With Avigilon to acquire VideoIQ, we answer a number of critical questions inside:
VideoIQ Failures and Success
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"Avigilon is going to load up VideoIQ into their marketing machine and, rightfully, bash away at major players like Axis, Milestone and Genetec for not having such a critical component."
Until VideoIQ cameras are only available through Avigilon dealers, and versions of firmware/hardware are released that are proprietary to Avigilon, VideoIQ cameras and their analytics have been integrated to Genetec for years.
Agreed, VideoIQ has been integrated into Genetec, Milestone, Exacq, etc. for years. But that's going to become a problem not for Avigilon, but for Genetec, Milestone and Exacq.
Now, Avigilon has an in to any competitor VMS account that is using VideoIQ and as they likely will tighten down access / integration in the next few years, they can exploit this.
It's good to see Axis moving forward on the edge analytics, albeit slowly. They have a hard time in Lund understanding the integrators want out of the box analytics, easy to configure and one throat to choke. Hopefully the VideoIQ acquisition is that wake up call
Sony & Bosch both offer edge analytics, hopefully they will decide they want to be players in the IP world and get the cameras to a competitve price point.
The problem with Sony and Bosch, more than price point, is that they do not work well enough. See our Camera Analytics Tested: Axis vs. Bosch vs. Sony. They need to improve performance as well.
Axis may have an advantage (for now) with a platform for developing edge processed software solutions, but they'll loose it as soon as someone in the industry comes up with a non-proprietary way of doing it for all cameras.
Think of it like this.... What if Apple had not opened up iPhone development to 3rd parties, but instead developed all apps themselves and tried keeping the profits from it? Then Google comes along and releases Android and unlike Apple opens it's system to 3rd party developers. While Apple would have been able to pocket profit from apps if they were the only ones developing and releasing them for the iPhone, they probably would have tanked in market share against Android phones because they would have not been able to keep up with the onslaught of choices and the innovation for Android apps.
Bosch and Axis and Sony developing their own edge analytics just delays what really needs to happen, and will be inevitable- the development of a common coding environment for edge applications in cameras (and maybe other devices), whether it be Android as the camera's operating system (which I've long proposed), or some other OCOS (Open Camera Operating System, which I hereby coin and trademark that, so don't use it without paying me royalty or I'll sue) that the industry comes up with so that any conforming camera can run any 3rd party's application.
John- how much is the overall analytics worth ? Do you see this integration into all avigilon cameras or a system level overlay ? This will primary be used as a key feature sale for Avigilon to push more of their core offerings?
Josh, for 'worth', I am guessing you are asking about global sales. It's clearly low, how low depends on accounting practices. That VideoIQ is somewhere around $10 million and is a market leader speaks volume, especially since they sell a combo of cameras, storage and VMS with it.
That said, I think video analytics could be huge, as big or bigger than megapixel. Megapixel gives you details (hopefully, if the lighting is good or even enough) after the fact but video analytics can prevent alert crime in real time, mitigating the impact.
I do not know what Avigilon will eventually do but, if it was me, I would offer options of VideoIQ analytics integrated into the IR lines at least.
With processors processing power growing by leaps at cheap prices, analytics will probably move for the most part to the cameras, or at least that's what Avigilon can do. Software based solutions (in this case analytics) tied to specific hardware based (in this case cameras) I think would have eventually hurt VideoIQ in the long run if they did not change. Just look at BlackBerry for that.
John:
What accuracy do you give to Videoiq $10million in sales? Did you have any info on Videoiq level of net income (if any). More than likely, sales were flat and net income did not justify a higher valuation.
I think there is a more interesting story about Videoiq - What is behind the curtain always interesting when a venture capital firm bails out. Check out the SIW article announcement of the new CEO and 7.5m of new financing in Sep 2011.
What was RedCloud's net income? ;)
I don't know what VideoIQ's net income, but in these cases, net income is not really a key consideration. If they were really profitable, they likely would have sold out for $32 million!
As for revenue, we are going to know definitively in a few weeks (or at worse, a few months) when Avigilon releases it next financials.
