Whether you consider the Internet of Things (IoT) simply a buzzword or the next revolution in technology, there's no denying its popularity.
It makes sense that major internet companies would be quick to invest in the IoT market. Of those, few put as much money in such a short amount of time as Google.
Just last year, the search goliath put up more than $3 billion for smart thermostat maker Nest Labs, began building its robot army, and made a few other strategic acquisitions along the way. So far, Google has focused its capital on four major verticals: wearables, the connected home, automotive (connected cars), and robotics.
First, let's take a look at Google's strategy. According to Ryan Martin of 451 Research, the first thing to note is how it has made its investments — vertically, not horizontally.
"What's interesting and I think wise on their part strategically is that, for their go to market, it seems more so like they're focusing on specific industry verticals, rather than going with that shotgun approach," Martin said.
Martin said that Google is off to the right start in seeing the horizontal opportunity, but focusing on vertical applications.
The implication here is that Google is building out its IoT product and service offerings before connecting the dots between them. Wearables, connected home, and auto all stand alone now, but Martin believes we will see more cross-pollination as the tech takes shape.
The second thing to note about Google's IoT strategy is who it is targeting in its approach. By choosing to engage those verticals, Google is positioned for both a consumer and an enterprise play.
"They are working in enterprise areas such as robotics and automotive, as well as the analysis and the management of the data from the things," said Gartner analyst Al Velosa. "Plus, they are working in consumer arenas and they've gone into hardware as well."
Gartner pegs the IoT services market at $230 billion by 2020, Velosa said, and Google has the resources to potentially dominate in that market. The opportunity for Google is huge.
According to Velosa, the opportunity for Google in IoT is two-fold. New data will drive better advertising and drive new businesses.
Better advertising will come from the data collected by connected things. Now that Google can tell not only what products you own, but how you are using them, ads can be better tailored to your specific situation. New businesses will spring from services offered, such as maintenance reminders, of connected things.
Another big opportunity for Google is the capturing of the global IoT market.
"I think a known, yet often overlooked, component that's really important here is Google's ability to serve a massive and global audience," Martin said.
While there are a ton of players in IoT, Martin said, the majority of them aren't equipped to roll out new products and services globally and scale their businesses accordingly. Google, however, is equipped to do so and could capitalize on that advantage.
Google does face its share of challenges in implementing an IoT play. The first of those challenges is in the monetization of the data created and collected by devices in an IoT ecosystem.
Velosa presented three major questions that Google will face as it gets further along: "How valuable is the data? How do they reimburse enterprises when they get some of that data? Or, alternatively, will the enterprises not let them get that data because it's more valuable to the enterprise to sell it itself?"
Data, at least, is Google's sweet spot. Hardware, however, is far from it. And that presents another challenge. Hardware is a limiting factor and Martin said Google will need to invest in it, at least in the interim, to make sure their services work well.
"The company has been forced to innovate on that front so that its software and services can thrive," Martin said.
Even if Google can take advantage of the opportunities and quell the issues of data value and hardware, there is still the question of when IoT will come into its own. As it stands, Martin characterizes IoT as a vision that has yet to become a reality, but that doesn't mean it won't become a major profit center for Google in the future.
Conner Forrest has nothing to disclose. He doesn't hold investments in the technology companies he covers.
Conner Forrest is Enterprise Editor for TechRepublic. He covers startups and enterprise technology and is passionate about the convergence of tech and culture.