Tech companies that make connected devices like FitBits and Nest thermostats are in an plum position. They rake in revenue every time someone buys their product, leaving the freeloaders to Facebook and Twitter. But the real prize isn't the cost of the device, it's your personal data.
What's more, taxpayers are indirectly footing the bill because government agencies are investing millions in using that data to (1) help utility companies manage the demand for energy and (2) help employers promote wellness through their healthcare plans.
Smart-thermostat maker Nest Labs (which is being acquired by Google for $3.2 billion) has quietly built a side business managing the energy consumption of a slice of its customers on behalf of electric companies. In wearables, health tracker Fitbit is selling companies the tracking bracelets and analytics services to better manage their health care budgets, and its rival Jawbone may be preparing to do the same.
"We'll get more and more services revenue because the hardware sits on the wall for a decade," he said during an interview in December in Nest's Palo Alto office.
Nest already has relationships with about a dozen utility companies. Activity trackers like Fitbit aren't as far along selling data, but insurers are already thinking about how that information might help them adjust prices:
For privacy reasons both self-insured employers and those with group insurance have to bring on a population-management firm such as StayWell or Welltok to manage the data as a neutral third party. Amy McDonough, who oversees Fitbit's employer program, wouldn't comment on how Fitbit data would affect pricing negotiations between employers and health care providers, though health insurer Cigna said fitness trackers "may" have an impact on future group insurance pricing . The data are still being tested.
Nest's thermostat uses multiple sensors to detect temperature and movement to learn a household's activity. Cofounder Matt Rogers told Forbes that Nest automatically adjusts the temperature, studying the data itself rather than selling it directly to utilities. But it's still a lucrative arrangement:
Nest's deals with utilities also vary. In some cases the utility reimburses customers $30-to-$50 a year per thermostat for the right to turn the air conditioner down on hot days to ease the load on the grid. In other deals Nest splits cost savings with the utility. Demand response programs are worth an estimated $80 per thermostat, so 1% of U.S. households potentially spells a $100 million pie that Nest, utilities and customers can split each year.
Multiply that by a decade of continued data collection. In the promotional video above Nest Lab promises: "It never stops learning."
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[Image via Nest Labs]