A new industrial revolution is happening thanks to the irruption of the Internet of Things (IoT), Artificial Inteligence (AI) (check our last post to know more about it) and some other new technologies. This industrial revolution enables for new market opportunities. It is a key element to properly understand the business models to monetize IoT or how to include IoT in your current business model to make it more profitable.

Business models for IoT

A huge increase of internet-connected devices is expected. And, several solutions are going to appear, implementing these new sensors and devices to extract real-time data. So, companies will use this data to solve problems and optimize a lot of their processes, like in our CoSMoS solution where through the monitoring of concrete strength we allow construction companies to avoid timeouts and reduce costs.


However, any company offering that type of solution asks itself: How can we make money out of IoT?

First of all,  we need to know that placing sensors and sending data is not enough to fulfill customer needs. If your objective is to get traction in the market, you must understand the real problem. In short, offering real value out of the data to your target audience.

IoT can have several revenue models, both direct and indirect

For this, it is necessary to build a way not only to capture data, but also to deliver value taking care about user experience. Tanking advantage of IoT technology you can offer 24/7 real-time data that generates innovation and differentiated value.

Once we understand this, there are different options to generate incomes through IoT solutions:

1. Pay per usage

Thanks to IoT, you can monitor the use of something, charging later your customer for the real use of it. For example new insurance companies like Progressive are taking into account the number of miles driven to offer fair prices to their customers. This is a clear example of how to improve traditional business models using IoT data.

2. Outcome based model

An innovative way to make money thanks to IoT. Instead of selling the hardware and the service, charge your customers based on the added value generated with your solution. Customers will pay you for the amount of outcome generated. As an example, monitoring crops and using monitored kg of fruits as a base to calculate the cost of the solution. The customer only pays if they truly receive the benefit. This may seem risky for the IoT provider, but can be a breakthrough to enter traditional and reluctant to innovation industries.

3. Offer a service based on the data

Giving your hardware and the monitoring system to your customer for free and later service the data acquired. As an example, predictive maintenance: some companies give free sensors and systems to track the industrial machines and when the sensors detect problems the company offer a maintenance service.

4. Razor blade model

Offering your main product at a low price or at a loss and later offer to your customer complementary/related products  that they are going to need for a profit. A typical example is Gillete. Focusing on IoT industry, you can give the hardware to make measurements at a low price and charge your customers with each measurement they can make with this hardware.

5. Subscription

A revenue system that any investor would love to see in your company. As the typical example Netflix, where the customer pays monthly an access to a wide multimedia content. Extrapolating it to IoT, you can charge a monthly fee for monitoring with your devices, including in that price the hardware renting and the access to the platform. However, the problems of this type of business model in IoT is the physical part. The cost of maintenance your hardware and offering a continued distribution of your product may make this not profitable or hard to implement.

6. IoT Data

A revenue system that consist of 2 things. Providing your customers with a valued solution, but also, collect the data to sell it to a third party. A well-known company using this option is Facebook. They collect users data and offer it later in its Facebook Ads solution.

To sum up, there are a lot of business models for IoT to incorporate as a strategy for your company. Any of them with pros and cons. Moreover, you can generate infinite solutions combining several options to build your definitive business model for IoT.

Our CoSMoS solution is a great example. Its revenue model is a mix between some of those systems that we have discussed.