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The economics and tradeoffs of ad-funded smart city tech – TechCrunch

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In order to have innovative smart city applications, cities first need to build out the connected infrastructure, which can be a costly, lengthy, and politicized process. Third-parties are helping build infrastructure at no cost to cities by paying for projects entirely through advertising placements on the new equipment. I try to dig into the economics of ad-funded smart city projects to better understand what types of infrastructure can be built under an ad-funded model, the benefits the strategy provides to cities, and the non-obvious costs cities have to consider.

Consider this an ongoing discussion about Urban Tech, its intersection with regulation, issues of public service, and other complexities that people have full PHDs on. I’m just a bitter, born-and-bred New Yorker trying to figure out why I’ve been stuck in between subway stops for the last 15 minutes, so please reach out with your take on any of these thoughts: @Arman.Tabatabai@techcrunch.com.

When we talk about “Smart Cities”, we tend to focus on these long-term utopian visions of perfectly clean, efficient, IoT-connected cities that adjust to our environment, our movements, and our every desire. Anyone who spent hours waiting for transit the last time the weather turned south can tell you that we’ve got a long way to go.

But before cities can have the snazzy applications that do things like adjust infrastructure based on real-time conditions, cities first need to build out the platform and technology-base that applications can be built on, as McKinsey’s Global Institute explained in an in-depth report released earlier this summer. This means building out the network of sensors, connected devices and infrastructure needed to track city data. 

However, reaching the technological base needed for data gathering and smart communication means building out hard physical infrastructure, which can cost cities a ton and can take forever when dealing with politics and government processes.

Many cities are also dealing with well-documented infrastructure crises. And with limited budgets, local governments need to spend public funds on important things like roads, schools, healthcare and nonsensical sports stadiums which are pretty much never profitable for cities (I’m a huge fan of baseball but I’m not a fan of how we fund stadiums here in the states).

As city infrastructure has become increasingly tech-enabled and digitized, an interesting financing solution has opened up in which smart city infrastructure projects are built by third-parties at no cost to the city and are instead paid for entirely through digital advertising placed on the new infrastructure. 

I know – the idea of a city built on ad-revenue brings back soul-sucking Orwellian images of corporate overlords and logo-paved streets straight out of Blade Runner or Wall-E. Luckily for us, based on our discussions with developers of ad-funded smart city projects, it seems clear that the economics of an ad-funded model only really work for certain types of hard infrastructure with specific attributes – meaning we may be spared from fire hydrants brought to us by Mountain Dew.

While many factors influence the viability of a project, smart infrastructure projects seem to need two attributes in particular for an ad-funded model to make sense. First, the infrastructure has to be something that citizens will engage – and engage a lot – with. You can’t throw a screen onto any object and expect that people will interact with it for more than 3 seconds or that brands will be willing to pay to throw their taglines on it. The infrastructure has to support effective advertising.  

Second, the investment has to be cost-effective, meaning the infrastructure can only cost so much. A third-party that’s willing to build the infrastructure has to believe they have a realistic chance of generating enough ad-revenue to cover the costs of the projects, and likely an amount above that which could lead to a reasonable return. For example, it seems unlikely you’d find someone willing to build a new bridge, front all the costs, and try to fund it through ad-revenue.

A LinkNYC kiosk enabling access to the internet in New York on Saturday, February 20, 2016. Over 7500 kiosks are to be installed replacing stand alone pay phone kiosks providing free wi-fi, internet access via a touch screen, phone charging and free phone calls. The system is to be supported by advertising running on the sides of the kiosks. ( Richard B. Levine) (Photo by Richard Levine/Corbis via Getty Images)

To get a better understanding of the types of smart city hardware that might actually make sense for an ad-funded model, we can look at the engagement levels and cost structures of smart kiosks, and in particular, the LinkNYC project. Smart kiosks – which provide free WiFi, connectivity and real-time services to citizens – have been leading examples of ad-funded smart city projects. Innovative companies like Intersection (developers of the LinkNYC project), SmartLink, IKE, Soofa, and others have been helping cities build out kiosk networks at little-to-no cost to local governments.

LinkNYC provides public access to much of its data on the New York City Open-Data website. Using some back-of-the-envelope math and a hefty number of assumptions, we can try to get to a very rough range of where cost and engagement metrics generally have to fall for an ad-funded model to make sense.

