential to create a sophisticated and efficient society with opportunity for all, but also runs the risk of a new form of danger with terrorists hijacking the very same 5G networks which are supposed to make our lives so wonderful. He even managed to drop China in, hinting at the threat of allowing the country to provide the majority of our critical communications infrastructure.

“They will transform healthcare, create smart, energy-efficient cities, make work lives more productive and revolutionise the relationship between business and the consumer,” Fleming writes. “But they also bring risks that, if unchecked, could make us more vulnerable to terrorists, hostile states and serious criminals.”

While it might sound very doom and gloom, Fleming is of course correct. The internet is a scary place with dark corners. New ideas are created every single day, some of them are a force for good, some of which will be utilised by nefarious individuals. The more light which is shed into these unexplored corridors of the web, the more we realise how exposed we are.

Unfortunately, Fleming is raising an argument which is not original; incorporating security into the building blocks of services and products, not simply treating it as an add-on. This should be the approach for making the digital economy secure, though this is rhetoric which we have been hearing for years. The more often it is said, the less impactful it becomes. Perhaps we are blindly wandering down the path to destruction purely because it is easier than tackling the difficulties of making consumers secure.

Another interesting point is collaboration. Again, this is not a new argument, but Fleming seems to be attempting justification for increased access to our digital lives. Using friendly words such as ‘collaboration’ or ‘public debate’ and ‘open co-operation’ should not put a smile on the face of an campaign which has been going on for years.

“We believe some principles allowing industry and governments to demonstrate responsible access that protects privacy are within reach,” Fleming states. “These do not require unfettered access for governments through so- called ‘back door’ or global ‘skeleton key’ schemes. But they do require public debate and close, open co-operation and agreement with technology companies. And when these solutions exist, they also require modern legislation and strong oversight to maintain public confidence.”

Fleming is right though. There does need to be a mechanism to ensure intelligence and police services can ensure our safety, but there is yet to be a sensible solution which offers security, accountability and justification. Last year, former Home Secretary Amber Rudd tried to scare us into submitting to government snooping by suggesting paedophiles use the same services as you and me. It didn’t work, though current Home Secretary Sajid Javid is yet to reveal his ambitions here. The encryption debate has been too quiet in recent months, perhaps another onslaught is on the horizon.

The dark corners of the web are full of nightmares which we are yet to discover. By connecting everything, we are making the digital dream a reality, but exposing ourselves more than ever before.

Apple makes minor dent in smart speaker segment after £1 trillion valuation

While Apple CEO Tim Cook was declaring the company is now the first to exceed the mystical $1 trillion market valuation, new research suggested its HomePod speakers were nothing more than an also ran.

Estimates from Consumer Intelligence Research Partners suggest Amazon is clearly in the lead with 70% market share in the US, unsurprising perhaps, Google is in a solid second on 24%, while Apple is down in third with 6%. Considering Apple’s HomePod has just been on the market for a few months, while Amazon has been present for more than two years, some might argue this is a successful launch, though how much potential is there for Apple?

Of course, the smart speaker market has massive potential on the whole. With the digital economy started to take a strangle hold on every aspect of our daily lives, it might not be too long before a smart speaker is a common feature in the home. The research also estimates 34% of Amazon Echo users and 31% of Google Home users own more than one device in their homes. The issues here is timing, pricing and competition.

Apple was always going to struggle to make an impact in the beginning because of timing. It came to the market months after Amazon and Google had already snapped up all of the early adopters and social media influencers. Of course, it does have its very loyal army of iFollowers, but it does appear the damage has already been done. The second issue is price.

Just as Amazon and Google are dropping prices for the devices, the HomePad remains significantly more expensive. Apple does of course have a premium brand to protect, therefore dropping the price too much would cause damage elsewhere, but it is also playing a different game.

Apple is primarily a hardware company, while Amazon and Google are software and services. Yes, Apple is making progress with its software and services division, but though this is the company sweating existing customers, a sound business model, but limited when you consider the breadth and accessibility of Amazon and Google services. The two internet giants are perhaps looking at the speakers as nothing more than a loss-leader, to encourage the growth of smart speakers and drive normalization of the products. Once the products have become a normal part of our lives, the digital assistants can start making money for them.

