My 2016 IOT predictions

2015 was another successful year for the IOT and wearable market, marked by major M&As (e.g. Intel’s acquisition of Recon Instruments, Fossil’s acquisition of Misfit Wearables, Apple’s acquisition of Metaio, Audi/BMW/Daimler’s acquisition of HERE, etc..), a world’s record crowdfunding campaigns (e.g. Pebble’s $20M kickstarter campaign), major product announcements and launches (e.g. Microsoft’s Hololens, Apple watch, Samsung Gear VR, etc.). But as we are about to celebrate the new year, now is the time to share my predictions for 2016:

1. New form factors emerging and expected to see good traction in the wearable space in 2016: smart patches, smart tattoos…earables, connected contact lenses.

Even though wristbands still dominate the wearable category today, thanks to companies like Fitbit, I expect to see new form factors such as smart patches, and smart tattoos, finally starting to gain good traction in 2016. One of the main reasons for this is that there are clear limitations when it comes to capturing biometric data from the wrist beyond steps, calories and heart rate. Capturing more advanced biometric data is a lot easier via other form factors such as smart patches. As a result of that, some research firms are already forecasting that the smart patch market will capture nearly a third (200M units WW) of the wearable market by 2025. Companies like Kenzen Wear, Vital connect..are well positioned there to take advantage of this trend. In addition I expect to see earable products, capable of wirelessly streaming music to the ear or capturing biometric data (blood pressure, heart rate..) to become a new hot category and also see some good adoption in 2016. Lastly connected contact lenses, capable of measuring glucose levels, displaying relevant information in front of the retina via AR , or correcting human’s vision..are another category to watch in 2016. Startups like LENS, EPGLMed, along with tech giants like Google, are set to be key players there. However, I would not expect significant deployments of connected contact lenses in 2016 yet as the technology will need to mature first and the price will need to come down in order to see good mass adoption. My point is that over time the wrist category will become less dominant due to some limitations to the benefit of new categories listed above.

2. Big data and analytics becoming key differentiators and a gold mine in the wearable health space.

Today the reality is that due to the lack of significant health insights from fitness trackers many fitness tracker vendors are seeing important abandon rates (e.g. Fitbit’s abandon rate is 50%+) which is a major threats for their business long term. This is why big data and analytics are set to become a key differentiator for IOT vendors in the IOT health space long term. Some wearable tech startups have already created algorithms capable of telling users if they are burning too much calories and should slow down while running on a treadmill, or even better if they are about to get an injury or a heart attack. With that in mind, I expect many IOT vendors to increasingly focus on hiring PhDs capable of building advanced algorithms in order to be able to provide to users significant health insights or create new features for their IOT products. Companies like LifeQ are well positioned there. I also expect to see some consolidation in the space with big data and analytics firms becoming prime M&A targets for wearable tech giants like Fitbit, Jawbone, and others.

3. More fashion and luxury brands getting into the fashion tech /wearable space.

Over the past 2 years, we have seen several luxurious and fashion brands jump into the fashion tech space. Those include companies like Open ceremony partnering with Intel, Tory Burch teaming up with Fitbit, Swarovski partnering with Misfit wearables, OMsignal partnering with Ralph Lauren, Omate teaming up with Ungaro (Full disclosure: I facilitated the deal between Omate and Ungaro to help them create and launch the Omate smart ring), Apple partnering with Hermes for its Apple watch, etc…In addition, we saw the emergence or the continued success of smart jewelry startups like WiseWear, Ringly…I expect this trend to continue in 2016 and beyond with more fashion and luxury brands entering the market. In addition I expect more leading apparel companies partnering with agile and innovative wearable tech startups to create “smart” versions of their latest collections (t-shirts, shorts, socks..) and further drive sales and take advantage of this trend. I can tell you that there are many discussions happening behind the scene and the interest from leading apparel companies is stronger than ever. My vision is that in the next 5 years most clothing stores will sell connected and unconnected versions of their clothing items embedded with biosensors, next generation smart fabrics (e.g. connected cellulose fabrics..). The price difference between the unconnected and connected versions will become almost insignificant over time as the adoption of smart clothing starts to increase and the price of the components continues to decrease.

4. 2016 will be a decisive year for VR but AR presents the biggest opportunity long term.