To try and retrace considerations for the developers’ investment decision, let’s first look at the terms of the deal signed with New York back in 2014. The agreement called for a 12-year franchise period, during which at least 7,500 Link kiosks would be deployed across the city in the first eight years at an expected project cost of more than $200 million. As part of its solicitation, the city also required the developers to pay the greater of either a minimum annual payment of at least $17.5 million or 50 percent of gross revenues.

Let’s start with the cost side – based on an estimated project cost of around $200 million for at least 7,500 Links, we can get to an estimated cost per unit of $25,000 – $30,000. It’s important to note that this only accounts for the install costs, as we don’t have data around the other cost buckets that the developers would also be on the hook for, such as maintenance, utility and financing costs.

Source: LinkNYC, NYC.gov, NYCOpenData

Turning to engagement and ad-revenue – let’s assume that the developers signed the deal with the expectations that they could at least breakeven – covering the install costs of the project and minimum payments to the city. And for simplicity, let’s assume that the 7,500 links were going to be deployed at a steady pace of 937-938 units per year (though in actuality the install cadence has been different). In order for the project to breakeven over the 12-year deal period, developers would have to believe each kiosk could generate around $6,400 in annual ad-revenue (undiscounted). 

Source: LinkNYC, NYC.gov, NYCOpenData

The reason the kiosks can generate this revenue (and in reality a lot more) is because they have significant engagement from users. There are currently around 1,750 Links currently deployed across New York. As of November 18th, LinkNYC had over 720,000 weekly subscribers or around 410 weekly subscribers per Link. The kiosks also saw an average of 18 million sessions per week, or 20-25 weekly sessions per subscriber, or around 10,200 weekly sessions per kiosk (seasonality might even make this estimate too low). 

And when citizens do use the kiosks, they use it for a long time! The average session for each Link unit was four minutes and six seconds. The level of engagement makes sense since city-dwellers use these kiosks in time or attention-intensive ways, such making phone calls, getting directions, finding information about the city, or charging their phones.   

The analysis here isn’t perfect, but now we at least have a (very) rough idea of how much smart kiosks cost, how much engagement they see, and the amount of ad-revenue developers would have to believe they could realize at each unit in order to ultimately move forward with deployment. We can use these metrics to help identify what types of infrastructure have similar profiles and where an ad-funded project may make sense.

Bus stations, for example, may cost about $10,000 – $15,000, which is in a similar cost range as smart kiosks. According to the MTA, the NYC bus system sees over 11.2 million riders per week or nearly 700 riders per station per week. Rider wait times can often be five-to-ten minutes in length if not longer. Not to mention bus stations already have experience utilizing advertising to a certain degree.  Projects like bike-share docking stations and EV charging stations also seem to fit similar cost profiles while having high engagement.

And interactions with these types of infrastructure are ones where users may be more receptive to ads, such as an EV charging station where someone is both physically engaging with the equipment and idly looking to kill up sometimes up to 30 minutes of time as they charge up. As a result, more companies are using advertising models to fund projects that fit this mold, like Volta, who uses advertising to offer charging stations free to citizens.

When it makes sense for cities and third-party developers, advertising-funded smart city infrastructure projects can unlock a tremendous amount of value for a city. The benefits are clear – cities pay nothing, citizens are offered free connectivity and real-time information on local conditions, and smart infrastructure is built and can possibly be used for other smart city applications down the road, such as using locational data tracking to improve city zoning and congestion. 

Yes, ads are usually annoying – but maybe understanding that advertising models only work for specific types of smart city projects may help quell fears that future cities will be covered inch-to-inch in mascots. And ads on projects like LinkNYC promote local businesses and can tap into idiosyncratic conditions and preferences of regional communities – LinkNYC previously used real-time local transit data to display beer ads to subway riders that were facing heavy delays and were probably in need of a drink. 

Like everyone’s family photos from Thanksgiving, the picture here is not all roses, however, and there are a lot of deep-rooted issues that exist under the surface. Third-party developed, advertising-funded infrastructure comes with externalities and less obvious costs that have been fairly criticized and debated at length. 

When infrastructure funding is derived from advertising, concerns arise over whether services will be provided equitably across communities. Many fear that low-income or less-trafficked communities that generate less advertising demand could end up having poor infrastructure and maintenance. 

Even bigger points of contention as of late have been issues around data consent and treatment. I won’t go into much detail on the issue since it’s incredibly complex and warrants its own lengthy dissertation (and many have already been written). 

