Innovation Within the Smart Home

This is an excerpt from Parks Associates white paper, Video at the Door: Driving New Revenues, developed for Xailient Inc.

Competitive Drive to Keep Innovating

The smart lock space is dominated by large diversified global companies, but startups are putting pressure on the door lock giants. All smart lock providers offer core features of remote connectivity, unique codes for guests, and integration with key smart home platforms. Manufacturers seek premium features, form factors, and services that differentiate them from the competition and earn a premium price point.

Differentiate Product Tiers with Biometrics

Biometrics are established in the market as a premium feature today. Many leading brands, including Schlage, Yale, Kwikset, and August, have at least one model offering fingerprint unlock. Several more now offer video-based unlocking using one of several facial recognition methods:

As of Q2 2024, Eufy and Lockly are early to market with locks featuring integrated cameras, and Yale offers European models with this functionality. In the US, Yale and August both offer facial recognition capabilities through smart phone face unlock.

More and more video device manufacturers are enabling facial recognition. Nest offers Familiar Face detection as part of its Nest Aware subscription that alerts users if unrecognized faces are detected. Smart home security provider Abode offers the Abode Edge camera that can distinguish between normal family activity and strangers on the premises.

Generate Service Revenue with Video

In addition to its ability to drive higher hardware revenues, integrated video services can add a monthly recurring fee for smart lock OEMs.

Generate annual service revenues: On average, smart camera and video doorbell owners pay between $8 and $16 per month, depending on the service received (video storage, self-monitoring, professional monitoring). With similar service options, lock brands can generate recurring revenue of $120+/user annually.

Video attach rates are growing: 71% of video doorbell owners paid a monthly fee for alerts, monitoring or video storage in 2023, up from 62% the year prior. Service attach rates also rose for smart cameras, where 66% of owners report paying a monthly service fee, up from 51% in 2022.

Today, smart lock manufacturers may look to integrate with other camera/doorbell providers, but associated service revenues would accrue to the video platform provider. With an integrated camera, smart lock OEMs have the basis for a DIY security solution that could layer on professional monitoring services.

Parks Associates estimates $13 billion in annual revenues for professional monitoring of residential security systems and video devices by 2025.

Going forward, we project the strongest growth for professional monitoring of stand-alone devices like video doorbells and cameras.

Service subscriptions also strengthen the relationship between the device manufacturer and the consumer.

Retain customers

Professional security services typically retain ~85% of their subscribers year-over-year.

Improve customer satisfaction and create product evangelizers

Smart device owners with attached services give their devices higher Net Promoter Scores.

Most smart lock OEMs carry the cloud and support costs of the smart model over its lifetime, charging no additional fees for basic connected functionality today. Video opens a pathway to a recurring revenue model, and a driver for customer retention and brand loyalty at the next purchase.

Parks Associates is a market research and consulting company. Since 1986, the firm has been tracking security and IoT markets. This is an excerpt from Parks Associates white paper, Video at the Door: Driving New Revenues, developed for Xailient Inc. This white paper investigates video innovation and integration in home access control.