In December 2016 research firm NextMarket Insights surveyed over 140 smart home industry executives to better understand the state of the industry, the biggest hurdles, successes and what they expected in 2017.

1. SMART HOME
INDUSTRY INSIDER
SURVEY 2017
Brought to you by NextMarket Insights & The Spoon
Author: Michael Wolf

2. Executive Summary
In December of 2016, NextMarket Insights surveyed a group of smart home industry insiders to
ask their opinion about what they thought about the year that was and what they expected in
the coming year for the connected home.
Here’s what we found:
Alexa and voice interfaces were the clear winner in 2016. 7 out of 10 respondents said that
virtual assistants and voice control were the story of 2016.
While many expect voice and virtual assistants to be important this year, things are not as clear
cut. Many believe the defining story of 2017 in smart home will be the growing need for more
robust solutions for privacy and security, likely a direct result of the wake up call that was Mirai
botnet attack last fall. Others see machine learning and artificial intelligence as a candidate for
the defining trend of 2017, while a smaller number see mesh Wi-Fi and robotics as important
but having a lesser impact.
Many saw 2016 as a disappointing year overall in the smart home, with nearly half (49%) feeling
the smart home market didn’t meet expectations last year. Their outlook for 2017 is a more
optimistic – if tempered – one. About 39% see the smart home as having a ”great” year this
year, while 54% see the market as performing “Ok”, where it will continue to serve mainly early
adopters.

3. Executive Summary (cont’d)
When asked what they saw as the biggest hurdle to the adoption of the smart home, the
number one choice by our panel of experts was consumer confusion over technologies and
products to choose. Other hurdles to broader adoption included lack of a compelling need for
consumers to buy smart home products and too much fragmentation in the smart home
market.
These concerns about smart home fed our respondents’ wishes for the future of the smart
home when we asked them the one overarching goal they’d like to achieve in the smart home
in 2017. Tied for the top response was greater consumer understanding about the value of
smart home and reduced fragmentation.
Overall, this survey of smart home experts shows an industry at an inflection point, one that has
learned some hard lessons about product value and approachability, the need to industry
cohesion and standardization and is starting to coalesce around innovative and disruptive new
approaches taken by industry leaders such as Amazon and Google.

4. About This Survey
This survey was conducted Nov-December of 2016. We surveyed 141 industry executives
employed in the smart home, IoT and related industries.
Unlike consumer surveys, industry surveys are meant to provide an understanding of what a
knowledgeable audience thinks will happen to their market sector. To that end, we are able to
detailed, industry specific questions.
We are also able to ask open-ended questions to let our audience educate us, the readers,
about their market and what they are thinking about.
In between each chart slide you will see a highlighted quote/observation (sometimes edited for
readability) from one of these open-ended responses from our panel of industry insiders.
To see the full appendix of open-ended responses to this survey, simply go visit the Spoon
here.
The study was authored by Michael Wolf.

5. According to our panel of industry experts,
the clear choice for biggest smart home
story of 2016 was: Voice control and virtual
assistants like the Amazon Echo/Google
Home.
This shouldn’t be a surprise to people who
follow the smart home, as the smart home
virtual assistant, pioneered by Amazon with
the Echo/Alexa, has become an early
consumer mass market hit, with the installed
base of Echos likely exceeding 7million by
end of year.
The success of Alexa as a voice interface was
a revelation for an industry that had watched
smartphones and apps become the primary
IoT control point the past few years. Fixed
natural language user interfaces in the home
present entirely new user-interaction
paradigms, while a robust ‘Skills’ platform
also presents an opportunity to friction
around potential integration for hardware
providers when compared to more
complicated platform integrations (such as
HomeKit).
While a distant second, 7% of industry
insiders viewed the growing interest in mesh
Wi-Fi as an important story.
3%
4%
6%
7%
7%
69%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Nest's struggles/ departure of Tony
Fadell
Continued growth of managed smart
home providers
Success of focused point products
The growing interest in mesh Wi-Fi
products
Steady growth of smart home
security
Emergence of voice control & virtual
assistants
What Was the Smart Home Story of 2016?

