The Internet of Things (IoT), a global, immersive networked computing environment built through the continued proliferation of smart sensors and various software, has been labelled as the next generation of start-up activity, with potentially unlimited potential. Although IoT is not yet a mainstream technology, acquisitions in the space are already dynamic and corporate finance boutiques are building up considerable portfolios in the segment. However, there are five challenges and factors to consider as an IoT future approaches.
1. Privacy will become a bigger issue
As tech majors including Cisco, Intel and General Electric have begun dedicating business units to sensors and processing data networks, consumers are gradually buying into the IoT trend by wearing tech devices and using smartphones to control household appliances. While convenience rises, the data-collecting nature of such processes infringes on privacy. This is likely to create some market opportunities for start-ups in the development of privacy software and encrypted products. There is already evidence that regulators in the UK and Europe are considering the impact of IoT on privacy. In the UK, for example, main impact of this is a requirement to comply with the Data Protection Act and its eight key principles, which require that the data is processed fairly and lawfully.
2. Quantification will provide big data explosion
Every part of consumer life will be quantifiable and eternal, meaning companies and users will be able to analyse vast datasets to develop lifestyle analytics, brand strategies and marketing cycles. Big data is already a major segment for research and M&A activity, but IoT will make it an essential component of business operations, removing doubts or errors from the equation. Whether it is connecting in-store technology or connecting with a customer, businesses are going to have numerous options for when the time comes to jump on to the IoT/big data bandwagon.
3. Advertising will become more direct and innovative
Google has already publicly backed the potential of IoT advertising through the suggestion that the smart thermostats produced by its recently acquired Nest Labs firm could contain marketing content. This would certainly offer a new dimension to the term “native advertising”. With more devices connected to the web and LED screens becoming cheaper, opportunities in specialised in-home marketing will be considerable. Google is presently dealing with declining values in its desktop advertising business as people switch over to searching on mobile devices. This is creating a downward pressure on profits in mobile as the value of clicks there is much weaker. Google may therefore want to diversify its offerings and enter IoT much quicker than originally assumed.
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