Doug Thompson published another excellent piece on the Beacon soap opera, with a bunch of interesting characters and plot twists. Beekn continues to lead this ecosystem in terms of timely well informed insights and education. Thanks for your contributions to making us all smarter about this market in 2014 Doug!

One of the story lines Doug highlights is that beacon vendors are continuing to build value higher in the stack. This makes sense given that there is very little money to be made in the hardware, unless you are in the chip business. It seems that the beacon OEMS have a set of choices that they can make in terms of where that value will be added. They need to exercise those choices wisely in order to foster an ecosystem around their platform and not declare war on every potential partner our there (kudos to Apple for doing that so well). The choices they make initially are likely to change as they move around the chess board and zero in on the ultimate pot of gold. In my mind the choices include: Fleet Management (e.g. Estimote), Beacon Physical Network (e.g. Gimbal), Beacon Ad Network (e.g. inMarket), Campaign Management (e.g. Pulsate), Analytics (TBD – mainly provided by players decoupled from hardware), Payments (e.g. PayPal), Applications (e.g. ShopKick).

Anyone can produce a bad beacon but making good beacon hardware is hard/expensive. This particular journey through the “Chasm” is likely to be slow (the speed of deployment is gated by the physical world, not just the software world). Think how long the Macy’s journey from pilot to full deployment has taken. Beacon OEMs will be under pressure to focus in order to conserve funds on this long expensive journey. So choosing their target value-add segment will be even more important.

I expect that we will see the cast of characters expand, but by the end of 2015 beacon vendors that don’t chose and execute on the area of value add will be lying dead on the beaches with over extended supply lines. More middleware only players will flourish (e.g. Rover), unencumbered by the inventory/supply chain and other burdens of the hardware business. The beacon hardware battle will be won by those who achieve volume and cultivate a healthy ecosystem.

Another prediction for 2015 is that IP battles will add to the drama. The early patent filings are starting to work their way through the USPTO process and the holders will have to decide if they are going to use what they have for offensive or defensive purposes.

My most confident prediction for next year is that 2015 will be far from boring. What will Apple announce with respect to hardware? How far up the stack will they move? Will Samsung really be able to untangle its web of confusing brand names and figure out how to make a proprietary stack viable? How far will Google go in linking its ad business to the world of digital to physical convergence? Who will get bought? Who will die and who will be the bright new entrants on this exciting stage?

Happy Holidays,

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