Home automation was gaining attention and experiencing robust growth in 2014, however a new report by Argus Insights reveals the sector is quickly losing steam. Data shows that as of May 2015 consumer demand for connected home devices such as thermostats, lightbulbs, locks, sensors and cameras experienced its first drop below the level of a year ago, a sign that consumer interest is stagnating.

Argus Insights proprietary data on the connected home shows that, as of last month, consumer interest in the devices actually fell to a level 15-percent below where it was 12 months ago. The report discloses that all smart home devices suffered from waning interest, and while security cameras consistently generate the most interest, they are also suffering a significant drop in demand compared to 2014.

“Based on our review of consumer interest, the state of home automation in 2015 is not looking good for anyone who sells or makes these devices,” said CEO and founder of Argus Insights John Feland. “Even though Google and Samsung made big purchases in this space by buying Nest thermostats, Dropcam and the suite of SmartThings products demand is stagnating. It is obvious that the early adopters have bought what they want and other consumers are expressing frustration that these products are complicated and difficult to set up and use.”

Even the analysis of social conversations regarding the Internet of Things supports waning interest and investment in the connected home market. Within IoT conversations, wearables dominate the mindshare, mentioned 10 times more than connected home. Social conversations, which reflect a mix of consumer anticipation and corporate marketing, are both slacking for the connected home market.

The Argus Insights’ analysis of over 12,000 consumer reviews of security cameras from Feb 1-May 31 discloses major negative issues such as persistent problems with reliability as well as trouble with connectivity. Earlier Argus Insights research highlighted that most consumer animosity arose from the frustrating and time-consuming challenges of connecting these devices to the home WiFi network. According to the consumer responses, the reliability problems associated with security cameras led to higher returns than expected. As new customers investigate their options and find products that are difficult to set up and fail after just a few days of operation, much of the market is passing on purchasing new connected home devices this year. These issues impact even the most popular smart security cameras, as represented by major brands such as Dropcam, DLink, Netgear, Foscam and Tenvis. Demand for these products has dropped drastically over 2014.

“Consumers are not seeing the value yet from these home automation devices,” said Feland. “There is a lot of confusion about standards with Google introducing Brillo and Apple’s new HomeKit. Add in WiFi, Bluetooth, Zigbee and Z-Wave and there is a lot for any consumer to grapple with during installation. Until things become easier and consumers don’t have to cobble together a total solution, I believe we will continue to see this stagnation continuing for the rest or 2015 unless a new offering addresses these issues and revitalizes the market.”

Key takeaways from the report:

·             Year over year slowdown in growth is clear indication that the home automation market is stalling and may be contracting

·             Consumers are unsure what products they want or need while first adopters have already made their purchases

·             The Google investments in Nest and Dropcam and Samsung acquisitions in home automation are not growing at the rate expected from such acquisitions

·             Overall Connected Home device market is shrinking as product segments lack innovation

Two Excerpts from the Argus Insights Connected Home Report