Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) has recently won praise for its new marketing for the smart city and the smart home. Bezeq is marketing solutions that the entire world is learning how to sell. Many operators in many countries have not yet found the perfect business model for marketing these services. In other words, everyone is conducting some kind of experiment to find a way to connect the customers' real needs with existing technology.
It is therefore no surprise to discover that some of the things that Bezeq is marketing as part of the smart home did not attract much response from customers. One example is the area of home cameras, which Bezeq began marketing last year. While thousands of cameras have been sold, several thousand have also been returned. Bezeq is selling the service for NIS 19.90 a month, including support and installation, but when customers find out that they can buy a camera for the home for $20, they realize that the service that Bezeq is selling is very expensive in comparison.
Bezeq recently altered its model, and began selling the sensors separately, following the wave of returned cameras. At first, it added the door sensor to the camera as part of the package, but now, following the many returns, the model has been changed to selling.
It is true that Bezeq is not selling a camera; it is selling an entire concept of home services, of which the camera is only one. Bezeq is therefore protesting when people talk about cameras, demanding that we take into account the series of sensors that come with the camera, and which constitute a new platform for services that will be one of the company's future growth engines.
A crude calculation shows that if Bezeq manages to sell 80,000 kits next year at an average price of NIS 20 a month, it will make NIS 1.6 million a month, which is nearly NIS 20 million for the year. That may not be much for Bezeq, but it is nothing to be sneered at. The cost of the product, which Bezeq is subsidizing, the technicians' services and repairs, maintenance of the system, and so forth should be deducted from the revenue. In short, as of now, no big profit is involved, but there is a strategy, and the more services and sensors from the platform that the customers buy, the more the average revenue will grow. The potential looks promising, even if it is not reflected now in the company's results.
At the same time, together with the cameras, Bezeq recently also launched the sensors for air-conditioners and lighting, which can be operated remotely. Here, too the demand for the services is not great, to say the least, and it appears that while money was invested in the campaign, the customers are not rushing to buy the services. In this case also, the reason could be that the public is not ready yet to pay for services it does not feel that it really needs, or for which there are much cheaper substitutes in the market.
The question of whether or not the services are succeeding is therefore premature. On the one hand, it is clear that what is involved is an attempt to educate the public and seize the position of market leader. On the other hand, however, the question arises of the cost for the user. Bezeq asserts that the smart home systems in the private market are likely to amount to tens of thousands of shekels, while it is staking all of its prestige on providing a stable and high-quality service to the customer, with a warranty and a feeling that there is support for the product.
Bezeq would be delighted to see NIS 20 million a year in revenue in the first stage. Where Bezeq is concerned, if they reach this figure, which will increase in the future, in the first year, it will be a very positive development for the company.
Published by Globes [online], Israel business news - www.globes-online.com - on August 25, 2016
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