Top 10 IoT business models for 2024

1. Platform business model

The platform-based business model combines manufacturers and consumers in the marketplace to benefit both. The key to it is interoperability and interconnection of the devices and the business to generate revenue from related transactions.

Amazon and its Alexa voice recognition platform is a good example of this, as Amazon generates data through Alexa and then uses it to sell related products to consumers. Amazon charges third-party vendors and developers to create and release services on the platform, increasing its revenue and market reach.

2. Subscription model

Businesses can use the always-on connectivity of IoT devices to develop a recurring revenue business or subscription model. Like the as-a-service business model for technology, an IoT subscription model enables you to deliver continuous value to customers for a regular fee.

The IoT device breaks down the barrier between you and your customers, helping you foster an active relationship instead of a transactional one. Your device gathers more data about customers over time, giving you the chance to provide valuable features and products tailored to their unique needs.

3. Pay-per-usage model

Active sensors on your IoT devices mean you can regularly monitor your customer's environment to see how much they use your product or service. This gives you an opportunity to use a pay-per-usage business model where you charge them for the amount of time they actively interact with your product.

Many auto insurance companies use this model to offer a mileage-based insurance plan to customers. People don't pay for the IoT device installed on their car that tracks their driving usage and habits; they pay for the lower rates based on the data they generate on the device.

Rolls-Royce does this with its TotalCare program, where airlines are charged on a fixed dollar-per-flying-hour basis for the use of the engines on their planes. Rolls-Royce retains ownership of the engines and actively maintains them through IoT sensors that send telemetry in real time to their monitoring sensors. 

4. Asset-sharing model

Many industries have big expenditures when it comes to vital equipment. They want to be sure they're going to use the equipment enough to merit the expense. An asset-sharing business model for IoT helps with this by allowing businesses to sell their extra capacity back to the market. That way, each business pays a reduced price for the equipment and can still use it. Businesses could use this model on their own assets or as their main business by renting out large assets for sharing.

For consumers, this looks like car and scooter sharing companies such as Zipcar and Lime. For industrial firms in construction and mining, this means partnering with nearby businesses to share the cost of heavy machinery. IoT sensors track the location and usage of the machines while also minimizing breakdowns by monitoring engine data in real time. Each customer has access to the data and reserves time on the machines as needed.

5. Asset-tracking model

Connected devices in the supply chain help businesses identify, monitor and track assets in real time. It helps them protect in-field assets from loss or theft while monitoring for maintenance purposes. With the data generated by connected devices on these assets, businesses can check on their status regularly and know when to repair, fix or replace assets before they fail. This business model can also track the supply chain to identify inefficiencies, optimize workflows and increase visibility into usage.

Sierra Wireless helps global companies track their cold chain cargo integrity with high-value IoT asset tracking platforms. Temperature-sensitive cargo such as food, produce and pharmaceuticals require precise temperature controls throughout the cold chain to maintain the integrity of the loads. As pressures mount for the refrigerated cargo industry as a whole, carriers can use these types of IoT sensors and online tracking platforms to ensure complete visibility of cargo, maintain adequate temperatures and take swift action on any identified issues.    

6. Outcome-based model

The idea for this model is for customers to pay for the outcome of the IoT product, not the product itself. Many of the models discussed here are outcome-based, as they focus more on what customers gain from the device, rather than the device itself.

Self-monitoring products that can automatically reorder replacement parts or create a service request are good examples of this. Think of printers that reorder ink cartridges automatically when you're nearly out of ink or the industrial company whose products automatically book a service call when they're not working optimally.

This model is expanding rapidly in healthcare with wearables and self-monitoring instruments that notify care providers and patients of significant changes. For example, Propeller Health's digital health tool, Propeller, enables those with asthma or chronic obstructive pulmonary disease to manage their conditions in partnership with their clinicians and an IoT sensor attached to their inhalers. AliveCor's KardiaMobile program offers a personal EKG device for heart patients and Aeris Communications provides a platform for medical device manufacturers and healthcare providers to maintain communications with patients so they comply with medical advice such as medication dosage. Patients and providers use these IoT devices and platforms to inform treatment plans and identify better outcomes.

7. Compliance model

Compliance tracking is vital to many industries and costs a lot of time, effort and money. Depending on the industry, there might be significant checks that must be done for safety, environmental or legal reasons. Deploying IoT devices into the field can help reduce the cost of compliance by making your business more responsive to changes before they become a problem.

IBM's Vegetation Management platform combines weather, satellite and IoT data to help utilities make better decisions, and increase reliability and customer satisfaction in a highly regulated industry. The platform helps utilities monitor sites in real time and offers relevant insights to help with budget allocation, work planning, hazard reporting and regulatory reporting. Willard IoT, in conjunction with IBM, offers a smart, IoT-driven way to monitor and ensure compliance with National Fire Protection Association regulations for public buildings and facilities. Their IoT compliance platform monitors exit signs status and health and displays the data in a dashboard for easy viewing and verification.

8. Data-driven model

A popular IoT business model is the data-driven model powered by the data generated by devices. You build a product that provides value to customers and collects data that you can use for other products or sell to a third party. This model works well if you have many devices out in the field collecting data and if you've notified customers that you're using their data for this.

There are many ways to use this business model outside of the classic online shopping model -- where consumers get product suggestions based on their browsing or purchase history. For example, in office buildings, energy efficiency devices can monitor energy consumption and be used by landlords to manage HVAC and energy usage throughout the day. This data can also be sold to utility companies for forecasting purposes as they manage the local energy grid.

9. Service-adjacent model

In this model, your business offers a service that enhances the use of the IoT device but doesn't necessarily sell the device itself. The device is the enabler of your service, not the main point of your business.

For example, you use an IoT device to monitor a network or system, predict maintenance timelines and sell a maintenance contract to customers. You don't create or develop the device. You might not even install the device but know of it and how it's used in the industry. You could partner with an IoT manufacturer to create a service industry that supports it.

There are many ways to incorporate IoT into your business model. Many businesses are combining them in creative ways to maximize their opportunities and diversify their revenue streams. You can be an IoT vendor, provider or partner, generating new revenues as you deliver more value to your customers.

10. IoT expertise as a service

As the technical labor market evolves rapidly and companies reduce their workforces to save costs, it's creating knowledge and resource gaps for companies with IoT fleets. IoT device manufacturers and managed service providers could respond to this by offering their expertise as a service to customers. They could assist customers with setup and deployment of their fleet, offer maintenance and upgrades, and design bespoke offerings using IoT devices. This saves customers the cost of technical personnel and continuous training while giving them access to the latest knowledge and skills.

Tech companies such as Qualcomm, NTT and Cisco offer IoT as a service to help those across various domains, including fleet management, predictive maintenance and connected factories. Industry-specific tech companies such as Newtrax, a division of Sandvik Mining and Rock Technology, offers custom IoT as a service in the underground mining industry, helping with digital transformation efforts in an industrial environment.

Julia Borgini is a freelance technical copywriter and content marketing strategist who helps B2B technology companies publish valuable content.