The Internet of Things, or IoT, is emerging as one of the biggest technology trends of this decade. Until the early 2000s, web connectivity was limited to desktop computers and smartphones. But in the developing IoT era, billions of new devices are expected to join the Web. Connecting anything – from wearables and home appliances to cars and heavy machinery – will have profound implications on most industries, including health, security, transportation and commerce. The new trend will help companies create new revenue opportunities while improving user experience and quality of life.
Companies’ ability to adapt their business models and developments to this new trend will predict the next set of winners. Technology giants such as Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB) are playing a big role in the IoT revolution through major acquisitions and new developments. As the world is getting more connected, these technology leaders are well positioned to catch the wave.
According to Goldman Sachs research, IoT is the third internet wave, after the rise of desktop computers and smartphones. An estimated 20 billion more devices are expected to join the Web in the next ten years. IDC researchers expect the IoT worldwide market to exceed $3 trillion by 2020, with a compound annual growth rate of 13%.
The IoT developments will have economic benefits for both the user and the enterprise. Companies will create more revenue opportunities, while consumer will save on costs while getting a better experience. Think of a smart home that connects your home appliances to your smartphone. Once your smart thermostat detects that you are driving home, it will warm up or cool down the temperature in your house automatically. This might save you money on your electricity bill while at the same time creating opportunities for smart device makers.
Google (NASDAQ:GOOG) and Nest are already working on this scenario. Google paid an astonishing $3.2 billion last year for Nest, a smart thermostat and smoke-alarm maker. But the giant’s 2014 spending spree didn’t end there. A few months later, Google acquired Dropcam, a WiFi-enabled security camera maker, for half a billion dollars. The tech giant clearly wants to be well position for the new IoT trend.
Google is focusing on many other IoT verticals as well, such as wearables, cars and robotics. More connected devices – and, therefore, more user data – will have positive implications on Google’s core business: advertising. Big data will translate into better, targeted advertising. On a less optimistic note, the data comes with security and privacy concerns. More than ever before, companies will have to gain and maintain their users’ trust.
Apple (NASDAQ:AAPL) has been the poster child of IoT through the launch of their new iWatch. According to Goldman Sachs, the wearables may become one of the fastest growing categories in the consumer devices space with 70% annualized growth over the next three years. A study by Acquity Group shows that roughly 50% of 2000 consumers surveyed plan to purchase wearable technology by 2019.
The growth of wearables is currently capitalized by Apple’s new developments. The iWatch has a long way to go before putting a ding in the consumer universe – similar to the iPhone. But the iWatch is only a first prototype, appealing mostly to health and fitness enthusiasts. In the future, the device will broaden its reach into other areas, such as payment, smart home remote controls, travel and entertainment.
While more devices and software are created, developers will face the challenge of making them work together. Facebook (NASDAQ:FB) and its Parse platform offer a potential cloud back-end solution. Parse is the company acquired by Facebook in 2013 for a reported $85 million in cash and stock. Until recently, Parse’s mission was to help developers handle data produced by multiple devices. Parse makes it easier for apps to send push notifications at scale or log multiple devices onto a cloud back-end. The platform created a more robust app ecosystem. Last month, Parse’ CEO Ilya Sukhar announced that Facebook will offer these solutions to IoT device makers also. The announcement represents a major move by Facebook into the IoT space.
Further down the line, if integrating multiple devices becomes easier, objects could act as agents for themselves. Think of an empty fridge sending a notification to your delivery service to restock, or your car driving itself to the gas station to refill. On a larger scale, the penetration of the internet into our everyday lives is even more exciting. If, let’s say, cities’ entire infrastructure gets connected, traffic jams and car accidents could be prevented. The possibilities seem wider than our imaginations.
Companies like Google, Apple and Facebook are equipped with large amounts of data and capital, so they seem to be obvious winners if the IoT trend plays off. But in the long run, the technological progress will benefit all of us. New technologies will help us live in a safer, healthier, and more productive world. And if the cost is less privacy from giving away our digital footprints, it seems like a small price to pay.