Literally every tech giant (e.g. Samsung, Facebook, Apple, Sony, Google, Amazon, etc.) have already announced or are rumored to be working on a VR product for 2016 and beyond. Following the acquisition of Oculus by Facebook in 2014 we are seeing a tremendous amount of interest for VR and a similar phenomenon a few years back when Google introduced the Google glasses and all the major competitors jumped on the AR bandwagon. In 2016, I expect to see many more major Hollywood studios, FX firms, brands, developers, sports teams (NBA, NHL, MLS, NFL..) being involved in VR projects one way or another. From a hardware standpoint, we are also likely to see a pricing war between VR vendors, especially from low cost Chinese vendors: In fact, some Chinese vendors are already selling their VR device for $30 today. With that in mind, I predict that in the next 24 months most vendors will give away their VR device for free in other words offer free ad supported VR devices or free VR devices coming with required subscriptions to VR content in order to offset losses on the hardware. I also would not be surprised if in the next 24 months, the Oscar end up introducing a new category dedicated to “Best VR content of the year”. With that being said, long term I strongly believe that AR will become a much bigger market in terms of revenue opportunity. In fact, some research firms are already predicting that by 2020 AR will generate $120B in revenue Vs $30B from VR. This is where players such as Magic Leap, Apple, Google, are well positioned to bank on this anticipated growth. Even though most of the attention is on VR these days, behind closed doors, big enterprise companies in select verticals (e.g. automobile, manufacturing, field services, transportation, mining..) are already adopting AR glasses to solve real problems, increase productivity and save money. In the long run, one of the biggest drivers for AR will be segments such as AR commerce once the technology matures.

5. AI war in the IOT space set to intensify and AI is set to become new valuable interface for IOT devices

I expect AI to start playing a more prominent role in the IOT space in 2016. Let’s face it: Google (Google Now), Microsoft (Cortana), Apple (Siri), Facebook (M), etc..all have their own AI solutions today. Long term I expect AI to become more teachable, contextual and capable of handling very complex inquiries across a wide variety of IOT devices to assist the user on the go and predict customers’ behavior. Viv, one of the most impressive AI startups that I have come across, is the illustration of such trend. Viv intends to put their teachable AI solution everywhere (Home, car, smartphone, tablets, wearables..) and open their API to developers to help them create new use cases, apps..With this type of technology advancement in the AI space, AI has the potential to become a new valuable interface for IOT devices (e.g. fitness trackers, smart watches, connected glasses, VR devices, smart home products, cars..) and bring the customer experience to a whole new level where devices will be able to learn about users and deliver contextual information or insights to users.

6. Holographic displays to become a new interactive interface across many IOT platforms.

I have seen a lot of technological advancements in the past 12 months in the holographic display space. Leia Inc, a Menlo Park based startup, is one of my favorite startups out there. Without disclosing anything, I can simply tell you that there is a lot of interest for such technology from many industries: Automobile, consumer electronics (Smartphone, tablet..), smart home.. Granted holographic technology is not a new concept but I think that it is reaching a point where it can become a new interactive interface for IOT devices across various platforms. My favorite use case is holographic video chat. Imagine being able to do a holographic video chat in your car through HUD. Well I think that we will start seeing such feature in the near future on many platforms (e.g. connected cars, smartphones, smart home products..). It is only a matter of time., not a matter of “If”. And once holographic displays start getting embedded with Google’s Solis on a wife variety of wearable devices (smart home, smart watches..) where users will be able to manipulate holographic objects via gesture, that’s where the magic will come to life.

7. Connectivity for IOT devices to become the new battleground for carriers

With wireless subscriptions reaching a saturation point (100%+), and an increased competition among US carriers, IOT has become the new battleground among US carriers to help them further drive their top line, and find new revenue opportunities. In 2015, US carriers have continued to lay the foundations to take advantage of the IOT opportunity. For example, AT&T, which has 25M IOT devices, has built a program inviting IOT players to leverage their platform to provide connectivity to IOT devices. Verizon, which has already 1000 IOT partners and is on track to generate $1B in revenue from IOT, also announced the Thingspace platform, a dedicated IOT platform inviting developers, partners to use its network to connect the myriad of IOT devices. Verizon understands that low cost of connectivity and big data are among key success factors to drive the adoption of IOT connected devices which is why it already announced that the cost of the IOT module will be about half the cost of its LTE module. It is also putting big data at the core of its dedicated IOT platform. While most of the IOT related revenues from US carriers are coming from M2M devices today, I expect this trend to change a bit in 2016, with more US carriers offering more IOT devices such as connected smartwatches, child locators, connected car products, etc..but don’t expect significant volume from those devices yet in 2016. However, we should start to see more significant deployments in 2017. Today having to pair an IOT device (smartwatch, connected glasses..) via Bluetooth or Wifi to a smartphone is currently the norm. However, once the cost of the IOT module to connect an IOT device to LTE or 5G becomes cheaper, and inexpensive business models (e.g. low cost monthly fee to connect the standalone IOT device) become available for consumers, I expect most IOT devices to become standalone devices. From a user experience standpoint this is just the way to go.

