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09 June 2021

The Internet of Things: Are we the customer or are we the product?

The internet of things (IoT) essentially centres around the concept of installing devices and components into products that transmit data to the creators, allowing them to alter the product to better meet customer preferences. However, these devices can be used more for the benefit of their developers rather than the users. Notice how the terms customer and users were used interchangeably, yet the people who use the product day-to-day are not in fact the customers, they are the product.
 
When we typically think about devices that are connected to the internet, we think of smartphones, laptops and even smart watches, but in the modern day, an extensive range of products have similar capabilities. Many users think that their actions of searching, liking and even speaking in the same room as a device has no material impact or benefit to the companies that sold the product to them, but they would be wrong. The typical internet user in Europe generates around 30p per minute for the big tech industry, with our US counterparts generating around US$1 per minute. The confusion comes from the fact that once a user has purchased an IoT product, they understand that to be the end of the transaction.
 
Let us take the recent trend of smart speakers, the technology where a user can request to purchase a product online, set up a music playlist or even find out the weather forecast through speaking to the device. If these products are plugged in, they can decode, store and send the sounds they hear back to their developers. These audio files are then broken down by complex artificial intelligence systems to analyse key words, patterns, and repeated requests. I am sure any reader will have experienced the feeling that someone is listening to them, adverts can often appear freakishly topical to a recent conversation you have had. While big data companies have denied that your device is listening to your private conversations, they know more about you than you realise by tracking your online browsing and shopping.
 
Big tech companies take this constant feedback loop of information transmitted from your home devices and figure out ways they can capitalise on that data. The prime way is advertising. Many of these tech companies are in the advertising business. They sell data on their products’ users to companies that wish to advertise their goods and services. The tech companies can make increasingly larger profits and charge high commissions to these companies as their adverts are so specific to each user on an individual level, making the user more inclined to consider a purchase.
 
But what is wrong with that? It sounds great that advertising is more specific to us, in the sense that we are not exposed to boring adverts outside of our preferences anymore, right? Some insurance companies send out free exercise watches after a person takes out an insurance policy with them. This is marketed as an incentive to go with that company; a person can now track their miles, their steps, and their calories burnt. However, this inventive is not for the benefit of the policy holder. This in fact is a strategy used by life insurance companies to evaluate whether a policy holder is remaining fit and healthy enough to limit the risk to the company from a potential payout. In cases where the person is barely moving, heightened heart rate etc. the insurance company may either use this information to void the contract, or to raise the premium and excess to the less active holder.
 
Looking at the positive side to the IoT, there are a great number of advantages which these products can provide, for example, the development of smart fridges. They can analyse the contents of your fridge and recommend potential meal options, or even make repeat online orders for the food products which you use the most. The technology integrated into trees in Paris ensures that the council can minimise water waste by hydrating the trees only when required, saving around two to three litres of water per day, equating to about 1p. Even looking at personal healthcare, with diabetes products collecting data on a user’s blood sugar levels and then releasing the adequate measurements of insulin into their bloodstream, this can substantially improve an individual’s quality of life.
 
The ulterior motive of corporations should not distract from the benefits of this progress. In quite a timely manner, the UK Government passed a new bill of law last year to increase internet privacy. In the direct context of increasing IoT use, the law now stipulates that all devices must have unique passwords, IoT manufacturers must provide public support in relation to vulnerable individuals and all devices must be explicit on software updates and their timeliness. We expect this awareness and regulation to increase as adoption of these technologies takes hold.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
 
The Internet of Things: Are we the customer or are we the product?
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