In 2025, companies working in connected home and consumer IoT businesses are finding a mix of factors both challenging the market and presenting opportunity for growth and differentiation. Parks Associates surveyed more than 100 executives across the connected home and consumer IoT landscape to better understand their view of the market, changing business strategies, key metrics for success, and top challenges facing the market.
Despite an uncertain economy, including tariff policies that threaten to increase the cost of doing business considerably, business leaders in the connected home market are optimistic about 2025. Parks Associates’ research finds that 74% of executives expect 2025 to outperform 2024.
Several factors inform this positive outlook:
- Broadening consumer awareness of connected home offerings
- Individual company plans for launching new products and features that they expect to drive a new purchase cycle
- Growth in energy-focused drivers and offerings specifically
The smart home and security markets benefit from delivering solutions that address consumer needs that only get stronger in uncertain times – safety and security. This – along with growing demands on the grid due to electrification and data center development – gives stability to the smart home market and a positive outlook that may not hold in other economic sectors.
Key KPIs to Watch
Connected products are operationally distinct from traditional products, and success must be measured by appropriate KPIs: unit sales, connection rate, return rates and monthly active users (MAUs).
Connectivity is foundational. Devices must first be connected to deliver on their full value to the end-user, and for the company to establish an ongoing relationship, service attachment, and other upsell opportunities. Companies report pro-install, install videos, and offering core features only available with connectivity are top drivers to get products connected.
AI innovation Opens New Possibilities and Competition
Connected home businesses are on the frontlines of AI use both internally and for product enhancement. Connected products and services generate a wealth of data that can inform organizational processes, including marketing methods and messages, support processes, and product development.
The arrival of generative AI causes all companies active in the connected consumer ecosystem to rethink their product development strategies. Generative AI may be a catalyst for growth, a critical new tool for operational efficiency, or a competitive threat. For many, it will be all three.
Key Factors for Smart Home Growth
Respondents see smart home, security, home networking and AI as current centers of market growth, and these have been the foundation of the market for decades.
However, new opportunity lives down the road for smart energy, senior tech, and insurance-related products. Major societal, economic, and demographic factors underpin these opportunities. There is ample opportunity to build new connected products and services that expand value in the smart home, open up new lines of service revenues, and differentiate players and platforms.
This excerpt is taken from Parks Associates’ new research, The Business of Consumer IoT: Product Strategy in a Maturing Market. This research surveys more than 100 executives across the connected home and consumer IoT landscape to better understand their view of the market, changing business strategies, key metrics for success, and top challenges facing the market.
Key questions addressed:
- Where is the growth in the smart home market today?
- What business models are most common, and which are most profitable?
- What are the best ways to acquire and retain customers?
- How is product marketing and merchandising changing as the market matures?
- How are solution providers incorporating AI?
- What will be the defining forces shaping the competitive landscape in the next three years?
- What are companies’ outlook on industry standards efforts, including Matter?
- What are the greatest challenges facing consumer IoT businesses in
For more information, visit parksassociates.com.
