What the Verizon-AOL deal means for the Internet of Things

mashable.com

When Verizon announced on Tuesday it will buy AOL for $4.4 billion, the company's statement emphasized its plans to insert itself into every single part of your home beyond the TV: the refrigerator, the washing machine, even the wearable on your wrist.

Verizon touted its Internet of Things ambitions prominently in the press release, right there in the second paragraph.

For those unfamiliar with the buzzy concept, the Internet of Things refers to devices — the things — connected to the Internet that don't have a typical user interface (i.e. screen, keyboard, mouse, etc.). This includes everything from smart thermostats and garage doors to toothbrushes, tennis racquets and even your bed. They collect data about your usage patterns and habits, and often connect to an app that offers feedback to improve your lifestyle.

Verizon joins a long list of tech giants such as Samsung, Facebook and Apple that have expressed a growing interest in the Internet of Things. Verizon joins a long list of tech giants such as Samsung, Facebook and Apple that have expressed a growing interest in the Internet of Things. Although Verizon doesn't have much hardware experience, one could assume a Verizon FiOS set-top box could be that entry point.

With a strong emphasis on growing its mobile TV and advertising networks, could Verizon users one day be reading headlines from AOL-owned content publications such as The Huffington Post and Engadget directly from a refrigerator's display? Will Verizon monitor how we live our lives at home (what temperature we like, what time we go to bed) and pump that data into its newly acquired AOL advertising technology engine?

How this partnership would manifest in consumer homes is up for debate. For example, Aapo Markkanen, principle analyst at ABI Research, believes users could see personalized grocery advertisements (based on what your fridge senses you are running low on) while reading Huffington Post stories on a smartphone or tablet device, rather than seeing content streamed across a fridge's display.

In theory, the products in the home could learn your habits from walking room to room, determine when you make coffee and note your favorite blend. We could see this trickle beyond smart home and into the connected car, too — all data that would be enormously valuable to advertisers.

While it isn't immediately clear how strongly AOL's assets could help Verizon's Internet-of-Things efforts, the move shows just how much Verizon wants to expand its business into "things," beyond just connecting people. the move shows just how much Verizon wants to expand its business into "things," beyond just connecting people.

According to experts, the deal is a match made in heaven for AOL’s ad technology platform and Verizon’s massive mobile and over-the-top (OTT) audience through its Internet provider, FiOS. Not surprisingly, the big opportunity here is to build out Verizon's ad network.

"AOL has done a great job of pulling together the pieces of the digital advertising world, such as display, video, mobile and TV, and providing those options to advertisers in one platform," Dan Marcec of eMarketer told Mashable. "For Verizon, that means being able to provide a one-stop shop for advertisers and potentially gain revenue, while AOL gets access to a huge mobile audience. This makes its advertising platform even more valuable by including more data to advertisers to better target their audiences."

The key: tracking how consumers behave at home.

"You can compare it to Google or Facebook, in that sense — it’s not necessarily a short-term opportunity, but from the advertising perspective, there is nevertheless a lot of upside in understanding how consumers behave in off-screen environments," Markkanen of ABI Research said.

While it's unclear how Verizon will pursue Internet of Things, there's a chance it will meddle with consumer data to influence its advertising network. The caution: avoiding creepiness.

"Verizon could start crunching more the data it has access to, but I wouldn’t expect them to get very aggressive about it," Markkanen said. "There’s no point risking such a big longterm opportunity by alienating customers with intrusive uses of data."

While Apple is taking a hands-off approach with its HomeKit platform — allowing it to act as a framework to connect products in the home but doesn't collect or store user data — companies like Jawbone are taking a different approach. For example, in a blog post last year, the fitness wearable company analyzed user data to determine which cities were getting the least amount of sleep (the answer: New York City, followed by Miami, Atlantic City, Las Vegas and New Orleans).

Although Jawbone users granted the company access to this data, Verizon will have to tread carefully to keep consumer trust before sharing collected data with advertisers.

Becoming a bigger player