6. “Early adopters are moving away from
their previously purchased point devices
and into products that are more
compatible across a particular platform.
We’ll also see continued subscriber
growth of Vivint/Xfinity home with entry
level, lower price point, smart home /
energy management offerings.”

7. Looking towards 2017, our panel of industry
insiders are split more evenly on what could
define the year in smart home While the biggest
percentage (29.8%) believe voice control will be
the biggest story in 2017, a close second believe
IoT security and privacy could the biggest
headline. AI and machine learning came in a
close third at 27%.
The prominence of voice control and AI/machine
learning in our survey underscores the growing
importance of virtual assistants such as Alexa
and Google Home in 2017. The rapid growth in
the number of Alexa skills, Amazon’s continued
evolution of the platform and recent efforts by
large technology platform players like Google,
Apple and Microsoft to bolster their own voice
interface and AI competencies for the connected
home are strong indicators our panelists are on
the right track.
The Mirai botnet attack was a wakeup call for the
industry, leading to much higher awareness
around security and privacy early in 2017. For
established companies, cohesive IoT security
strategies will become a requirement in 2017.
However, we also expect more high-profile IoT
security breaches like Mirai as the year
progresses, which will raise the prominence of
the topic even further and possibly create more
concern about connected products in the minds
of consumers.
3%
4%
7%
27%
29%
30%
0% 5% 10% 15% 20% 25% 30% 35%
Home robotics and the smart home
Connected commerce platforms (i.e.
Amazon Dash)
Mesh Wi-Fi
Artificial intelligence and machine
learning
IoT security and privacy
Voice control and the smart home
What Will be Defining Smart Home Story of 2017?

8. “Security is going to be an issue, but
adoption is the key barrier to transpose
in the near term. If products don't
become easier to setup and use, we will
struggle to reach mass market adoption.
Once there is semblance of mass market
adoption, security will become a real
issue in consumer's minds.”

9. Nearly half of our smart home industry insiders felt
the smart home had a disappointing year in 2016.
49.3% of respondents said the smart home
performed below expectations in 2016, compared
with 4 out of 10 respondents (40%) who said that
the smart home met expectations in the last year.
Only 11% of respondents said that the smart home
exceeded expectations for the year.
According to our respondents, some of the
problems plaguing the smart home industry
according include continued technology and
standard fragmentation, confusion among
consumers about the value delivered by smart home
technology, as well as an inability by the smart home
industry to adequately articulate smart home.
The good news is the industry seems to recognize
their problems. Regarding fragmentation, the
challenge is developing solutions in the face of
continued divergent agendas among large
technology companies, standards bodies, etc.
Meet
expectations,
40%
Exceed
expectations,
11%
Below
expectations,
49%
Did Smart Home Meet Expectations in 2016?

10. “Consumers still remain wary of the
complexities of smart home technologies.
Voice control seems to be an attractive
way to illustrate the potential for
simplification of the smart home, but in
reality it still has ways to go.”

11. When asked to pick the smart home product
of 2016, our panel of smart home industry
insiders were pretty clear in their choice:
virtual assistant products like Amazon Echo
and Google Home.
This isn’t surprising. At the beginning of
2016, it was clear Amazon Echo and Alexa
was the integration product of choice for
smart home hardware makers, and by the
end of 2016 the Echo had sold out on
Amazon and was the #1 product on the site.
Coming in a respectable but distant second
was the smart front door, which includes
video doorbells and smart locks. Ring was
the standout here, but others like August,
Vivint, Kevo and Skybell also had a decent
2016.
Mesh brought Wi-Fi back into vogue, with
6.4% choosing these products as the product
of the year. We expect 2017 to be bigger for
mesh with a flood of new products.
2% 4%
6% 7%
14%
66%
0%
10%
20%
30%
40%
50%
60%
70%
Connected
commerce
(i.e. Dash)
Smart
kitchen (i.e.
Samsung
Hub)
Mesh Wi-Fi
system (i.e.
Eero)
Smart
security
Smart front
door (i.e.
Ring)
Virtual
assistants
(i.e.
Amazon
Echo)
What was the smart home product category of 2016?

12. “Echo and other devices will replace
traditional remote controls.
Voice is killer app in 2016 and will
continue in 2017. 2-way voice for
interaction with live agents and other
service providers. A new Amazon kitchen
device expanding to video with voice
control will open new product categories
and use cases.”

