The Internet of Things and Its Impact on Your Privacy

Google’s recent $3.2B acquisition of Nest Labs has raised many eyebrows since Google paid 4x more than Nest’s current financial valuation. Why would Google pay so much to a company that had two relatively lowbrow products:  a thermostat and a smoke detector?[1]

Obviously Google didn’t buy Nest for just these two products. And likely Google didn’t buy Nest just to get in the home and small business controls business. Spending $3.2B means Google has monetization plans outside of just selling a couple of Internet-enabled devices. So let’s contemplate what those plans might be and how it might be a precursor to the business potential of the larger “Internet of Things” (IoT) opportunity.

Google is the master of data monetization. More than the traditional control and appliance manufacturers—like Honeywell, Siemens, Maytag, and others—Google has mastered the art of 1) capturing ALL the transactional data, as well as the larger body of ancillary metadata about that transaction, 2) mining that data to uncover insights about consumer, product, and operational usage and behavioral patterns, and 3) leveraging that insight to provide highly relevant, actionable ads and product recommendations.

Google in your home

Now imagine that Google brings that expertise into the home automation and small business markets. Just imagine how Google could leverage all the usage data about your energy, utilities, entertainment, cooking, washing, showering—usage patterns, behaviors and propensities to offer new services to you the consumer. But let’s go one step further and also imagine how Google could enable a marketplace (platform) where third parties could leverage the wealth of data about your usage patterns to market new services and apps, like Google Store, to consumers.

For example, let’s imagine a smart refrigerator that not only knows what’s insideat any given time, but also knows the expiration dates on those items and what you typically buy at what time of year. With this data, the smart refrigerator could automatically assemble your shopping list, scour the local online newspapers and grocery sites for the best deals, and recommend where to buy your groceries to save the most money. But wait, there’s potentially more. Google could create a marketplace where the shopping list could then be offered to competitive grocery chains to let them bid on the price at which they are willing to sell and deliver those particular items to you. Gives real-time bidding (RTB) a whole new meaning!

The Internet of Things

I believe that Google’s acquisition of Nest is a precursor to their move into the “Internet of Things” market including smart grids, networks, and smart products. Each of these areas produces massive amounts of real-time usage data ripe to be mined and monetized. The resulting consumer, product, and operational insights can be monetized in the following areas:

• Energy usage:  help consumers (and small businesses) optimize their energy usage by buying energy at the lowest possible prices and even enable consumers to sell home-generated energy from solar cells back to utilities at the best possible prices.
• Utilities usage:  help consumers minimize utilities costs (water, garbage collection, recycling) by observing usage patterns and recommending times to use utilities (e.g., identify optimal watering times and patterns for your lawn and garden)
• Home security management:  offer services to consumers to not only manage home security, but leverage third-party population data and crime trends to recommend different security protection products and security precautions.
• Home entertainment (set-top boxes, smart TVs, home entertainment networks):  allow consumers to easily manage the growing body of entertainment they already have, but typically can’t easily access (piles of DVDs and CDs, movies on Netflix, iTunes, Roku, etc.). Google could also provide services that help consumers discover more entertainment options across the growing body of movie, TV, and self-generated entertainment options (like those found on Google-owned YouTube). Google could capture your viewing preferences and provide a marketplace where third parties could sell you your desired movies at the best possible rental or purchase terms.
• Appliances maintenance:  leverage smart appliances usage data to monitor current product performance patterns and make recommendations as to when an appliance needs maintenance (predictive maintenance). Google could even recommend local service providers that could fix your soon-to-break appliance and include the Yelp ratings for each of those service providers. Google could eventually collect enough usage information that—when coupled with third-party data such as local energy costs, weather and temperature forecasts, local water conditions, etc.—could rate which appliances are the “best” for each part of the country and for different usage types. Heck, Google could ultimately become the Consumer Reports for smart appliances!

Summary

The business transformation potential of Big Data continues to grow, and we’re seeing more and more companies starting to embrace Big Data not as a technology, but as a business enabler. Most organizations don’t need a Big Data strategy. Instead, most organizations need a business strategy that leverages Big Data to transform and optimize their key business processes and uncover new monetization opportunities.

Figure 1: Big Data Business Model Maturity Index

If you want to learn more about how organizations can leverage Big Data to optimize key business processes and uncover new monetization opportunities, check out our most recent big ideas video on the Big Data Business Model Maturity Index.