My point is that RedCloud's annual revenue was under $3 million and they got acquired by Avigilon for $17 million cash. That most certainly makes VideoIQ's price low, especially considering (1) analytics is a tougher product to do well and (2) VideoIQ had much stronger reputation.
We covered the 2011 announcement here. What's behind the curtain there? I guess the investors hoped a guy who nothing about this market (new CEO) would pull off a miracle IPO or major deal. Two years later being sold to an industry company at $32 mil is a clear demonstration that it did not work.
Without knowing a whole lot about VideoIQ's business strategy prior to the Avigilon acquisition. it seems that a company of this type would struggle to get enough global visibility for its product with only 30 employees, being only one vendor out of a plethora of products available to integrators.
Avigilon appears to have a much tighter grip on its channel partners and can more easily demand added visibility for it's complete product lineup , including analytics, than VideoIQ may have been able to on its own.
The same can probably be said for Redcloud.
It may appear that net income is not a factor to the outsider, but in the negotiation for determining sale price the valuation discussion starts and ends around the net income. If a startup has no net income track record and the net income is negative and going south with sales flat - investors soon lose interest. Do you know how much had been invested in Videoiq?
Videoiq in the last 12 months has done a lot of new sales strategy roll outs (changed its logo-what was that all about?, new hires for marketing, a surprising number of new product and software announcements) These are not things you do to position yourself for a sell at Xmas 2013, rather you would cut costs to create some net income or net income trajectory. Even worse, you pour new money into growing sales and you get nothing for it. The decision to exit was quick and must have been a dramatic shift.
Videoiq has some great products. It is a sophisticated appliance that very few integrators have the time to learn or stick with - the product requires monitoring to deliver its value, not clear to me how avigilons dealer network of integrators will be able to capitalize on this.
Videoiq was a failure in execution, the people at Videoiq making the decisions, didn't do enough to find out from their customers to try and figure out what they needed to do (what was working and keep doing) to be financially successful.
"In the negotiation for determining sale price the valuation discussion starts and ends around the net income."
Strongly disagree. For Avigilon, the current net income is not relevant because they are an operational company in the same market.
Avigilon knows they can slash the cost structure of VideoIQ tremendously, eliminating redudant roles (marketing, reps, bookkeepers, legal, admins, etc.) plus, since they have their own camera production facilities, they can decrease unit costs.
More importantly, Avigilon knows they have a powerful sales machine and rabidly loyal dealers, which means they can significantly increase recenue, even withought major R&D investment.
There are instances were net income is critical in valuation, but that's generally because the acquirer is a financier who cannot or does not plan major operational changes.
John
I think you made my point for me. You still have to rationalize where the acquisition will impact your net income. Now with a 30+ million investment you have to rationalize your way to a ROI.
Your point of rationalize the sale around the opportunity with the dealer network is probably what took place. However, I don't think they really have it figured out yet how their dealers are going to be any better than Videoiq dealers when it comes to overcoming the technicial humps with the Videoiq product. As far as gaining the analytics technology and incorporating it into the Avigilon cameras - sounds good but who is going to pay more for a camera unless you are using the analytics - got to be monitoring the cameras to make use of the features.
The rationale has little to nothing to do with current net income (i.e., 2012, 2013). That's my point.
Some deals are based almost strictly on historical profits (generally established, low growth, low potential ones). This is just not applicable to VideoIQ.
But I think we are getting at your real issue, as you allude to "overcoming the technical humps with the Videoiq product"
If you think that VideoIQ's technology is flawed or can be easily beat, then there's no reason to pay $32 million for it, even if it's generating tons of net income right now.
I disagree here and that's why ultimately I think it's a good deal for Avigilon. The technology has value and Avigilon should be capable of maximizing its profit potential.
According to a NR from Avigilon a bit earlier this morning, VideoIQ had annual revenue of approximately $11 million in 2013.
You weren't far off.
