Lee Odess Alleges Omdia's "Numbers Complete Garbage"

The most widely used physical security market sizing numbers are from Omdia, formerly known as IHS Markit and IMS, which has been providing this for over a decade.

However, "Anyone using Omdia's marketing sizing data that our industry is USD 10B ... will find these numbers Complete🔥Garbage," alleges Lee Odess.

Previously, Odess was SVP at Latch. The company laid off 90% of its employees, the stock crashed 90%, was delisted, and even the name was dropped.

Odess now aims to compete with Omdia, saying, "we did the work to assemble a formula to size the market. That is how we got to $70B."

Unfortunately, Odess' disparagement conflates his self-created Total Addressable Market (TAM) size with Omdia's "numbers," a professional estimate of the actual current market size.

Inside, we explain market sizing numbers, the inherent challenges in categorization, and the fundamental difference between actual marketing size and Total Addressable Market (TAM).

False Claims About Omdia

Odess' actual specific claims about Omdia are simply false:

They don't have access to most industry information and extrapolate from LinkedIn employee numbers.

Omdia has direct access to various large manufacturers, who provide them with non-public segmented sales data, something that executives at many of those companies have confirmed to us over the years.

Omdia elaborated to IPVM on its research process:

Our Access Control research is based on extensive primary research discussions with senior management and product lead personal at leading manufacturers. These conversations include market trend discussions, company sales data discussions, market sizing discussions, and comments on previous market sizing and forecasts.

Additionally, Omdia collects a number of excel based questionnaires that provide detailed revenue analysis from the last complete calendar year. As well as analysis of publicly available financial reports, Omdia also performs due diligence and clarifies estimates with channel partners such as distributors and component providers”.

The Omdia process is imperfect, but, in our experience, they try hard to get the numbers right. Some companies will not give them numbers, and some information will be wrong. But they have a team of people working all year round trying to get the numbers right, and large companies paying them tens of thousands a year each for this.

Odess, by contrast, can personally guesstimate and use it as a marketing tactic.

Sizing Markets What To Include

The most fundamental question is what to include when sizing a market. Depending on this, the "size" of the market could vary by 200%, 400%, or more.

Let's use pizza as a simple example.

A straightforward method is to sum up revenues from major pizzerias like Domino's, Papa Johns, and Pizza Hut. This is a widely accepted approach.

However, sizing of the pizza market could also consider the following:

• Non-Pizzerias: Consider pizza sales at places like bars, diners, theaters, and theme parks. However, isolating pizza revenue from other foods like hamburgers or hot dogs can be tricky.
• Specialty Breads: Should flatbread, focaccia, or naan be counted? And what if they have toppings like cheese? Does a genuine pizza always have cheese and sauce?
• Frozen Pizzas: Should brands like DiGiornio, Red Baron, and Tombstone that people cook themselves be included?
• Homemade Pizzas: Consider sales of individual ingredients (dough, sauce, cheese) for those making pizzas at home.

Reasonable people will disagree about which of these pizzas should be counted in the market size.

This same exercise can be done for any market, including physical access control and video surveillance.

Omdia Access Control Numbers

Last month, Omdia posted a chart highlighting its access control research, which we partially copied below:

Omdia includes "top-level product segments" of Readers, Electronic Locks, Software, Panels, and Credentials. For example, Omdia is roughly estimating reader revenue of ~$1 billion annually (i.e., $6.7bn total x 16% of the total).

As with pizza, others could categorize access control differently. Assa Abloy alone generates more revenue than the entire access control market as sized by Omdia, but that is because most of Assa's revenue is from "opening solutions," mechanical hardware that is grouped separately.

Omdia And "Factory Gate Pricing"

Another factor is that market research firms, such as Omida, typically use what is called "factory gate pricing," but other pricing levels or points could be used.

Factory gate pricing is the revenue the manufacturer directly obtains, excluding markups in the channel, as well as the labor of installing or servicing any product. For example, HID sells ADI a reader for $200. Omdia would record revenue of $200 to HID and to the access control reader market. However, ADI might re-sell that reader to ABC Security for $250, and then ABC Security might resell it to end user XYZ for $400 plus charge $200 to install the reader.

A different way of sizing the market might be triple what Omdia would record as "factory gate pricing," if one includes the abovementioned markups and charges.

Omdia primarily serves manufacturers who are trying to understand what their competitors are achieving and what the overall current market size is for manufacturers.

Total Addressable Market Vs. Actual Current Market Size

A key problem in this debate is conflating what the actual current market size is (what Omdia typically reports) versus what the total addressable market (TAM, what Odess is generally alluding to) could be. That is, what might the market size be if everyone who might buy, did buy?

Take plant-based meat (i.e., Beyond Meat, Impossible Foods, etc.). The actual market size of plant-based meat, compared to conventional meat, is tiny. Imagine it is $5 billion this year. That, if true, would be its actual current market size. However, the total addressable market (TAM) for plant-based meat might be $50 billion or $100 billion or more. Reasonable people may disagree on this since it depends on future changes, e.g., how inexpensive plant-based meat can become, how much it tastes like conventional meat, how well it will be culturally accepted, etc. Every reasonable person would agree, though, that the TAM is not the market size today.

Marketers Like Bigger Numbers

Odess certainly understands one important psychological element - marketing people, and even many executives, like bigger numbers. An analogy would be instead of saying factually what your actual personal wealth is, in the bank, home equity, etc. (say $100,000), you could calculate how much social security payments may bring you and how much you may make in the future, and then say, actually, you are worth $1,000,000, etc.

Using bigger numbers will get more attention. It worked for Latch for a while. Maybe those numbers will come through, and maybe they are far overinflated. Don't conflate that with Omdia.

Odess concludes:

We should stop using [Omdia] data as an industry and start telling our story.

Omdia aims to assess honestly how large the market is actually today. Unlike Odess, they are not storytellers.

Quiz

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