9. Apple to introduce new wearables and IOT devices in 2016 and beyond

With 60% of the smartwatch market captured by Apple, the Cupertino based company already owns a lion share of the smartwatch market. So why would they stop there? Plus Tim Cook already announced that Apple is working on other wearables. It makes total sense for Apple to do so as it can help the company reinforce its already sticky hardware and software ecosystem. Apple has done a great job converting its large install base (sold 1B+ iOS devices ) to new products to lock them into their ecosystem. The next logical step would be an AR and VR device based on its recent acquisitions (e.g. Metaio, Faceshift..) in the space. I also expect Apple to enter the smart clothing market based on Tim Cook’s interest for fitness and fashion. Plus it would be a nice complement to the largely successful Apple watch. To do so, Apple is likely to continue to make strategic acquisitions to acquire innovative technologies, expertise and talent. Then of course there is the Apple car rumor, which is a whole article by itself. At the end of the day, more Apple products in the IOT space is good news for consumers as Apple products usually tend to set the bar in terms of user experience.

10. M&As and IPOs in IOT space to further intensify in 2016

In 2015, we saw leading IOT startups like Fitbit and GoPro going public. With 2015 being a down year in terms of number of IPOs, I expect to see more IOT startups going public in 2016. Going public Vs getting acquired can be a tough decision.. I know some IOT startups who passed on offers in order to go public later on, while others accepted those offers while their investors where hoping for an IPO. It really depends on the CEO’s long term vision, ambition, the potential synergies with the acquirer, and sometimes the timing of the offer. But here are my favorite IOT startups to go public in the coming years: Smart August Lock, Athos, Pebble, Viv, Canary, Uber. and Hyperloop.

11. Sports teams to continue to adopt wearables and IOT devices to gain competitive edge, prevent major injuries and create new sports experiences.

Over the past 2 years, I have been involved with a number of major US sports teams across the NBA, NFL, MLS and NHL in order to successfully adopt innovative wearable and IOT (VR, AR..) technologies. While there is a great interest from sports teams for wearable health and fitness, and AR/VR products, I strongly believe that we are at the beginning of a real revolution in the world of sports where wearable and IOT technologies have the potential to transform the game, help those teams get a competitive edge, create new type of sports experiences, and help the brands/sponsors better engage with their audience and the fans. Currently there are a lot of trials going on behind the scene, and most teams have not settled on the wearable/IOT solutions that they will be using in the coming months. We are still in the exploration phase for the vast majority of those teams. Also, in general when it comes to wearable health devices, sports teams care about a couple of things: Affordable cost, reliability, privacy and security, ease of use, data visualization, reliable connectivity, and valuable insights to the coaching staff. Companies who can help them reduce the number of injuries, better monitor the health of their players, and help them win more games, will get their attention. They are not interested in another Fitbit or Jawbone, and if your product will add significant amount of hours every week to the already busy schedule of their medical staff without providing significant value, it will be a very tough sale. In 2016 I expect to see more signficant deployments around wearables, AR/VR and IOT happening in the world of professional sports. Several sports teams are also already using VR devices to train their athletes, or virtually showcase what the inside of their new arena will look like, or what it feels like to watch a game from a front row seat. Some other sports teams are also starting to use drones to better monitor training sessions. This trend will accelerate in the next 12 months. I am also a strong believer that there is a huge potential in combining AR/VR technology with wearable health devices in order to allow the coaching staff to receive timely and relevant data about the health of their players, or even for the fans to see in real time relevant information (e.g. stats, speed, acceleration, jump height, G-force of a kick..) about the players that they are watching on TV or at a stadium. All the piece are already there. This is not a technological issue but just a matter of putting all these pieces together and executing on the vision. In 2016, I also expect to see more pro teams launching their sports incubators and high profile individuals and team owners launching their own funds to invest in the space. In fact, in 2015, the LA Dodgers launched a sports accelerator program with Tech Star, and Sacramento Kings owner Vivek Ranadive recently announced, in association with Shaq, Drake, Ron Conway, Jerry Yang, a $250M fund with the University of California dedicated to backing startups that will shake up a market. Vivek and the LA Dodgers will certainly not be the first and last ones to do so.