But some of the major uncertainties and questions cities are trying to answer include: If third-parties pay for, manage and operate smart city projects, who should own data on citizens’ living behavior? How will citizens give consent to provide data when tracking systems are built into the environment around them? How can the data be used? How granular can the data get? How can we assure citizens’ information is secure, especially given the spotty track records some of the major backers of smart city projects have when it comes to keeping our data safe?

The issue of data treatment is one that no one has really figured out yet and many developers are doing their best to work with cities and users to find a reasonable solution. For example, LinkNYC is currently limited by the city in the types of data they can collect. Outside of email addresses, LinkNYC doesn’t ask for or collect personal information and doesn’t sell or share personal data without a court order. The project owners also make much of its collected data publicly accessible online and through annually published transparency reports. As Intersection has deployed similar smart kiosks across new cities, the company has been willing to work through slower launches and pilot programs to create more comfortable policies for local governments.

But consequential decisions related to third-party owned smart infrastructure are only going to become more frequent as cities become increasingly digitized and connected. By having third-parties pay for projects through advertising revenue or otherwise, city budgets can be focused on other vital public services while still building the efficient, adaptive and innovative infrastructure that can help solve some of the largest problems facing civil society. But if that means giving up full control of city infrastructure and information, cities and citizens have to consider whether the benefits are worth the tradeoffs that could come with them. There is a clear price to pay here, even when someone else is footing the bill.

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Meet Matter: The IoT badge aiming to simplify the smart home

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Get ready to look out for a new name and logo as you shop for the smart home, with the Zigbee Alliance rebranding and launching a new name, Matter, for Project CHIP. The revamp sees the old alliance name retired in favor of the Connectivity Standards Alliance (CSA), intended to reflect a broader array of ways for things like connected bulbs, smart locks, cameras, and more to talk among themselves.

The Zigbee Alliance has been around for a while now, pushing the low-power, mesh-supporting network technology. While it may not be a consumer-recognized brand, Zigbee is actually found in a fair amount of smart home devices. Hue bulbs, for example, rely on it for their intercommunication, much like numerous remotes, locks, and other devices.

You can even find Zigbee on Mars at the moment, with the Ingenuity helicopter using the wireless tech for its link to NASA’s Perseverance rover.

While Zigbee may be well-traveled, as time has gone on it has become clear that no single communication standard will dominate the market. Instead, multiple different wired and wireless standards exist, and multiple different companies want to use their own proprietary connection types.

The CSA will try to bring them together as much as possible, it said today, and at least from the list of names onboard that does seem a more achievable goal. Amazon, Apple, Google, IKEAGoodbye Project CHIP, hello Matter

Key to the transition is the arrival of Project Connected Home over IP – aka Project CHIP – which is also getting a rebrand today. Now known as Matter, the brand by which it will launch in stores by the end of the year, it’s intended to be a badge by which smart home and IoT device interoperability can be checked. That, the CSA hopes, will cut down on “will gadget X work with ecosystem Y?” confusion in stores.

Initially developed by Amazon, Apple, Comcast, Google, SmartThings, and the Connectivity Standards Alliance, and subsequently joined by IKEA, Legrand, NXP Semiconductors, Resideo, Schneider Electric, Signify, Silicon Labs, Somfy and Wulian, Matter has some decent buy-in from device-makers at least. The platform promises IP-based connectivity with built-in security, initially via ethernet, WiFi, and Thread, with Bluetooth Low Energy used for easier initial setup.

The upshot should be devices that can be controlled within multiple ecosystems simultaneously, as well as interoperability between devices from different brands. “The Matter mark will serve as a seal of approval,” the CSA says, “taking the guesswork out of the purchasing process and allowing businesses and consumers alike to choose from a wider array of brands to create secure and connected homes and buildings.”

For example, a Matter-compliant device could work with Amazon Alexa, a SmartThings hub, and with Google Assistant devices. Existing devices will be in many cases brought along for the ride, too, such as Signify’s Hue bulbs. Final certification is expected in late 2021, across everything from lighting and electrical, HVAC, access control, security, smart shades, TVs, and more.

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New iPhone 13 leak tips a mighty change in size

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The latest iPhone info leak suggests there’ll be a significant change in how the devices look and feel in your hand – when you’re looking from the back, or the side. If you’re the sort of person who never looks at the back of your phone and always uses a protective case the differences may not seem all that extreme. The biggest change comes in the Pro model, where the camera array becomes massive.

