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Google Inc. Gains A Key Ally In The Internet of Things

By Leo Sun - Jul 22, 2015 at 7:20PM

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Qualcomm and Google take a big step towards unifying IoT communication standards.

Qualcomm (QCOM -1.38%) recently announced that it is working with Thread Group, a Google (GOOG -0.30%) (GOOGL -0.31%)-backed effort to establish a unified communication standard for Internet-connected devices. That move was surprising, since Qualcomm also leads the AllSeen Alliance, a rival consortium which aims to establish its own unified communication standard for Internet of Things devices.

The Internet of Things, or IoT, market consists of everyday objects -- like appliances, vehicles, toys, and wearables -- connected to the Internet and each other. Cisco (CSCO 0.39%) expects the number of connected devices worldwide to double from 25 billion this year to 50 billion by 2020, making it a key market for tech giants to expand into.

The communication standards dilemma
Many tech companies are fascinated with a future filled with smart homes and vehicles. Unfortunately, many smart devices don't speak the same language yet -- which means that a smart light bulb might not be able to communicate with a smart home hub.

Five industry groups are trying to unify all those standards -- the AllSeen Alliance, the Open Interconnect Consortium (OIC), the Thread Group, the Industrial Internet Consortium (IIC), and the Institute of Electrical and Electronics Engineers (IEEE) P2413.

Consortium

Members

Prominent Companies

AllSeen Alliance

160+

Qualcomm, Microsoft, Cisco, Panasonic, LG

OIC

80+

Intel, GE, MediaTek, Samsung, Dell, Hewlett-Packard, Lenovo

Thread

160+

Google (Nest), Samsung, ARM Holdings

IIC

170+

GE, Cisco, IBM, Intel, AT&T, Microsoft, Samsung, Huawei

IEEE P2413

25

GE, Qualcomm, Cisco, Intel, STMicroelectronics, Huawei

Source: Company and industry websites.

Many companies are part of multiple consortiums, because each alliance is focused on a different market. Thread is mainly focused on low-power devices for smart homes, the IIC focuses on enterprise applications for IoT devices, while AllSeen and the OIC both aim to straddle multiple markets. The IEEE is an oddball alliance, mainly comprised of engineers working at companies which are already members of other consortiums.

The consortium conundrum
There are so many different alliances because large companies are trying to leverage their dominance of key markets to expand into the IoT market. Qualcomm believes that its position as the largest mobile chipmaker in the world puts it in a strong position to expand into connected objects like smart appliances. Intel (INTC -0.41%), the world's largest chipmaker for PCs and servers, similarly believes it can build an IoT business upon that massive customer base.

Google, which owns the world's largest search engine and mobile OS, wants to expand its presence into smart homes with Nest-connected devices. General Electric (GE 1.58%), which sells industrial machines, wants to establish unified communication standards between those products. Cisco wins no matter which alliance comes out on top, since sales of its networking hardware will likely benefit from the proliferation of connected devices.

Google's Nest smart thermostat. Source: Google.

Some of these alliances complement one another, but a fierce rivalry exists between Qualcomm's AllSeen Alliance and Intel's OIC, due to their overlapping chip businesses. Qualcomm plans to move into Intel's backyard by selling chips for servers, while Intel has been expanding into mobile devices, Qualcomm's core market.

Not picking sides
Qualcomm's alliance with Thread could be seen as a major blow against Intel and the OIC. Thread Group President Chris Boross suggested that AllSeen's AllJoyn open source software framework could be added on top of Thread, which could create the largest unified IoT communication standard on the market.

However, Boross also claimed that IoTivity, the framework supported by the OIC and Intel, could also be run on top of Thread. If AllJoyn is integrated with Thread, then it's likely that the OIC will have to sign up with Thread as well, thus uniting the three communication standards. By linking its platform to both AllJoyn and IoTivity, the Thread Group will enable companies to sell more cross-compatible smart devices.

What does this mean for Google?
Google acquired Nest last year for $3.2 billion, then purchased Wi-Fi camera maker Dropcam and smart hub maker Revolv to lay out the hardware framework for smart home devices. It also revealed an operating system for IoT devices, known as Brillo, during I/O 2015. Meanwhile, the growth of Thread Group will encourage companies to sell more smart devices tethered to that ecosystem.

But despite all those moves, Google hasn't really outlined its long-term plans for the fledgling smart home market. We can assume that Google wants to gather data from smart devices for targeted ads, but it must do so in a way that doesn't raise red flags with privacy advocates.

Google also needs to stay ahead of other rivals in the smart hub space, including Amazon's Echo, Samsung's SmartThings Hub, and Apple's HomeKit platform. All of these competitors are eager to connect their hubs to universal communication standards to tether their own ecosystems to the massive Internet of Things market.

Leo Sun owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, Cisco Systems, Google (A shares), Google (C shares), Intel, and Qualcomm. The Motley Fool owns shares of Amazon.com, Apple, General Electric Company, Google (A shares), Google (C shares), and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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