Apple might be compared to the pair for the moment due to its pretty useless digital assistant, but its DNA is in hardware. If the business model is reliant on selling hardware, the smart speaker segment could be a tough one to crack as specialised competition begins to emerge. This leads us onto the final point, competition.

Sonos is one of those companies, having just completed an IPO, finishing the first day at $19.91, 32% higher than the starting share price. Though there is a suspect relationship between Sonos and Amazon, the internet giant can switch off its Alexa service with limited notice, Sonos has said it will also begin supporting the Google Assistant before too long. This is the future of the smart speaker market; specialised designers and manufacturers, with recognisable brands in the audio world, creating the hardware and leaving the software component open to the consumer.

Apple might be able to call on its loyal army of iCultists, but soon it will not only be competing with Amazon and Google, but also Sonos, as well as the likes of Bose, Pioneer, Kenwood and numerous other specialists. We suspect Amazon and Google might fade from the device segment soon enough, once there is a high enough market penetration for hardware, why not focus on the key competence of making money through software and services, but Apple will have to go toe-to-toe with the specialists.

This is not to say Apple will lose, but diversification is difficult. Unless you get a jump-start on the market, like Amazon and Google did here, you will always struggle to impose your product against specialised brands who have an established reputation with consumers. Apple will have to sweat the iLifers hard to ensure the HomePod products have a more successful mission than its smartwatch product.

Data scandal set to stall Facebook’s assault on the smart home

Facebook’s data privacy scandal is heading into the second week and it doesn’t look like it’s going to calm down, so much so the team has reportedly decided against unveiling its smart home products in May.

Sources close to Bloomberg claim the social media giant is going to push back the launch of a new range of smart home products as it weathers the privacy storm. The launch was supposed to take place in May, during the company’s developer conference, but will now likely take place towards the end of the year.

Google and Amazon have both shown that the public is open to the idea of smart assistants, even considering the intrusive nature of the devices. Despite already being late to the party, Facebook might have to hold off in this space; launching a product line which is reliant on consumer trust might not be the most sensible idea as its privacy-practises are being scrutinised and criticised. Surely not even Facebook is bold enough to ask for more personal information from the user when it is standing in the eye of the storm.

Interestingly enough, should Facebook enter the world of smart assistants, it might prove to be a hit. The frustrations of many virtual assistants nowadays is that they are not living up to the personalisation promise, but when you ponder the vaults of information Facebook has on you already, it might prove to be the most adaptable and successful assistant. This might be considered throwing fuel on the fire however…

This report is based on the launch of hardware, not specifically a smart assistant, but we have wondered for some months when Facebook was going to get involved in the smart home battle. It is a software business, and a highly successful one, which has (or at least used to have) the trust of the consumer and has been working on personalisation initiatives for some time. It is a recipe which says the smart assistant market would be an opportunity ready for the taking.

The problem which Facebook faces now is the go-to-market strategy. Being late to the party isn’t necessarily the worst idea in the world, there are numerous examples of when the initial innovator gets usurped by a company who just does it better, but you have to wonder when late becomes too late. In the past when latecomers take over the segment, the incumbents had failed to develop solid foundations in terms of customer loyalty and brand credibility. The longer Facebook leaves it to get involved in the smart home space, the more securely Amazon and Google are entrenching themselves in the lives of consumers.

For the moment it is a very sensible idea to back off. Releasing a smart home product in during this period of criticism would essentially be a slap in the face of the consumer, but Facebook needs to turn this public perception around very quickly. The smart home segment is advancing fast, and Facebook might miss the boat if it doesn’t buy a ticket soon.

Google poaches IoT exec, what does this mean for Samsung’s software ambitions?

Google has hired former Samsung mobile communications CTO Injong Rhee who will now lead the internet giant’s move into IoT under the very glamourous job title of Entrepreneur In Residence.

