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Dinner and a Movie with the Vivint Executive Team in NYC

by William Ablondi | Oct 13, 2016

Well, it wasn’t really a movie, but there were some videos of Vivint’s latest product portfolio on the screen at the back of the room  J

Earlier this week I had the privilege of attending a dinner meeting with many of Vivint’s top execs including: Todd Pedersen, CEO and founder, Alex Dunn, president, Jeremy Warren, CTO and Jeff Lyman, CMO. In addition, there were a couple of other analysts and journalists from Bloomberg, CNBC, Fast Company and Dwell magazine. A perfect group to chat about the future of the Smart Home in the perfect setting: The Modern restaurant in New York’s Museum of Modern Art.

Enough name dropping. Vivint finished its 2nd quarter 2016 (June 30) with 101,000 new subs… a record for one quarter and this wasn’t even their summer selling season – typically their biggest for sign-ups. This was driven in part by a significant uptick in sign-ups by their inside sales team. They accounted for nearly a quarter of new subs; up from 15% in the 2Q 2015. This gives them more than a million subscribers in total. In addition, the new subscribers’ uptake for at least two smart home services increased to 87% for the quarter; up from 80% in the prior year quarter. Average recurring monthly revenue (RMR) per subscriber (overall) increased $5/month to $67. All in all, a very good quarter behind them as they visited New York to chat with some of their money (Blackstone) and, of course, us.

Todd Pedersen kicked off the dinner with remarks focusing on the company’s dedication to customer service. They sell smart-home-as-a-service… pay the monthly fee, get about $1,500 worth of hardware with installation and professional monitoring included with the typical 42-60 month contract. This theme was revisited numerous times during the discussions especially when I asked Todd about the competitive threat of DIY/Pro-monitored systems like SimpliSafe. He doesn’t see them as a threat; in fact, he views them as potential prospects.

He said people signing up for these low cost alternatives are clearly interested in having security, but most of the systems are not as expandable as Vivint’s is and customer service is lacking. The hardware is bland with limited functionality. For a few bucks more (after factoring in the benefit of the bundled hardware) Vivint’s customers get a much more robust offering. Evidently Vivint winds up converting a lot of dissatisfied DIY customers to their offering.

Todd also mentioned that they are working with a host of brand-name hardware vendors that want to get into the Smart Home market, but don’t know how to offer “service”. They’re manufacturers, not service providers. They’re already working with the like of Nest and Amazon, but more are on the way. Again, Vivint will wrap their service around the hardware becoming a distribution channel for manufacturers.

Alex Dunn mentioned that, on average, Vivint hangs onto customers for more than 8 years and expects that to increase with the expanded capabilities they’re building into the Vivint Sky platform. He measures customer acquisition costs against a goal of $60/month x 30 months or about $1,800 excluding the value of the hardware. Hanging on to customers that long will help them to eventually turn profitable (which they aren’t currently due to their rapid growth). I asked Alex if he thought the “Mass Market” will pay $60 a month for security… it seems to be a lot in my view. He pointed to typical fees for smartphones and video services that the mass market currently pays for. He did say that Vivint is testing pricing plans where customers pay upfront for the hardware and, in exchange, receive a lower monthly fee.

OK, but what is Vivint doing to make their Smart Home service with security as compelling as cellular data and video? That’s where Jeremy Warren and his team come in. Jeremy described the efforts of his Artificial Intelligence and User Experience teams. They’re working to employ data collected by sensors currently available, as well as those in new devices coming to market, to allow their platform to be more aware of the presence of specific individuals and what they’re doing in order to initiate automation routines without requiring commands.

Jeremy reminded me that they already integrate with Amazon’s Alexa, which he sees as a useful input tool, but by no means the only type of input in his vision of the Smart Home. I asked him about Amazon collecting all that data from his customers and what Vivint was doing to protect their privacy. He pointed out that Amazon only collects data from actions generated through Alexa and most activities in a Vivint Smart Home won’t go directly through Alexa. Amazon evidently isn’t interested in all of the “background” data generated within the home.

Google, on the other hand, is interested in all that data. Vivint is working with Google to integrate Google Home, but they have issues with the data Google wants. Jeremy described Home as a sort of data vacuum sucking up everything from everywhere and Vivint is not planning to allow that. On the topic of integrations with tech giants, Vivint is also working with Apple on HomeKit integration. Not surprising, but interesting to know.
I asked Jeff Lyman if they do much TV advertising while admitting that I personally don’t watch much TV other than sporting events. He said they didn’t do much on TV and prefer targeting prospects based on Google searches and Facebook activity. They’re investing to build their brand image as a Smart Home company.

During the discussions I was reminded about some of Vivint’s other initiatives aimed at the Smart Home including their wireless broadband service which costs about $60/month for a 100 Mbps connection and their cloud back-up service Space Monkey which costs $199 for the hard drive and $50/year for 1TB. Vivint bundles in the hardware with their high-end Smart Complete package. In addition, Vivint is working with its sister company, Vivint Solar, to integrate its smart home capabilities with solar installations.

BOTTOM LINE:
• Vivint is a pure-play Smart Home company; not a security company.
• They are convinced that professional installation with professional monitoring is the way to ensure customer satisfaction and build a sustainable business model.
• Vivint is focusing on the user interface and building a more intelligent platform and not just enhanced connected gadgets with more features to differentiate itself from the competition.
• They might just be able to develop a “Mass Market” solution for $60 a month.

For more on Vivint and the US interactive Security market stay tuned for our upcoming report: 2016 Smart Home Market Update: Interactive Security.
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