The next analytic company to be bought will be Sightlogix. I believe that Genetec and Milestone etc, will need to seriously consider purchasing a company such as this. Having a strategic buy like this will not hurt their overall relationships with someone like Axis, but instead move them towards what I think is a natural progression in our business.
Milestone is now selling hardware for their mid tier software, analytics need to be part of the software eco-system to be truly effective. again this type of purchase for a Milestone or Genetec will not hurt their Platform for Open software and eco-System 3rd party partners.
The real question is if analytics are more effective on the edge (in the camera) or at the server, and the associated costs involved with each.
Adding an analytic to a VMS substantially increases the load on the server. Are customer willing to pay more for the added hardware requirements?
My experience with analytics to date has been customers want them if they are free or very low cost, but are not willing to pay much, if anything, for them
I think it depends on the market. In military/critical infrastructure/commercial/industrial, it's pretty clear that customers are willing to pay significant premiums. The only problem is most of the time, analytics worked poorly, creating a big problem. But.... the value proposition is there for those markets. They really desire / need immediate alerts to threats and robust video analytics can deliver them.
John: Which do you think the market would gravitate towards, assuming they performed as advertised - edge or server based?
For sure edge, as Luis mentions above, the combination of increased processing power and the ability to control / know the video input are big advantages.
We have a post that covers this: Video Analytic Architecture Comparison
That is an excellent breakdown of the analytics world.
I strongly agree with your conclusion that embedded camera analytics are the best option
Hi John,
Reading through the pros and cons for each model, would it be fair to say that dealing with one vendor offering an integrated solution would do away with many of the cons?
Having the camera and the analytics vendor being from the same vendor is important as it eliminates a core contention ("No, it's a problem with the camera," vs "No, it's a problem with the analytics").
Sightlogix is like a tank when the market needs more jeeps. Unless Sightlogix can offer something at a mass market prices (sub $1000), I think it's stuck at the high end (not that it's a horrible place but it simply leaves out the other 95% of the market).
I really really doubt Milestone would buy an analytics company, especially one that makes cameras. I could possibly see Genetec doing this but that's still hard to believe.
In 2011, ABI research estimated the global video analytics market would be worth approximately $900 million by 2016. They don't seem to have updated that report since.
ABI, like most market 'research' firms are doing little more than throwing out guesses. In this case, they were estimating that the market was ~$360 million USD in 2011. The only way to get to that number is to include whole devices that happen to have some form of analytics built in, like Sony and Bosch cameras, etc. In any event, it's not realistic nor appropriate to what's actually being adopted.
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We use VideoIQ exclusively to protect our critical infrastructure. Cost is secondary to performance. We have found we get more bang from our buck with VideoIQ than any other product.
As a product I have always found the product sturdy and nearly bullet proof. Our apprehension rate was 65% higher and our false alarm rate was 75% lower with VideoIQ than our previous provider.
The ability to record at different rates for storage and for streaming is a huge benefit. Thankfully others appear to be developing their edge based systems as well.
I am not very excited about the merger as we preferred to have a third party providing the analytics verse the analytics being provided on the VMS. When one manufacture has the whole piece of the pie then tend to be less responsive.
We have suspected VideoIQ would be sold and were hoping that it would occur in 2016 not in 2013.
What do you think about the new product from Brickstream?
The company dominates the people counting market (together with Irisys themal counters), especially in queue management and high-accuracy requirements. The LIVE product includes wireless and video streaming, and the idea was to play in both counting and security markets.
Thanks for bringing up the Brickstream Live.
Since it is clearly positioned and designed for retail, it will most likely stay within retail. By contrast, for most security analytic vendors, retail has been a secondary market so even if the Live is successful, it probably will not have much of a direct impact on each other.
The bigger questions I have is about the use of such an all-in-one device. Brickstream claims that their "security analytics identifying 'wrong way' traffic, people running, tailgating into a secure facility, and unidentified/suspicious objects are supported." Even if they work well, it's physical constrained by having to put one of these very expensive devices at each location you want to cover.
I suspect it is a nice upsell to their core customer base who want more but not something that expands them into the purse security market.
