Here comes the second internet boom

Your fridge is about to get smarter

Google’s acquisition of Nest Labs last week was a bit of a strange one. Why, exactly, did Google spend $3.2bn on a company which makes smoke alarms and thermostats?

It’s the second biggest deal in Google’s history, and at first glance it seems a bit odd. But you see, Google isn’t just buying smoke alarms. It’s betting big on the next generation of technology.

You’ve read me banging on about cloud computing a lot recently. But today I want to look at the internet’s next step: ‘the internet of things’ (IoT).

Google bought Nest because it does IoT very well. The idea behind IoT is that ordinary devices can be improved by connecting them to the web. So Google is not just buying smoke detectors. It surely plans to move the business into all manner of other types of smart gadgetry.

That’s why I want to talk about IoT today. In the same way that the internet created a whole new industry, and made millionaires of many, I think the internet of things is about to do the same thing all over again.

Bigger than the internet itself

Up until now, the internet has essentially been a new mode of person-to-person communication. Just about every webpage in existence is there because somebody’s taken the time to put their thoughts and ideas down on… well, a hard drive… and then publish it to the web.

The internet of things is different to that. In the future, the web will be filled with all manner of smart gadgets publishing their own information. This data can be analysed and used in so many different and exciting ways.

Though the internet is massive, IoT is likely to be even bigger – and by several magnitudes!

We all know about smartphones. In many respects, they’re already right up there in the IoT. Now smart TVs are becoming pretty normal too. And soon, it’s going to be everything from electricity meters, to washing machines and maybe even your toaster.

To become smart, all the gadget really needs is to have its own internet identity (ie, an IP address) and a web connection.

Think about a future where, for instance, you have a smart thermostat in each room of your house. It’s certainly logical. I mean, right now your heating probably comes on at predetermined times, and it probably heats the whole house.

But what if nobody’s home? Or what if mum’s at home and she’s only interested in a warm lounge? What if the outside temperature doesn’t really warrant stoking up the heating anyway? Other smart gadgets in the house will help determine what bits of the house are in use and therefore what needs heating.

The IoT solution gives you a more comfortable and energy efficient home.


Sign up for a 4-week FREE trial of MoneyWeek magazine

MoneyWeek magazine signup

"The only financial publication I could not be without."
John Lang, Director, Tower Hill Associates Ltd.


Big brother or handy Harry?

I know that a lot of readers have reservations about the sort of newfangled world I’m describing.

But I guess the only reason people will yield personal data is because they get something in return.

It’s a symbiotic relationship. Just take Google Maps. Installing this app on a smartphone offers all manner of advantages to the user: from sat nav to what is effectively a Yellow Pages right there in your pocket. And in return, Google gets data… lots of it!

I sometimes find myself using Google Maps while on the occasional ramble. The mapping facility includes paths and tracks I didn’t even know existed – I find the whole experience utterly fascinating. But what does Google get in return from me?

Well, Google now knows I’ve walked across a field. It even knows that it was raining at the time (I got soaked).

Next time I’m browsing the internet, maybe there’ll be an ad in the corner for a brand new pair of weatherproof walking boots – or perhaps a specialised rambler’s brolly – who knows?

Are these targeted ads useful to me, or an invasion of privacy? That’s for you to decide. But all this data collection definitely has its benefits. And these could be serious benefits. How about a monitor on your watch that could forewarn of an imminent heart attack, and may even call an ambulance for you. Useful?

And whether or not you’re on board with a benevolent Californian corporation tracking you on your ramble across the South Downs, the upside for investors is pretty clear.

A few ambitious companies, like Nest, are driving his whole IoT story forward.

Songdo, South Korea

Songdo is a brand new city built on reclaimed land along waterfront 40 miles southwest of Seoul. Songdo is the world’s first ‘smart city’ where homes, gadgets and people are all interconnected.

Vacuum tubes carry rubbish straight from the home to its point of recycling. Everything from energy needs to security is monitored. Here’s a nice little five-minute video courtesy of the BBC if you’re interested. Utopia? Or dystopia? However you feel about it, it’s a reality.

Last year, Google acquired seven robotics companies. Recently, it’s been making acquisitions in the artificial intelligence space too. Combining hardware, software, analytics, robotics and AI tells us a lot about Google’s plans, particularly in the area of IoT.

Industrial behemoths IBM and GE are investing too, with the aim of bringing businesses into this futuristic world.

Like it or not, the revolution is coming. We’ve already looked at Iomart, a stock set to profit from the rise of the cloud. But looking to the future, we should also start getting used to the idea of the internet of things. It’s the natural progression.

Google is pushing forward, and as I argued in Wednesday’s Right Side, Apple is falling behind. Perhaps we should be thinking of a long Google, short Apple trade?

This article is taken from our FREE daily investment email The Right Side.
The Right Side is our FREE contrarian investment email delivered every Monday, Wednesday and Friday. It cuts through market noise to deliver useful, shrewd and to-the-point advice - straight to your inbox. Please enter a valid email address

To sign-up enter your email address.



Information in The Right Side is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. The Right Side is an unregulated product published by Fleet Street Publications Ltd. Fleet Street Publications Ltd is authorised and regulated by the Financial Conduct Authority. FCA No 115234. http://www.fsa.gov.uk/register/home.do

[xyz_lbx_custom_shortcode id=10]

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

2 Responses

  1. 31/01/2014, Sage of Aldershot wrote

    I would think there is a great business opportunity for a whizz-kid who knows how to help individuals avoid the kind of de-humanising robotic garbage that google is dreaming up.

  2. 03/02/2014, Jonathan Tedd wrote

    The future of domestic life? Brought a smike to my face recalling the hilarious film Sleeper where Woody Allen has to come to terms with life after being frozen for 300 years during an operation. (“I knew it was to good to be true, I parked right near the hospital”).

Commenting on this article closed

MoneyWeek magazine

Latest issue:

Magazine cover
Faster and faster...

The frenzied pace of the high-tech revolution

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.