The iPhone 13, iPhone 13 Pro, and iPhone 13 Pro Max will likely be revealed at an event this Autumn. Information shared with MacRumors suggests there’s a large enough change in size for both the iPhone 13 and iPhone 13 Pro that users will not be able to use an old model case. Both the iPhone 13 and iPhone 13 Pro are expected to get a thickness increase of 0.17mm.

The iPhone 12 is 7.4mm thick – the iPhone 12 Pro is also 7.4mm. That’s the thickness of the bulk of the device – not including the camera bump. Both models are expected to come in at 7.57mm without their camera bumps. The bump on the iPhone 12 is 1.5mm, while the iPhone 13’s bump is expected to grow to 2.51mm.

The iPhone 12 Pro has a camera bump relatively similar to the iPhone 12. The iPhone 12 Pro’s camera bump is 1.7mm, while the iPhone 13 Pro’s camera bump is expected to grow to a whopping 3.65mm.

It would seem that the new iPhone 13 Pro will feature a camera array that’s significantly different from that of the iPhone 13. The iPhone 13 Pro will likely have the same camera feature set as the iPhone 13 Pro Max. This suggests that there will be features that are important enough to the whole series that they will not be restricted to one model alone.

It’s likely there’ll be an event in October of 2021 at which Apple will reveal the new iPhone 13 device lineup. It’s difficult to predict when the devices will be released due to changing schedules and supply lines courtesy of the COVID-19 pandemic and manufacturing fallout therein. If Apple holds an event in mid-October for the iPhone 13 device family, we’ll likely see an iPhone 13, iPhone 13 Pro, and iPhone 13 Pro Max release date by the end of October 2021.

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Naim Uniti Atom Headphone Edition puts amp and streaming apps in one lavish box

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If the idea of your own little bubble of perfect audio sounds appealing, Naim Audio’s new Uniti Atom Headphone Edition may be the trick to bringing out your inner-audiophile. A headphone-optimized version of the British music equipment specialist’s Unity Atom system, it combines a streaming box for platforms like TIDAL and Spotify with a high-quality headphone amp and more.

Rather than playing music back through a set of speakers, then, Naim’s newest box is focused on a single listener. It comes equipped with a new transformer design which, Naim says, has been reworked to deliver the best power for a headphone amp. There’s a choice of both balanced 4-pin XLR and Pentaconn outputs, plus a standard 6.3mm output.

The amp itself is a class-A that can switch into class-AB. Normally, at regular volumes, it sticks with class-A, but as you crank the power up – and the impedance of your headphones drops – then it can add in class-AB power for the top dB. There’s 1.5W per channel into 16 Ω, regardless of which output you’re using, and the Uniti Atom Headphone Edition connects to all outputs simultaneously.

There’s also support for using the box with a pre-amp, for those times you do want full speaker support. However, you can choose which to use depending on which headphones you feel like listening to. If you’re using the front 6.3mm and Pentaconn outputs, for example, the pre-amp outputs automatically mute and a headphone button illuminates. Or, you can press it manually if you want to use the XLR connection on the back.

On the streaming side, meanwhile, there’s the same tech that Naim already used on its Mu-so 2nd Gen, Uniti, and ND 555 players. There’s native support for TIDAL, Spotify Connect, and Qobuz, along with Chromecast and AirPlay 2 streaming to access other services, and Roon Ready status. TIDAL Connect, meanwhile, will be added in a few months time, Naim says.

There’s support for up to 24-bit/384kHz WAV, FLAC, and AIFF audio, plus ALAC. For MP3 and AAC, there’s up to 48kHz/320kbit (16-bit) support, plus up to 48kHz (16-bit) OGG and WMA. There’s DSD 64 and 128Fs, and finally SBC and AAC support over Bluetooth.

For connectivity, there’s an ethernet port, and WiFi 802.11ac, plus a USB port that can play music from external drives. Up to five Naim Streaming products can be connected and have their playback synchronized, all controlled via the Naim app. If you’re just operating the Uniti Atom Headphone Edition, there’s a front panel with buttons and a traditional rotary volume knob, or you can use the included Zigbee remote.

The Naim Uniti Atom Headphone Edition is available now, priced at $3,290.

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