Wireless sensor network-based service provision: A three-sided market model

Abstract

In order that the Internet of Things (IoT) realize its full potential, it has been claimed for the IoT industry to follow the smartphone recipe of market-creating innovation. Indeed, the main mobile apps platforms derive a significant part of their brand value and pricing power from their reputation to have most innovative apps coming to them. Having witnessed that the same steady stream of developer-driven innovation is already emerging in IoT, demand for IoT-based services will be driven by this growing innovative community of IoT developers. In order to make it possible, main players should focus on building platforms that support third party applications instead of developing applications for their own devices. As a way to materialize the above idea, we propose a business model for IoT-based services where a platform creates a multisided market. The business model comprises a platform that serves as an intermediary between human users, app developers and Wireless Sensor Networks, so that the users use the apps, and the apps process the data supplied by the sensor networks. The platform, acting as a monopolist, posts a fee for each of the three sides so as to maximize its profit. We conduct an analysis of the profit maximization problem faced by the platform. We show that the relative strength of the value that advertisers attach to the users determines the platform price structure. All in all, a high valuation is beneficial for all agents (users, platform, developers, and WSNs).