Popular Internet of Things Forecast of 50 Billion Devices by 2020 Is Outdated

If you follow discussions about the Internet of Things, you’ve probably heard this stunning prediction at least once: The world will have 50 billion connected devices by 2020. Ericsson’s former CEO Hans Vestburg was among the first to state it in a 2010 presentation to shareholders. The following year, Dave Evans, who worked for Cisco at the time, published the same prediction in a white paper.

Today, that figure has arguably done more than any other statistic to set sky-high expectations for potential IoT growth and profits. Remarkably, those projections weren’t even close to the highest of the time—in 2012, IBM forecasted 1 trillion connected devices by 2015. “The numbers were getting kind of crazy,” recalls Bill Morelli, a market research director for IHS Markit.

Now it’s 2016, and we’re nowhere near 1 trillion IoT devices, or even 50 billion for that matter. The current count is somewhere between Gartner’s estimate of 6.4 billion (which doesn’t include smartphones, tablets, and computers), International Data Corporation’s estimate of 9 billion (which also excludes those devices), and IHS’s estimate of 17.6 billion (with all such devices included).

Since they first made their projections, both Ericsson and Evans have lowered their expectations from 50 billion for 2020: Evans, who is now CTO of Stringify, says he expects to see 30 billion connected devices by then, while Ericsson figures on 28 billion by 2021. Other firms have adopted similar tones: IHS Markit projects 30.7 billion IoT devices for 2020, and Gartner expects 20.8 billion by that time (excluding smartphones, tablets, and computers). Lastly, IDC anticipates 28.1 billion (again, not counting those devices).

Meanwhile, the popular 50 billion figure continues to be widely cited. Even Evans is a bit surprised by its lasting power. “I think people do tend to latch onto numbers that seem really hard to fathom,” he says. “Fifty billion is pretty staggering.”

Forecasting the future is no easy task, and there’s nothing unusual or wrong about analysts and companies revising their projections. However, IoT forecasts are especially large with significant variability among firms and over time, skewing tens of billions of units in either direction.

At the same time, any market with such potential girth dazzles entrepreneurs and investors. For comparison, 18.6 billion microcontrollers were shipped in 2014, and 10.4 billion RFID tags will be shipped this year. Given the forecasts, IoT is expected to top them all. “I don’t think we’ve seen this type of market size before, to be honest,” says Vernon Turner, a senior IoT analyst for IDC.

Peter Middleton, a research director at Gartner involved in the firm’s IoT forecasts, says future IoT projections are intended to create “market efficiency,” helping companies make smart choices about whether they should enter a new area and informing venture capitalists as they decide where to place their investments. Earlier this week, Intel executive Venkata Renduchintala emphasized the company’s enthusiasm for IoT in a keynote at its annual developers’ forum.

Still, it would seem the practical utility of IoT estimates is limited if they have the potential to be revised by many billions of units. Turner at IDC says such variation and fluidity of these numbers is typical of early estimates focused on nascent markets. The point, he suggests, is to think of the estimates as a general signal, rather than focus on the specific numbers.

There are many reasons why projections from different firms may change over time, or simply not match up in the first place. Each company starts with its own definition of IoT and refines its methods over time.