In 2012, there were 8.7 billion connected objects globally, constituting 0.6% of the ‘things' in the world. In 2013, this number is exceeding 10.0 billion. Driven by reducing price per connection and the consequent rapid growth in the number of machine-to-machine (M2M) connections, we expect the number of connected objects to reach 50bn by 2020 (2.7% of things in the world). We expect connectivity costs to reduce at a 25% CAGR during 2012-20, which is approximately equal to the growth in number of connected objects (implying price-elasticity demand of 1). Lastly, we believe that more than 50% of the connected objects added during 2013-20 will be added in the last 3 years of the decade. This also implies that the maximum connected objects are likely to be added when the connectivity costs are the lowest.
To estimate the number of connected objects during 2013-20 we first estimated the total number of ‘things' in the world and then determined the proportion of connected things. For 2012, we had estimated the total number of ‘things' in the world to be 1.5 trillion and the number of connected objects to be 8.7 billion, implying 0.6% penetration rate of connected objects. We expect the number of things to reach 1.8 trillion in 2020, growing 3% annually. Subsequently, we have assumed that connectivity costs will decline by 25% annually during 2013-20. Conservatively, we assume the price-elasticity of demand to be ~1 and consequently expect annual growth in number of things to be 25% CAGR during 2013-20. Based on these assumptions, we estimate that the number of connected objects to reach ~50 billion in 2020 (or 2.7% of the total things in the world).