While monetization models are evolving with increased sophistication, today most of them can be grouped into primarily six categories:

Device Operations: One of the older monetization models for IoT is in device operability.  The earliest implementations of IoT were basic in that it mostly provided for remote operation and maintenance of devices. When the industry was (and still is) trying to figure out how to monetize this disruptive innovation, it provided for an initial revenue stream.  Examples of this model are in remote diagnosis of stalled automobiles, remote locking and unlocking of devices, etc.

Premium Service: Premium services is a model where the provider offers connectivity and operations for advanced capabilities.  They may or may not offer free basic services.  Examples are On Star Corporation which provides value add services for a premium.

Data Vending: This revenue model is still a nascent concept at the moment.  It has gained a lot of traction in the consumer goods sector where device usage data is collected (with the permission of the user) and then the data (either raw or analyzed) is then sold to interested parties.

Information Ecosystem: Industries with an established supply chain system are good candidates for the Ecosystem revenue model.  The data from the end user is passed back along the chain to the suppliers upstream in the chain.  An example of this is in the consumer goods sector.  Consumers buying habits and spending profiles have been always collected with point of sale data which was hitherto passed back to the suppliers.  Now, with IoT, even their device operational data can be analysed by the supplier.  For example, if connected refrigerators report consumers’ water drinking habits, the makers of the water filters can use that information to send replacement reminders at the right time.

Freemium: The free/reduced cost model is also one of the older revenue models.  Examples are internet providers who provide the modem for free while charging for the actual internet connection.  Another example is also the tollway devices (iPass, EZPass, etc.) where the device is free but then needs to be periodically replenished based on usage.

Demand Driven:  The market segmentation revenue model is probably the most sophisticated of the lot.  In this category, IoT data is extensively used to analyze usage patterns.  The patterns are then used to tailor is extensively analyzed to identify usage patterns.  It is then used to uniquely price different user segments.  A common example is the internet data plans offered by cell phone providers.to uniquely price different user segments.  A common example are the internet data plan offerings available to consumers.

In the next post, I will talk about common monetization challenges faced by the industry.