In a world with an increasing number of smart phone users, a continuously growing number of people with an internet connection and endless new innovations, the trend of connecting the analogue world with the digital sphere has emerged: The Internet of Things (IoT).
The Internet of Things strives to connect former analogue devices to the internet in order to control them via apps. One of the most commonly known devices is the ‘Nike fuel band’, a device that tracks sport activities, or the ‘Samsung Galaxy Gear’ smart watch which is a smart phone extension that is worn on the wrist. The media recently picked up on the subject after Google acquired Nest Labs for 3.2bn dollars. Nest Labs was founded by two former Apple employees and produces smoke detectors and heating thermostats that are accessible via smart phones and adapt to the user's behaviour.
Increasing investment volumes show that the IoT is seen as a market with plenty of potential. According to a forecast by Cisco, the connected devices market will grow from today’s 8.7bn to 40bn in 2020. For advertisers the biggest benefit results from the immense data collection opportunities by combining and connecting devices.
IoT allows even more in-depth insight into consumers’ preferences and behaviours which enables a more targeted advertising approach. This paves the way for more accurate branding, targeted product pricing and optimised advertising. David Day of The Blake Project said that the potential of the IoT is the possibility of communicating brand messages at every touch point hence creating an in-depth relationship with the consumer.*
Customers are willing to allow companies to use their data for an IoT-enabled device if they can benefit in doing so. Daye also highlighted that customers willingly become part of the business model when they love the product. In order to benefit from the potential effectively, the biggest challenge will be to coordinate and optimise the connectivity between the different manufacturers and products. Handling the vast amount of data effectively will be another quest for the businesses in question.
However, there are also concerns regarding the IoT’s future development: Collecting data is an advantage for businesses but consumer protection organisations aren’t convinced that it is in the best interest of the customer. According to Glenn Allmedinger from Harbor Research, businesses need to implement new data strategies to meet customers’ privacy requirements. If this doesn’t succeed it is likely that consumers hold back when it comes to using connected devices which will then slow down the growth of the IoT market.
The deciding factor will be transparency: When and why is the data collected as well as what happens to this data are key questions. Marketing strategies will be crucial when communicating this new approach in an understandable and beneficial way. As the English historian Eric Hobsbawn said: ‘We are at the beginning of a device era which once connected will create a level of intelligence that was unimaginable.’