Earlier this week, Liron Shapira, a self-proclaimed skeptic of Web 3.0shared an article from the generalist newsletter that delved into the Helium Network and, with it, their skepticism about the business. One of the biggest surprises in the article, and its related tweet thread, was the fact that Nova Labs, the company behind the Helium Network, made just $6,500 in revenue in June.
Nova Labs CEO Amir Haleem did not dispute that number. But I’d like to put it into context and explain why it’s not the indictment against the business model that others may think it is, while also explaining my own concerns about the future of Helium.
First, a review. Nova Laboratories, which changed its name earlier this year in an attempt to distance itself from the long-range, low-power Helium Network, it has a long history in the IoT sector. The company was started in 2013 and went through several pivots before settling on the idea of using tokens to incentivize people to put Helium hotspots in their homes. The access points act as wireless gateways, receiving LoraWAN or Helium’s own LongFi radio signals and using the access point owner’s broadband network to transfer the data to the Internet.
To reward users who place hotspots in their homes, Nova Labs established the Helium Network Token (HNT). An access point owner generates HNT by providing coverage and transferring data. And companies that want to buy data on the network use HNTs to buy data credits. Each data credit is worth $0.00001. So, Nova Labs’ reported June revenue from data transfers represents 650 million data packets.
As an outreach point, I run a Helium hotspot in my home and have since 2020. I made around $20,000 selling HNT in 2021 and currently has 126 HNTs worth about $1,195 at the current price of about $9. In the time I’ve owned the hotspot, the price of HNTs has ranged from less than $1 to a high of around $ 55, peaking as interest in cryptocurrencies increased.
Which leads to the first big question anyone interested in the Helium network should be asking themselves: What happens to a decentralized wireless network if the people who bought their hotspots and expected to make $50 a week start making just $4 a week? week? In fact, is that post-crypto drop rate enough of an incentive for people to keep their hotspots? It’s for me because I got into this thinking it would be fun to support an IoT network. And I didn’t spend $500 or even a few thousand dollars on a hotspot during the frenzy of 2021 hoping to make money.
Yet tens of thousands of people did. Kevin, my colleague on the podcast, is one of them. She ordered the hotspot from him in March 2021 and it arrived in April 2022. She paid $450 for it and based on current HNT prices, she can expect to earn $15.75 a month. But while he’s understandably disappointed with the ROI, that wasn’t his primary goal in purchasing the access point. Like me, he’s interested in supporting a decentralized IoT network, so he says he’ll be happy to keep it running.
Meanwhile, Helium added roughly 500,000 access points to the network in the last year alone. They are operated not only by individuals, but also by companies that were created to buy and distribute hotspots to specific areas and households in exchange for a portion of their HNTs. How many of those companies want passive income in the $15 per month range?
Also, given that many of the inflated revenue numbers were created by the speculative frenzy around HNT and the increased ability to mine HNT during the early stages of building a network, what will be the true revenue opportunity?
I may have bad news on that front. One of the reasons Helium is so appealing to me as an IoT reporter is that it fundamentally changes the cost of delivering data over a LoRaWAN network. These networks are useful for sending small bits of data over long distances.
Cellular networks can also provide this type of long-range connectivity, but they cost more. For example, some of the best prices I’ve seen on the cellular side come from companies like Hologram or Blues Wireless. Hologram charges 78 cents per MB per month per device (70 cents per month for the device and 8 cents per MB of data), and Blues allows a customer to purchase a module with an MCU and connectivity for $49 in exchange for 500 MB of data. data. the following 10 years. Both companies offer different prices depending on the volumes.
They also use LTE CAT-M or even full 4G networks, which means they can send a lot more data than a LoRaWAN network, so this isn’t an apples-to-apples comparison. Nova Labs COO Frank Mong told me that Helium packets are about 24 bytes in size. But devices running on the Helium network won’t need several megabytes of data. According to previous conversations with Mong, one packet is enough to send a GPS location, time and temperature, or other data. So if you had a sensor that transmitted every five minutes, the cost for the entire year would be about $1.05 on the Helium network.
If you wanted to send the same amount of data using Hologram, you’d pay $8.40 for the device and 8 cents per MB of data. Based on the number of packets you would send in the scenario above, the end user would accumulate approximately 2.5 MB of data, resulting in an annual cost of $8.64 per device. The cost discrepancy is partly because the hologram charge includes an eSIM and device management and partly because customers on each network have different levels of technical expertise and needs.
But what’s important here is that the Helium network is designed for hundreds of millions of devices to send small bits of data at a really low price. Which means we won’t see amazing revenue from Nova Labs until we start seeing hundreds of millions of devices on the network. Today Nova Labs has Lime, Cisco, MyDevices and Careband as customers on the Helium network, but many of them are in testing phases or sell relatively few LoRaWAN devices.
This is exactly how the network is supposed to work.. This is not a network designed for connected vehicle trackers or hot tubs. This is a network designed for companies like UPS to install an inexpensive sensor on every package and monitor its progress across the country. It’s for a few hundred million outdoor weather stations or mailbox sensors. As such, it must be inexpensive and must convince customers to put billions of devices on the network.
Which brings us to another challenge facing the Helium Network, and one that could affect its overall $1.2 billion valuation. There are still very few LoRaWAN devices out there. When he was giving a talk at the LoRaWAN World Expo earlier this month, he was dismayed by both the lack of sensors and the subsequent frustration expressed by many attendees, who said it was still too difficult to easily bring LoRaWAN devices online.
Without LoRaWAN devices, the network will sit empty and never reach the volumes it needs to drive revenue into the hundreds of millions it would need to support its valuation. It will also not generate data transfers across hotspots which, in turn, will generate more HNTs for hotspot owners that comprise the majority of the Helium network. And if those owners are not incentivized to continue operating their access points, the network will lose coverage and capacity, making customers reluctant to use it.
Basically, Nova Labs is running a grand experiment in market making and cryptocurrencies at the same time. Each one is difficult, but his attempt to do both at the same time is fun to watch.