SmartThings Economics

There have been a lot of threads complaining about issues with SmartThings lately.

I too am not a completely satisfied user.

I struggle with the long-term viability of the SmartThings model. I keep hearing people talk about how other solutions cost more, or require monthly fees, and everyone talks about how SmartThings is better in that regard. But, think about this.

You spend $99 on a hub. Since that hub will work with generic Zigbee and Z-Wave devices, in theory, that is all you have to give SmartThings, and in return, they promise to give you a cloud-based Home Automation solution forever.

So, hypothetically speaking, if SmartThings makes $10 profit on every hub (not very likely.) and they have 5 employees making $100,000 per year, they have to sell 50,000 hubs every year just to pay salaries. But, in order to support those 50,000 hubs, plus all of the hubs they’ve sold prior to that, they need to have infrastructure to handle the cloud-based home automation requirements.

The Google Play store says the ST app has been downloaded 10,000 - 50,000 times. If you figure iOS downloads are comparable to that, and every download is a hub (which would assume only one user per hub, which is not realistic), that means ST has sold at most 100,000 hubs.

Sure, they sell other things, like starter kits and sensors and thing shields (when they are in stock) but my assumptions are very conservative, and I struggle to see how this model is sustainable.

I’m using Home Automation as a hobby. I have been very careful to implement things in a way that if the hub goes away, all of my things still work the old-fashioned way. If you are looking for a perfect, 100% reliable, hosted solution that works forever for $100, you are kind of not being very realistic.



Same here regarding home automation as a hobby. So far I’ve only implemented things that will still function when the hub goes down. Yesterday I broke that rule and bought 2 Cree bulbs. After reading your post, I am not sure if the bulb will still function like a regular bulb after I turned it off via the app. It was probably discussed already before so I will have to look it up or test it myself.

Monthly fees are coming… but don’t think SmartThings isn’t monetizing your data at this very moment. Home automation does not need to be entirely in the cloud, yet SmartThings chose to do so.

I think it is realistic to expect the product to do what it is advertised to do, for the price they asked for it. How is this any different from your expectations for any other product you would consider purchasing.


I don’t think that they expect to make a net profit from the current hardware. The margins may be higher than guessed above, but the operations costs are much higher than speculated. Staff is over 50 people and growing, not 5.

That leaves only a few options for long term viability, just hypothesizing…

  1. High margin on Hub V2.0.
  2. High incremental margins on connected Samsung products (new TVs or other appliances = hub + controller, Gear watch, phone, ,tablet, VR, high end version of ST overall?).
  3. High margin subscription services.
  4. Sponsorship & Partnerships (advertising, sale of customer data, overvalued integration deals).

Just my speculative thoughts… :thought_balloon:

Maybe the viable business model was to sell the company early on, and squeak through lock-up periods.



You’re scaring this Puppy. :dog:

My total guess:

ST could never have survived for long on the model as described in post 1 of its thread.

But it doesn’t have to. It is a VERY small piece of a very large company, Samsung.

Samsung has a lot of different things to sell, from light bulbs to refrigerators. And smart watches and tablets and phones. And TVS.

IoT is hot and buzzworthy. SmartThings gets Samsung a mention in every article.

The current ST customer base is pretty much irrelevant to the value of the buzz. Which is why they can afford to be, let’s face it, spectacularly generous with the quality of the support they’re providing right now.

I don’t know where they’ll be by summer 2016. But it won’t surprise me if a Samsung watch + tablet + TV + smart bulbs + SmartThings ecosystem is a very viable competitor to HomeKit + Insteon.

And that will be an important and profitable business model for Samsung.

So ST may well pull more things into a fee for service model. But meanwhile, its current model is pretty much irrelevant to its long term survival, either way. Its real paying customer is Samsung, and they’re spending a lot more than $99.


Yup… That definitely aligns with my Bullet #2, above. Offhand, I would say that is the business model I would prefer to see (over the alternatives).

Ah the sheep are lead to slaughter. Just today you see where Youtube has a billion (with a B) views and is hemorrhaging cash. The Gen X’s think everything is free. Just log in and all content, features and everything else is just free free free. All of that from their $150 a month cell plan. Everything else is free. Anything you log on the internet should be free. Yes I bought a hub and the company LOST $20 on it and everything all future development and all things related are free.

ST people should wake up there is a reason you don’t have a streaming, video storage solution. NOTHING IS FREE. I don’t mind paying for something but installing 50 devices in a home and being teased with a everything is going to be free lifetime model? Please … people need to be a little smarter about this. Nothing is free companies are all about profit as they should be. Just don’t think because a lot of the development on the applications are being done by the community (which btw are owned by ST) and are going to free forever …

I just would like a little honesty on all of this…

I question the validity of this example.

The investor community research shows that YouTube is profitable.

Google’s YouTube likely as profitable as Netflix

Ergo: It is possible for a business to be profitable with a free or low-margin product or service.

Let the SmartThings Economics discussion continue :wink:

Eh some disagree … let me know when Snapchat turns a profit … mark this post

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I guess everything takes time. A lot of time. And patience. And luck…

Samsung only paid ~$200 million for SmartThings.
Google paid $3.2 BILLION for Nest, and …

Heads Up, GOOG Investors! Nest Won’t Be Profitable for 10 Years

$3.2B for Nest was the result of too much Silicon Valley ego and testosterone – stupid bidding war. No way the business itself is worth that. People don’t remember when totally stupid Internet startups barely with a website were asking for ridiculous valuations – that people bought. Oh boy! That worked out well.

So who’s stupid and who’s Smart? Google or Samsung?


I will sell my my soul to the devil (forget ST) for 150000. :wink: I hate myself doing financial/investment/portfolio management related architecture work for all the big shots here in the Wall Street using Sencha’s ExtJs day in and out. Will be nice to be on the darker side. Is @april listening? She either loves me or flags me! :wink: you hiring for serious?

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Whomever invents the glue that makes the Internet of Things stick will have a money minting machine. That is the reason that Google spent 3.2 billion on Nest. That is also the reason Samsung dropped 200 million on SmartThings. I am sure these same kinds of discussions happened at the turn of the century when electricity was being rolled out. The immediate effects of electricity might have been obvious to a few people, but at its inception no one could have predicted that losing a ton of money wiring up the country with reliable electricity would create the foundation for millions of other new ideas up to and including the internet.

“We believe that there will be a literal representation of the physical world in digital form - integrated to form the physical graph. Through this, the entire world will be made more intelligent through software and the inventiveness and creativity of an open community of consumers, developers, and inventors.
What will this mean? Nothing less than solutions to many of the worlds most pressing problems. Energy efficiency, safety and security, waste reduction, convenience, random fun, and so much more.”

From @alex during his reddit AMA.


I’m personally not doing the hiring. but yes. We’re serious. We’ve been hiring an average of 10 per week, and 3 weeks ago, I was part of 10 also. .

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@April will ask somebody’s help to write up a smart resume for me in this community if I get the next desk to you… :slight_smile: done?

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Sorry. Ben sits next to me. No one is moving ben away. That was my deal when I signed.

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Nest and also ST were nothing more than the Sandhill Road shuffle. Look at the transactions in the previous 6 months before acquisitions … Kleiner Perkins and associated gang just trade the meup with their friends and make transaction like Dropscam a 500MM paper transaction …

all you need to do is a little research … Dropcam? Really Foscam has off the shelf dozen much better optics … Just another Silicon Valley shuffle

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no. he actually treats me like he would any other person. you know? Best type of manager I can hope for!

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