How To Profit From The Internet Of Things

By the year 2018, which Internet device industry will be larger than all of the rest combined?

The answer is the burgeoning Internet of Things (IoT), in which seemingly ordinary objects are interconnected in order to automate everyday tasks. Some items that are already part of the IoT include thermostats, air conditioners and door locks.

The IoT could be coming to your home, office and hometown, courtesy of tech giants Apple AAPL, Google GOOGL and International Business Machines IBM. These companies are poised to return a lot of value to investors because of the IoT.

A Bunch Of Things

According to one estimate, in four years the installed base of smart devices will have grown from five billion to 18 billion, with the majority considered to be part of the IoT.

The total estimated market value at stake in the IoT is projected to increase from $1.2 trillion today to $14.4 trillion in 2022, according to a projection.

In addition to Internet devices, the IoT will also have applications in the following areas that will impact the business-to-business market:

1. Advertising (electronic billboards)
2. Traffic management
3. Waste management
4. Smart electric grids
5. Smart water systems
6. Industrial automation

Apple Wants To Be In The Middle

The iconic maker of consumer devices wants to be in the middle of things. Apple filed a patent and created HomeKit, a platform for developers that provides some insight into the strategy behind IoT.

Some sort of device, whether it be the iPhone, a wearable or the iPad, will be able to either automatically or manually control all of the objects connected to the same network.

Apple and its investors will profit from sales of both the remote control device and the apps needed to interface with the rest of the interconnected network. Take the Kevo smart lock, for example. With the Kevo smart lock, the deadbolt to an entry door will automatically open as the homeowner approaches it with an iPhone. It's possible that the long-rumored "iWatch" will be able to do the same thing in the future. Google is on your wall
 The search engine giant is looking for ways to grow other than from ad revenue. One of the things the company has done so far is to acquire Nest, a manufacturer of smart thermostats and smoke and carbon monoxide detectors.

Apple and its investors will profit from sales of both the remote control device and the apps needed to interface with the rest of the interconnected network.

Take the Kevo smart lock, for example. With the Kevo smart lock, the deadbolt to an entry door will automatically open as the homeowner approaches it with an iPhone. It's possible that the long-rumored "iWatch" will be able to do the same thing in the future.

Google Is On Your Wall


The search engine giant is looking for ways to grow other than from ad revenue. One of the things the company has done so far is to acquire Nest, a manufacturer of smart thermostats and smoke and carbon monoxide detectors. 

Nest devices work in conjunction with smartphones to raise and lower the temperature in your living room and detect the presence of smoke or carbon monoxide. There were a few problems early on, as Nest had to recall products and temporarily pause new shipments while it corrected a software bug. Hopefully the company learned from its mistakes and things will go more smoothly going forward. 

What about the famous driver-less car that has been getting a ton of attention? It really belongs to the IoT. The smart automobile will require tons of interconnected sensors and devices to get you around the roads automatically.

IBM Is Behind The Scenes

In addition to the visible part of the system, there is a complicated process behind the scenes too. The databases and calculations required to automatically turn on machines in a factory, drive a car, open a door or lower the temperature in your living room or office is an area in which IBM excels.

Big Blue has been doing big data for a long time, and the company has made IoT a priority in its business model. As part of its Bluemix PaaS offering, IBM has created a toolkit that will allow the enterprise to move forward in the IoT.

IBM will act as a guide as more businesses come on board, and investors should profit from the success that IBM will have doing that. The recent announcement of an enterprise partnership between Apple and IBM might involve some elements of the IoT, too.

Conclusion

Selling smart devices to consumers has been lucrative for some companies thus far, but it might just be the tip of the iceberg in the tech sector. 

Apple, Google and IBM could profit from an exponential increase in the number of interconnected IoT devices and, in turn, increased market value. Investors might be rewarded as a result.

Disclosure: The author owns shares of Apple and International Business Machines.