Rhee, who left Samsung in December, was responsible for several heavyweight products at Samsung including Knox, its enterprise security platform, and mobile payment solution Samsung Pay. Specifics of Rhee’s role in Google is not entirely clear just yet, but he will lead the IoT business unit, reporting into Diane Greene, CEO of Google Cloud.

“IoT is a new and exciting space with tremendous potential to transform how we use and deploy technology in our everyday lives,” Rhee said in a LinkedIn post.

“Google and Alphabet have many IoT related products and assets. One of the first things I would like to do with my Google colleagues is to get these efforts coordinated and aligned toward a concerted IoT story of Google — in the process, create distinct consumer and enterprise product lines.”

While this is certainly a positive move for Google, a company seemingly on a never-ending quest to diversify, it is less promising for Samsung. Samsung is a business which has been searching for future relevance and losing a senior executive is never a good sign for a business.

While Samsung is still the leader in the smartphone global rankings, it hasn’t been able to emulate Apple is collecting the profits. This is not to say the mobile is not making money, more that Apple has done an excellent job in monopolizing smartphone profits. Software and services has been one of the areas Samsung has been looking to for differentiation and additional revenue streams.

Bixby, Samsung’s own digital assistant, is a good example of how the Koreans want to be more involved in the consumers lives, but acquisitions such as cloud provider Joyent (which Rhee was responsible for) could be viewed as a strategy to be more than a simply a smartphone brand. With the connected economy just around the corner there are profits to be made in the software game where recurring revenues can be realised, but losing such a senior executive will surely dent the Samsung ambitions.

Apple is perhaps the only brand which can survive in product mode. We’re not suggesting the iEngineers aren’t working on improving the software side of the business, but such is the level of brand loyalty the company will be able to continue making money off products for at least the foreseeable future. Other brands, who customers are a bit less sticky, will have to throw a horde of new features and software at the consumer to demonstrate the attractiveness of their devices. Such is the minimal differentiation which we are seeing in the devices market.

The hire gives us insight into yet another disruptive play from Google, but also puts a bit of a dampener on Samsung’s connected dreams. Rhee has been credited as the driving force behind Samsung’s positive moves into the world of software and will be a notable loss for the firm.

Telcos are losing the battle of the brands

Brand Finance has released it rankings of the top 500 brands worldwide, and while the future is looking rosy for the technology industry it is a bit more gloomy for the telcos.

According to the rankings, the internet giants are the biggest, baddest and best around. Amazon, Apple, Google, Samsung and Facebook complete the top five, showing some extraordinary climbs in brand value across the year. Amazon sits at the top of the table with a brand value of $150 billion (a 42% jump from last year), but the story is not as favourable for telcos.

AT&T and Verizon are still sitting in the top 10, but Brand Finance states the value of their brands has decreased 5% each across the year to $82 billion and $62 billion respectively. While this does not necessarily indicate the current performance of the business, it takes into account several factors which ultimately give a measure of how important that business is to the world and what the future could hold.

Some of the areas taken into consideration when calculating the value of the brand is enterprise value (the total value of the business), brand contribution (the uplift a business gets from having branded as opposed to generic products), brand value (value of the trade mark) and brand strength (customer loyalty, perception, financial performance etc.). There are other factors, but these are the important ones. They paint a picture of how any brand might fit into the economic hierarchy.

Unfortunately, the trends are not looking good for the telcos. Verizon and AT&T slumped in the top 10, Vodafone’s brand value declined 14% to $18.5 billion, DT’s brand increased in value but it slipped down four places, BT dipped to 133rd position from 117th, while Sky dropped as did O2, Telenor, KT and Telia. There were some positive moves though. Orange increased its brand value by 3% and its position from 52 to 51, while China Unicom just 14 places to 134 and China Telecom saw its brand shoot up 36% to almost $24 billion in 47th position.

This is of course a sign of greater trends worldwide. The telcos are slowly being relegated to utility as the OTTs and technology firms reap the benefits of services innovation and more customer facing services. Telcos are seemingly being viewed as dumb pipes to facilitate the transfer of information while the value add services, and the lion’s share of profits, are being absorbed by the internet and technology brands at the top of the supply chain.

