Embedded impulses

by Steve Blum • , , , , , , ,

The machine-to-machine sector is getting a lot of attention this week at the CTIA Enterprise and Applications conference in San Diego. The growth of M2M figured into CEO keynote speeches and panel discussions. AT&T’s Ralph de la Vega called connected devices “the next big thing for mobility.”

The growth is driven in part by the decisions taken by service providers to back out of the hardware and hosting ends of the M2M business, and just provide connectivity. Users are moving faster and with far more knowledge of their own needs and objectives than carriers could ever hope to do.

Users do not have this kind of freedom of action in consumer voice and data segments. Mobile carriers like to control hardware and transactions. As do manufacturers. Apple’s App Store forbids direct transactions between app developers and publishers and their customers, and takes a 30% cut off the top of any sale.

Embedding connectivity into devices doesn’t necessarily put the power to choose into consumers hands. Companies can put a product on the market, tie it to a specific service and monopolize transactions by owning and controlling the connection. Amazon’s Kindle device and service is a prominent example of this rapidly growing business model.

As the cost of thin stream mobile data modules drops, expect transactional connectivity to be built into more and more devices, moving from content-driven hardware like e-book readers that are of limited use without the ability to continually make purchases, to products that don’t need it but can occasionally offer upgrades and updates at critical moments.

Consumers may well be reluctant to buy products that come with an ongoing service fee, or buy optional services at the time of purchase. But making an impulse purchase possible at any time puts the selling proposition in front of the customer at the moment of greatest need and propensity to buy.

LG exhibited networked appliances at the show, including a washing machine. It’s easy to say no to a service contract in the store. But when the washer starts making funny noises a couple years later, pushing a button and paying $20 for a virtual repairman will seem like a bargain. And you won’t have to watch him bend over. Bonus!