13. When asked what they believed was the
biggest hurdle for the advancement of the
smart home, our panel of industry insiders
saw consumer confusion as the biggest
issue holding back consumer adoption. 32%
said consumers were confused by which
technology and products to choose.
In a way, this response is also related
another response: market fragmentation
and a lack of interoperability. 18% said that
this was the top hurdle holding back smart
home. These two responses show that
approximately half of our insiders see
technology and product confusion as a
serious issue.
The second most popular response was
’consumers don’t see a compelling need’ for
smart home at 24%. This points to the need
for product companies and retailers to learn
how to better tell the story of smart home,
identifying compelling use-cases and
applications for these products that are
relevant to consumer lives. I’d suggest this is
related to retailer inability to show the value
of smart home (9%), the fourth most
popular response.
Interestingly, price was not considered a top
concern, with only 8% seeing this as an
hurdle to wider consumer adoption.
8%
9%
18%
24%
32%
0% 5% 10% 15% 20% 25% 30% 35%
Prices for a smart home system are
too high for mass market adoption
Retailers don't know how to
properly show the value of smart…
Too much market
fragmentation/lack of…
Consumers don't see a compelling
need to adopt smart home…
Consumers confused by which
technology and products to choose.
What is the biggest hurdle holding back smart home?

14. “2017 will be a down year for the Smart
Home. Retailers will be dismayed at the
poor sell-through and will pull back on
featuring products. Several start-ups will
fail. A big player will take a hit --
Alphabet may sell Nest. This will lead to
a lot of negative media and "will it ever
take off" articles..”

15. When we asked our panel of smart home
industry insiders what they thought should
be the overarching goal of the smart home
industry for 2017, two responses tied for the
top overall response at 29%: consumer
education about the value of smart home
and finding ways for disparate platforms to
interoperate.
Both of these are directly related to the
previous question, which aimed to
understand what hurdles continued to hold
the industry back. By addressing the need
for better consumer education and
reduction of fragmentation, our
respondents hope that they can reduce
what has been holding back the smart
home and make it more approachable to a
wider audience.
22% of respondents see the creation of new
and sustainable business models as an
important for the smart home. This is one
area we are seeing significant advances, as
smart home providers embrace
subscription, concierge and commerce-
based business models.
14.9%
22.0%
29.1%
29.1%
0% 5% 10% 15% 20% 25% 30% 35%
Expanding and better defining use-
cases for smart home technology
into new areas such as eldercare…
Creating sustainable business
models using smart home and IoT
technology
Finding ways for disparate smart
home platforms to interoperate
Consumer education about the
value of smart home and IoT
What should be the goal of smart home in 2017?

16. Amazon showed how much natural UIs
matter for smart home. There are so
many more smart home UI possibilities
that can be opened by the backing of a
big player such as augmented reality,
gesture, location, etc

17. The outlook for smart home in 2017 is decidedly
mixed according to our panel of industry insiders.
One in four respondents are optimistic about the
coming year, saying that outlook is great and that
the smart home should see significant growth.
The majority – 54% - are more subdued in their
outlook. They say the smart home will do ok, but it
will not gain traction among mainstream users this
year.
Only a small percentage felt the smart home market
would show poorly in 2017. Compared with nearly
half (49%) that felt the smart home market didn’t
meet expectations in 2016, this is a relatively small
overall percentage who have low expectations for
this year.
Great - Smart
home will
grow
significantly/
see
mainstream
adoption,
39%
Ok - smart
home will
continue to
sell to early
adopters but
not
mainstream
consumers ,…
Poor - I think
the smart
home market
will perform
poorly in
coming 12
months, 4%
Outlook for smart home in 2017

18. Amazon showed how much natural UIs
matter for smart home. There are so
many more smart home UI possibilities
that can be opened by the backing of a
big player such as augmented reality,
gesture, location, etc

19. About The NextMarket Insights &
The Spoon
NextMarket Insights is a research and advisory firm focused on the connected consumer.
The Spoon is a site dedicated to covering the future of the smart ktichen, smart home, cooking
and food and is a sister publication to the Smart Kitchen Summit.
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