According to forecasts released by the International Data Corporation (IDC) earlier this week, the global Internet of Things (IoT) market is set to grow 19% by the end of 2015.
Overall, manufacturing operations are expected to reach $98.8 billion by 2018, up from just $42.2 billion two years ago.
Both of these forecasts put the IoT at a steady compound annual growth rate near 20%.
When broken down by category, it’s clear which two areas will be driving this growth in the near term…
The first is connected-vehicles. The second is digital signage.
Connected Vehicles
According to IDC, the connected car market will grow at a 34.8% compound annual growth rate through 2018, making it the second fastest-growing category within the Internet of Things.
IDC’s forecast reflects the overwhelmingly positive sentiment towards connected vehicles coming from various other research agencies.
According to Frost & Sullivan’s “2015 Outlook of the Global Connected Car Market,” for instance, connected vehicles eventually represent an additional $300 billion opportunity for OEMs in North America alone.
Further, GSMA Intelligence forecasts that revenues for the connected car market will triple to $39 billion as soon as 2018:
Within the connected car market, the two fastest-growing categories are expected to be services and hardware.
Connected car services include familiar embedded security and navigation options such as General Electric’s (NYSE: GE) OnStar but also extend to radio streaming services such as Sirius XM (NASDAQ: SIRI) and Pandora (NYSE: P), as well as various telematics companies.
As for hardware, the bulk of revenue is likely to come from embedded Wi-Fi and M2M (machine to machine) components — that is, sensors that continuously relay information about a car’s speed, fuel use, etc. in order to maximize efficiency for insurance companies, individual drivers, and even entire trucking fleets.
Eventually, we can expect cars to use these kinds of embedded solutions to speak to each other directly in order to reduce accidents and even cut down on traffic. The driverless car revolution will depend highly on efficient and reliable vehicle-to-vehicle communication.
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Digital Signage
Digital signage is nothing new. It’s been around for over 20 years now, but recent advances in connectivity and reduction in cost have put this market on the cusp of a major revolution.
Modern digital signage provides value to retailers by enabling dynamic and interactive content and, in turn, allowing them to better engage and attract target audiences. The list of advantages for using digital signage includes:
- The ability to cross-sell and market to audiences in different locations of a store
- Reduction in printing costs
- Ability to offer promotions by time of day or day of week
- Increased consumer perception of store quality
- Supplemental revenue source (digital ads in bars, taxis, etc.)
- 70% of consumers agree digital signage is entertaining
According to joint research conducted by Intel, EdCom, and Capital Networks, digital signage can increase impression rates as much as 500% when compared to static signs. Obviously this is a major benefit to merchants looking to engage customers.
It should be of little surprise then that according to IDC, the digital signage market will reach $27.5 billion by 2018, up from $6.0 billion in 2013. This represents a 35.7% compound annual growth rate, making digital signage the single fastest-growing category within the Internet of Things.
In the words of Keith Kmetz, Vice President of the IDC’s Imaging, Printing and Document Solutions research segment:
Driven by more flexible, interactive content that helps organizations be more “cutting edge,” digital signage will experience strong growth over the next two years. The transition from static, paper-based signage to digital content is developing quickly as companies understand the benefits of digital solutions as indicated by high satisfaction rates among users. New survey results from International Data Corporation (IDC) show nearly 82% of companies currently using digital signage are “very satisfied” with the technology.
As for investment opportunities in the digital signage market, there are a number of public companies to choose from.
Advanced Micro Devices (NASDAQ: AMD), for one, is investing quite heavily in the digital signage space by providing embedded low-power APUs, systems-on-chips (SoCs), and graphics cards. Others, like Ballantyne Strong (AMEX: BTN), are emerging as small pure plays in the digital signage OEM space.
Final Word
If you’re looking to invest in the Internet of Things, you’ll want to spread your bets across the industry as much as possible. Connected cars and digital signage are essential areas to dive into, but there are a number of other categories worth exploring as well.
Keep an eye out in the coming weeks as we further explore the Internet of Things and the investment opportunities that go hand in hand.
Until next time,
Jason Stutman
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