The business model in terms of total available market (TAM) for information appliances may have to be clarified.

Info Appliances

Kurt Scherf | Parks Associates


by Kurt Scherf,
Vice President of Research, Parks Associates

The business model in terms of total available market (TAM) for information appliances may have to be clarified.  Granted, there are very few instances in which a manufacturer of a non-PC Internet access devices came right out and declared, "This product will only be marketed to the 45% of U.S. households that do not own a PC."  Indeed, in looking back at the early press releases from these first product announcements, companies were careful to note that the devices were well positioned to meet the needs of households exhibiting both early and late adopter tendencies.  However, given a slower than expected rollout in certain sectors of the IA space, do manufacturers need to reassess their actual market potential based on a smaller and more targeted TAM?


The information appliance space generates incredible buzz, thanks to shows like CES and COMDEX, where the latest and greatest in gadgets are demonstrated.  Very few pundits - especially in this industry - doubt that, at the very least, these new platforms simply look cool.  The IA space has also benefited from the entry of some very powerful names into the market.  When such recognizable companies as 3Com Corp., Ericsson, Intel Corp., Microsoft Corp., and others (apologies for the hundreds of companies left out of this non-exhaustive list) - which happen to be full of some very smart people - take this market seriously, an undercurrent of optimism begins churning.  Finally, research firms - present company included - are bullish on non-PC access devices, and have released several multi-billion dollar forecasts in the last few years.

However, the widely publicized failures of at least two efforts - Virgin Entertainment Group's partnership with the Information Appliance Network to distribute Virgin Connect Webplayers and Netpliance Inc.'s i-opener - in addition to other notable pullbacks (Gateway, for example) has tempered the early optimism, and forced companies to re-examine business models based on subsidization.  From these early setbacks, there may be consensus on the following points:

  • Certain information appliances may be difficult to market to a mass audience - particularly in the United States - where PC prices are being squeezed further downward.  A consumer may well ask, "Why pay nearly as much for a device as a PC, when it doesn't do as much for me?"

  • However, in Europe and in other locations where PC penetration has not reached the level that it has in the United States, information appliances may play a much more significant role in bringing Internet access to less tech-savvy consumers.  Already, European efforts in interactive television - something that does not currently whet the appetite for many Americans - are significant.

  • With this in mind, the role of the service provider takes a much keener importance, particularly with Europe in mind.  Although most manufacturers are mum on their plans in that arena, discussions swirl around using banks, telcos, and other service-oriented institutions to distribute these devices - likely with little or no upfront cost for the end-user.

  • Finally, the business model in terms of total available market (TAM) for information appliances may have to be clarified.  Granted, there are very few instances in which a manufacturer of a non-PC Internet access devices came right out and declared, "This product will only be marketed to the 45% of U.S. households that do not own a PC."  Indeed, in looking back at the early press releases from these first product announcements, companies were careful to note that the devices were well positioned to meet the needs of households exhibiting both early and late adopter tendencies.  However, given a slower than expected rollout in certain sectors of the IA space, do manufacturers need to reassess their actual market potential based on a smaller and more targeted TAM?

Perhaps.  It certainly is a question that will not be answered in one sitting, but there are indications that this strategy may pay off - at least to kick-start this market.  In an effort to see if different consumer segments are more amenable to the idea of non-PC Internet access, we pulled recent consumer data on that front.  In looking at what we would consider early-adopter consumers (who live in homes with broadband Internet access and/or multiple PCs) and those in households with dial-up Internet service only (these include multiple-PC households, as well, although the proportion is far fewer than in broadband households), certain trends are emerging.  For example:

  • Consumers with broadband Internet access are 15% more likely to find Web tablet devices useful than their counterparts in multiple-PC or dial-up households;

  • More significantly, both broadband and multiple-PC household consumers are 45% more likely than consumers in dial-up households to desire Internet access on a mobile phone;

  • TV-based Internet access is geared more toward less tech-savvy consumers, as respondents in dial-up households are more likely than their broadband counterparts to desire this type of access.

  • Finally, households with multiple PCs and broadband Internet access are more than 80% and 50% more likely, respectively, than their counterparts in dial-up households to desire Internet access on a kitchen appliance, including white goods.

So, there is some significant difference in how consumers react to the usefulness of certain information appliances.  Does this mean that households without PCs won't purchase simple-to-use Internet and e-mail access devices?  Absolutely not.  However, at least for the short-term, information appliances may sell more effectively as peripheral devices on a broadband network, and as supplements to already existing technologies in the home.

Stay tuned, as I'll continue to discuss the marketing and rollout efforts across different categories of technologies that include home networks, residential broadband Internet access, and small office/home office (SOHO) solutions.  We'll also be covering these and many other topics at the fifth-annual CONNECTIONS™ conference.  Hosted by the Continental Automated Buildings Association (CABA) and Parks Associates, join an expected 1,000 attendees to discuss and see the latest in home networks and residential gateways.


Comments (0)

This post does not have any comments. Be the first to leave a comment below.


Post A Comment

You must be logged in before you can post a comment. Login now.

Featured Product

This is Control4 Home Automation with Amazon Alexa.

This is Control4 Home Automation with Amazon Alexa.

INTRODUCING THE SIMPLEST WAY TO CONTROL YOUR ENTIRE HOUSE YOUR VOICE. Imagine this... We've all been there-walking through the door into a dark house, arms full. Wouldn't it be nice to tell your house to offer a helping hand? Now you can. A simple voice command-such as "Alexa, turn on Welcome"-lights up the hallway and kitchen, fires up your favorite Pandora station, while the door locks itself behind you. This is Control4 Home Automation with Amazon Alexa.