You may know Verizon Communications (NYSE:VZ) as a wireless carrier or an Internet service provider, but the company is also diving in the next big tech trend -- the Internet of Things.
If you're unfamiliar with the IoT, it's the connection of formerly unconnected things (like bicycles, electric grids, cars, etc.) to the Internet so that companies and users can track and analyze the data they collect.
It's going to transform the way you live your life (eventually), and it could make some companies a lot of money. Cisco Systems expects the IoT to be worth $19 trillion by 2025 and even the more conservative estimate from IDC pegs the IoT's worth at $7.1 trillion over the next five years.
So why is Verizon getting excited about the IoT? Because it believes IoT connections will grow by about 350% between the end of last year and 2020.
Where's this growth coming from?
In a recent report, Verizon focused on a handful of sectors that will experience significant Internet of Things growth, including the healthcare, energy, manufacturing, and auto industries.
In health, the company noted that participation in wellness programs by overweight persons increased by 86% when a wearable fitness tracker was part of the plan. That's great news considering that by 2018 companies will introduce more than 13 million fitness trackers into the workplace.
Verizon thinks wearables will help reduce healthcare costs because elderly people will be able to live on their own longer and doctors will be able to track patients more efficiently. That may seem a bit optimistic, but Verizon isn't the only one with that idea. General Electric (NYSE:GE) believes the Internet of Things -- or the Industrial Internet as the company refers to it -- will save save the healthcare sector $63 billion over the next 15 years.
Energy and utliities will see huge IoT adoption, and benefits, as well. Verizon says that by 2025, IoT connections in this industry will increase by 49%. The company said that in 2014 just 94 million smart meters were installed worldwide, but over the next 10 years that number will reach 1.1 billion. Using the IoT to make the energy sector more efficient could bring a total savings of $66 billion.
In the manufacturing sector, the IoT has the potential to completely reshape how companies make their revenue. Verizon says that in 10 years manufacturing companies will make more revenue from services than actual devices. The company predicts manufacturing devices connected through the Internet of Things will increase 204% year over year.
Perhaps that's why GE created its own IoT software called Predix to manage the equipment it sells to companies. Last year GE made about $1 billion from the service (just a drop in the revenue bucket for the company). But by 2017 it plans to make $5 billion from its Industrial Internet services.
The auto industry is diving into the IoT as well. In fact, Verizon expects 85% year-over-year growth in the industry between now and 2025. Why does that matter? Because the Internet of Things in cars has the potential to save lives. Nearly 33,000 people die on U.S. roads each year and Verizon believes connected cars can substantially lower than number.
To do so, cars will communicate with each other (called vehicle-to-vehicle, or V2V) and the infrastructure around them (referred to as vehicle-to-infrastructure, or V2I). Verizon says five countries are aiming for "zero road fatalities" by 2025 using these systems. I think we're a little further away than that, but working toward that goal is clearly a great way to implement the IoT.
How Verizon will benefit
Verizon provides network connections, cloud services, and security offerings for the Internet of Things, and while it's not the only one doing so, Gartner recently said Verizon is a leader in the machine-to-machine space (which is a big part of the IoT).
While the company may be gearing up for the IoT's effects, its revenue in the space is still pretty small. Last year Verizon made $585 million from IoT and telematics solutions, up 45% year over year. For Verizon, as with many companies, the full potential of the Internet of Things has yet to be realized. Verizon, General Electric, and others are positioning themselves now for the IoT's massive growth in the coming years. And if even some of the predictions mentioned above prove true, Verizon and others are making a very safe bet.