Connected vehicle revenue potential: Spotlight on Activity Based Revenue model (Part 1)

This segment casts a spotlight on some of the connected vehicle monetization potentials & models as well as briefly introduce the concept of activity based revenue

This segment casts a spotlight on connected vehicle revenue potential as well as introduces the concept of Activity Based Revenue(ABR) model

So you’ve been reading…

  • Gartner predicting that by 2020 there would be around 250 Million Connected Vehicles on the road
  • GM announcing 1 Million of it’s Connected Vehicles on road whilst boasting the potential earnings of rather modest $350 Million from related Connected Services by 2018
  • Select wireless carriers increasingly reporting millions of new connections from wireless Internet-Connected vehicles
  • Daimler begins testing a self-driving, mass-produced truck on public roads; displaying confidence in the technology
  • Ford is actively exploring many use cases of Connected Vehicles including data from Connected Vehicles that could help Reduce insurance rates for safe drivers
  • GSMA & SBD research says the Global Connected Vehicles market would be worth €39 Billion by 2018

One thing these recent stats from leading automakers, analyst houses and wireless carriers alike make crystal clear is that there exists an enormous economic potential associated within the broader connected vehicle ecosystem

Connected vehicle revenue potential

When vehicles become connected, it transforms into an entire ecosystem of connected vehicular & user services that not only offer a variety of new user experiences to consumers but also reveals a treasure trove of revenue opportunities for each value chain player across the connected vehicle ecosystem

At a high level; connected vehicle revenue could be derived from a combination of network provisioning, terminal management, analytics & insights services or holistic end-2-end solution offerings

Connected vehicle revenue opportunities - Connected Corners

Connected vehicle ecosystem

Generally speaking; a myriad of value chain players across a diverse set of industry verticals (traditional, vertically integrated, startups, et al.) would be involved in the makeup of a typical connected vehicle ecosystem

Connected vehicle value chain players - roles & partnerships scenario

These connected vehicle ecosystem not only includes the final product (vehicle) offered to the end consumer by the automaker… but also a range of correlating connected solutions developed by 3rd party entities either jointly or independently

Connected solution providers could either be a single entity (e.g. automaker), joint partnership between two or more related entities (e.g. automaker + wireless carrier) or a Connected Solution Aggregator(s) / Partner(s) – CSAP; which brings together entities from various industries to design a scalable end-to-end connected vehicle solution

This CSAP based approach could provide its value chain providers with virtually unlimited and untapped connected vehicle revenue opportunities

Vehicle automakers for example; could find renewed revenue source in provision of various connected services such as vehicle monitoring & security, semi-autonomous driving features, et al. …

whilst entities such as wireless carriers are already considering connected vehicles as an extension of their existing core offerings and developing a myriad of correlating connected solutions as another diversified (potentially high ARPU generating) revenue source

Concurrently; value chain players across the connected vehicle ecosystem are engaged in developing a dizzying array of correlating connected vehicle revenue models

Activity Based Revenue (ABR)

One way value chain players; particularly CSAP; can approach monetizing connected vehicles is through the lens of Activity Based Revenue (ABR) model

At a very high level the ABR model would include mapping of every activity(read: vehicular & user functions) unlocked by their respective connected embedded modules and subsequently attributing a monetization value to them

Connected vehicle: activity based revenue concept - Connected Corners

The 3 key stages involved in building the ABR model would generally include –

Step 1: Deciding on embedded modules

Entities, typically automakers or CSAP would need to first decide the suite of connected modules that need to be embedded & activated in the final product (vehicle)

Each of these modules could comprise of singular or group of interconnected sensors and radio equipment

In a bid to differentiate their product offerings; automakers may choose to vary the type & capabilities of connected modules (think: modules that enable full autonomous driving would be only be offered on higher grade / more expensive vehicle models)

Some automakers may choose to embed all available connected modules across their vehicle lineup but may choose to ship some of them inactive (read: activated later through a OTA software update)

Step 2: Mapping activities to related embedded modules

At the ‘lowest common denominator value chain players would then need to map each & every core activity to their respective connected embedded modules

For example, the embedded connected infotainment module would unlock streaming audio & video, connected apps and smart POI navigation activities; which value chain players can then choose to offer in a multitude of ways (individual features, combo upgrade, et al.)

Step 2: Formulating connected vehicle revenue potential

The next step for would be to derive a commercial value for each of the activities across all of the embedded modules

Subsequent revenue models could also be developed at an activity level (think: pay-per-use for smart POI navigation features when need)

Whilst the ABR based connected vehicle revenue model does offer the benefit of ROI transparency at an embedded module & activity level; it isn’t without challenges (think: customer perception & CX for charging at a pay-per-activity level)

…and it is ultimately up to the automaker or CSAP group to decide how best to monetize and market their ABR-derived connected vehicle offerings based a multitude of factors (activity type, regulatory, safety compliance, competitive landscape, strategic goals, et al.)

So…

There are virtually limitless connected vehicle revenue opportunities yet to be uncovered as the overall industry continues to evolve

Value chain players can further customize connected vehicle revenue profiles to best reflect their strategic goals, regulatory requirements and even each individual customer’s needs; ABR being one such model to offer this flexibility

Whilst a level of standardization across connected vehicle revenue & services may be desired; it may not be realistic owing in particular to varying levels of ownership, partnership & access to connected vehicle data within the connected vehicle ecosystem

Forthcoming segments will aim to explore the ABR model in further detail, key segments who stand to benefit from connected vehicle paradigm as well as the potential for extended connected vehicle & IoT monetization models

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