12. Extending life becoming the new battleground for tech giants.

Few years ago, extending life would have remained a dream or a fantasy. Today with tech giants like Google, or Microsoft investing millions of dollars into research, there is hope that this dream might one day become a reality. The head of Google Ventures already said that that he thinks humans can live to 500 years due to medical breakthroughs and a rise in biomechanics. Google, who launched Calico in 2013, an anti ageing research and development lab, has already hired some of the best researchers in the field and has invested in genetics firms and cancer startups. Google’s director of engineering Ray Kurzweil, who has an impressive track record when it comes to predicting the future, already said that we would be uploading our brains to machines by 2045. Those companies aims at extending life by using the latest and greatest technologies available such as machine learning, algorithms, big data, and the most advanced chips. I expect more giant tech companies to focus their resources and money on moonshot projects focused on extending life via technology in the next 12 months.

13.Sharing economy to increasingly become a key component of the IOT space as it can help create new business models.

The sharing economy has become a hot topic in the past 12 months due to the growing success of companies like Uber, Lyft, Airborn, Spinlister, etc..As the cost of connectivity (GPS, LTE..) continues to drop and IOT related technologies continue to improve, sharing economy companies will further gain in popularity. The typical example of this is Uber. The unicorn startup is already rumored to be working on self driving cars. Google, who is already working on self driving cars, is also rumored to be working on a ridesharing app to compete with Uber. Self driving cars will become a great vehicle to create a new generation of sharing economy services to deliver food, goods, etc..and I expect new sharing economy services to appear in the next 12 months and which will allow users to share their commercial storage, lawn movers, motel rooms, rug cleaners, , tablets, smartphones, wearables, etc.. As those sharing economy players continue to open up their APIs to developers and third party companies, a new generation of sharing economy services will also emerge. Of note, I also expect more mobile carriers to jump on the bandwagon to further drive their top line and take advantage of this phenomenon. Verizon has already launched its own Auto share service, allowing customer to share their cars with others. Clearly connectivity is an area where we will see significant price erosion in the coming years, thanks to companies like Sigfox, which developed a wide range, low cost and low maintenance technology to connect smart cities, and a wide range of IOT devices. As we mentioned earlier, carriers are already creating dedicated IOT network that will make it more affordable and easier to connect IOT devices to their network in the years to come which should help drive the adoption of sharing economy based IOT products.

14. Security issues raising in the IOT space

In 2016, I also expect to see more companies focusing on cybersecurity for IOT simply because in 2015 we have seen many IOT and connected devices (connected cars/Tesla S, wearable health devices, smart toys., GPS systems, etc.) being the victims of hackers. It is not surprising considering the fact that IOT devices are for the most part and by definition connected to the internet. This issue is particularly sensitive as hackers could threaten the life of many individuals. Some hackers have already been able to remotely hack connected cars, pacemakers, etc.. Companies like AT&T have already reported seeing a dramatic 458% increase in 2015 in the number of times hackers have searched IOT connections for vulnerabilities. In 2014, HP released a study showing that nearly 70% of all IOT devices are susceptible to getting hacked or compromised. Not surprisingly BI intelligence is already reporting that by 2020 investment in securing IOT devices will increase five-fold and reach $120B in annual investment in 2020. Securing IOT devices is a big problem as many low power IOT devices do not have the computing power to run antivirus software like a computer. This is why companies like Intel who bought McAfee and is actively involved in the IOT space, is well positioned to take advantage of this trend.

15. Insurance companies finally figuring out valuable business models to reduce churn and attract new customers

Over the past 24 months, many insurance companies have partnered with IOT startups (e.g. fitness trackers, monitoring cameras, smart thermostats, connected car startups, etc). Among the most active insurances are AXA, Progressive, Allianz Group, StateFarm. Oscar, etc. For example, AXA partnered with leading wearable health startup Withings while Progressive teamed up with Zobie (connected car startup), and Censio. The Allianz group also partnered with Panasonic to provide smart home solutions; StateFarm also forged a partnership with Canary to advocate home protective solutions. Misfit Wearables also teamed up with Oscar to reward fit customers while Liberty Mutual and American Family partnered with Nest the maker of smart thermostats. These are some of the few examples out there but there are many pilots currently in development between insurance companies and many other IOT startups. For insurance companies the benefits are clear: Teaming up with IOT startups can help them provide additional value to their customers, reward good behaviors, reduce their churn and find new customers, but it can also help them to continue to innovate, remain competitive and provide incentives to their customers to adopt their current and future offering. In 2016 I expect more insurance companies to partner with IOT startups. We are also likely to see startups focusing on new form factors such as smart clothing, smart patches and tattoos, connected contact lenses to partner with insurance companies.

