Last week’s Consumer Electronics Show (“CES”) put a spotlight on Internet of Things (“IOT”) technology and its leading application, the smart home. The term Internet of Things was coined 17 years ago and has had a couple of waves of enthusiasm in the past. Has it now arrived? I’m skeptical because I don’t yet see the killer app.
I first heard the phrase Internet of Things (“IOT”) in 2000, from an entrepreneur out of the MIT Media Lab who was pitching a start-up to develop a networking technology to enable the IOT.  That start-up became Ember and the technology evolved to ZigBee. In 2012 we sold Ember for about 80¢ on the investor dollar. The management team got a big bonus but not the “change your life” money they had hoped for.
I love the phrase “Internet of Things” because it suggests that the magic of the internet can be expanded from a world market of circa one billion computers and smart phones per year to all the world’s smart devices, including cars, appliances, and controls and sensors of all kinds, about 10 billion devices sold per year. What venture investor would not be excited by the opportunity to create a 10x bigger Internet? We set out to build an inexpensive, easy to manage, secure network like Ethernet that would enable many services, from clocks that reset themselves to daylight time to complex monitoring and process control applications. Bob Metcalfe, the inventor of Ethernet and founding CEO of 3COM, a major networking company, also invested in Ember.
Of course, we made some mistakes. We were ahead of the market. We over-engineered ZigBee and lost a large part of the home market to a simpler, cheaper technology (Z-Wave). And we failed to bring a marketing genius on board who might have been able to stimulate more demand. But the biggest problem was the absence of a “killer app”, what the spreadsheet was for the PC, a use case that a large number of consumers really cared about.
The apps that looked most promising were energy management and home automation/security. Industrial markets are fragmented and inherently slower to change. Seven years later, the smart home (encompassing automation, energy management, and security) is still the most promising market.
The learning from Ember was: few people feel a burning need for a smart home. Energy concerns come and go with energy prices, and since 2008 energy prices have been down and SUV sales are up. The ZigBee companies got a nice lift from smart meters around 2010, but that was mostly a regulator-driven initiative, versus consumer-driven. When the regulatory mandate was met, the market stalled.

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