The telcos are keen to resist this trend as utility is seemingly being viewed as a dirty word, despite them actually helping reinforce this perception with the data pricing race to the bottom. While it is a different model, we can’t see what is wrong with being a utility. It isn’t as ‘sexy’ as the telcos previous lofty position, but there is a profitable business to be made in the utilities market, where risky and expensive consumer advertising efforts are removed. The whole model is about efficiency and making more money; that doesn’t seem too bad.

To be considered in the big leagues with the internet players, the telcos need to do something innovative and get ahead of consumer trends. They were caught napping when it came to the OTT messaging trend, voice calls, video consumption and smart home, with the initiative being seized by someone else. The traditional telco model is very risk-adverse, so simply repeated what made them successful in years gone is not going to work in the fast moving digital economy. Unfortunately that is all they seem to be doing.

There are a few companies who are doing things differently, and this seems to be recognised by Brand Finance. Orange is doing a great job at differentiation, and despite falling in the rankings, DT is making itself known as a major IoT player across Europe and a good content aggregator in its domestic market. How AT&T performs once it has (assuming it ever does) absorb Time Warner will also be an interesting one. These are telcos trying something different, maybe they will be the last to be branded the dreaded tag of utility.

Could the smart assistant race be swaying to Google?

Amazon is in the lead, but announcements at CES could see momentum gathering in the Google offices, as the pair battle for market share in the fast emerging smart speaker space.

At the annual CES event in Las Vegas, Google has gone big. Marketing is prominent, announcements will be glorious and partnerships are starting to stack-up. The latest incident of back-patting has seen the internet search giant integrate its virtual assistant into speakers from a large number of manufacturers, including (but not limited to) Anker Innovations, Bang & Olufsen, Braven, iHome, JBL, LG, Klipsch, Memorex, and SōLIS.

And the team are not stopping at speakers. Several manufacturers will be producing smart displays, featuring the Google assistant, it will also be plugged into your Android phone, with the option of downloading onto your iPhone. The assistant is also coming to Android Auto, where Google is working with auto makers to integrate the assistant directly into their cars. Over the next twelve months, the team is also working with the likes of Jaybird, JBL, LG and Sony to feature the assistant into headphones.

Soon enough, some might be able to operate without a smartphone. Your smart speaker is connected to the rest of your smart devices, while your car will automatically be plugged into your life, as will headphones. All devices, from your TV, to your smart display unit, will be able to have the functionality of a smartphone, as will (to a degree) your car and headphones. If you had a basic device which was only configured to watching video or playing games, you could run your life without a smartphone. Google could potentially cut the device manufacturers out of the value chain.

This is where we think Google is starting to gain an advantage in the smart speaker/virtual assistance space; it has more friends than Amazon. We’ve speculated before that Google and Amazon were only venturing into the hardware space to show the manufacturers there is a consumer appetite for the devices; a loss leader PR stunt to stimulate the market. The theory here is that the real win for Google and Amazon will be to have their virtual assistant in as many places as possible, focusing on the software and services revenues, but the electronics manufacturers needed a bit of nudging.

With more manufacturers entering the smart speaker space, the price point of the devices will come down, which will make them more attractive to consumers. There will also be consumers who are more confident in buying electronic goods from more traditional names. Finally, there will come a stage where smart speakers are the standard. With dozens of new products flooding onto the market, in partnership with Google, the Google virtual assistant will start to interact with a much larger number of consumers.

The more consumers Google is interacting with, the more influence its internet advertising model will have on the space. The more advertising there is, the more money Google has to develop both its hardware and software ecosystem, both of which will already be substantial. It might be a slow burner, but you can see how Google could gain the upper hand in this potentially lucrative space.

We have a feeling that Google will prevail, but that is far from an Amazon write-off. Amazon is one of the most powerful and influential brands in the world, led by one of the most innovative CEOs. Only a fool would categorically claim Amazon cannot take advantage of its current market leading position, but we have a Google hunch.