16. Ambient computing, a new hot theme in 2016 and beyond.

The ultimate promise of IOT is for users to be able to evolve in a “truly smart, connected and contextual” environment surrounded with sensors and smart displays everywhere and hyper-connected via connected IOT devices and contextual apps and products in a very seamless way. Ultimately this is what IOT is all about. Well known Silicon Valley Venture Capitalist Marc Andreessen call this concept Ambient or ubiquitous computing. Marc recently said: “The idea that we have a single piece of glowing display is too limiting. By then, every table, every wall, every surface will have a screen or can project,” (..) “Hypothetically you walk up to a wall, sit at a table and [talk to] an earpiece or eyeglasses to make a call. The term is ambient or ubiquitous computing.” I think that we are not too far off from seeing this concept come to life in the years to come because key components are slowly becoming a reality.

- Cost of IOT connectivity becoming cheaper: As noted earlier, major carriers like Verizon recently introduced Thingspace a dedicated IOT network where the cost of the IOT module for connected devices would be half the cost of LTE module currently. IOT startups such as Sigfox, using a low cost connectivity technology for IOT devices, are expected to connect 10 major US cities in the near future. These are the types of initiatives that will help reduce the cost of connectivity for IOT devices.

- Cost of sensors coming down: BI expects the cost of sensors to go down to $0.38 by 2020, which would be down significantly from $0.60 in 2014. Down the road this would mean more sensors everywhere and partially cheaper IOT devices.

- Holographic display technology maturing: Companies like Leia and Voxiebox have already built 3D holographic displays that could enable 3D holographic video chats in the coming years. Leia is already talking to a myriad of companies to put its holographic displays in cars, smart home devices, and other deviceswhile Voxiebox aims at offering small scale social 3D displays in the home and public places. These are the kind of companies that could provide the display technology needed in the context of ambient computing.

- AI technology maturing and set to become omnipresent and the new UI for IOT devices: Companies like Viv have already built an AI solution that is teachable and can handle very complex inquiries, and their vision is to offer their AI solution everywhere (e.g. home appliances, smart home products, connected cars, smartphone tablets, wearables, etc…)

- Connected devices within smart cities set to experience significant growth: Companies like IBM are investing billion of dollars in building connected cities. Gartner already forecasted that there will be a total 3.3B IOT devices connected within smart cities in 2018.

Clearly key components that will be critical to “ambient computing” are already there. The only question is “when” will this concept become a reality. I personally think that within the next 5–10 years, ambient computing will be part of humans’ daily life.

17. More IOT devices making a bigger impact and solving big problems threatening our planet.

With major issues (e.g. global warming, pollution, deforestation, aging population and higher cost of healthcare, etc..) ahead of us, I expect to see more IOT startups focusing their efforts on building IOT devices aiming at solving those particular issues. For example, there are already IOT devices capable of measuring the air quality or pollution (e.g. Airbeam, Birdi, Tzoa, Atomtube, BreezoMeter, etc..), diagnosing early signs of chronic diseases or even cancer (e.g. Google is rumored to have built a pill that can detect cancer..). Some other IOT startups have also already built algorithms that could predict heart attacks before it happens. Oxford-based start-up Biocarbon Engineering is also planning to fight industrial deforestation by planting 1 billion trees a year using drones. In addition, a San Francisco based startup Nebia has built a smart showerhead capable of reducing water consumption in the shower by 70%. Not to mention moonshot projects from tech giants like Google (e.g. project Loon, Makani, Verily, Calico, etc..) and Facebook (e.g. solar power internet drone project to connect the unconnected). These are some of the examples of companies building IOT products that can help tackle the big challenges of our time, and I expect many more IOT companies following a similar path in 2016.

Bottom line: While 2015 was all about market validation for the IOT/wearable space, 2016 is set to be the year where a new generation of IOT devices with more advanced capabilities (e.g. devices with advanced algorithms), solid business models (e.g. sharing economy type models, subscription based or ad supported models..), and with a higher purpose, will emerge in the IOT space. I also expect to see some new unicorn IOT startups emerging in 2016 that will disrupt new industries. In addition, I expect to see more carriers, insurance companies, brands, agencies, major sports teams, US cities, involved in the IOT space in order to generate new revenue opportunities and take advantage of the expected growth in the space. As far me, professionally 2016 is set to be the year of new opportunities and the beginning of a new chapter and I can’t wait to tell you more about it. So stay tuned! In the meantime I would like to wish all of you and your family a happy new year for 2016!!