Why Would Google Inc. Want to Get Into Toys?

By Markets Fool.com

Would you buy stuffed animals from Google for your kids? Google thinks you might, according to a recent patent filed by the company's secretive Google X division.

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Image from Google's patent for "smart toys". Source: USPTO

The patent filing describes a smart teddy bear that can detect a child's voice and movements, "gaze at the source of the social cue," "interpret the command" via cloud-based servers, then respond by expressing curiosity, tilting its head, furrowing its brow, or scratching its head. The device could also be used to control smart home devices like smart TVs and thermostats. Google notes that the device should be "cute" so that young children will find it "attractive."

A Google-powered super toy would certainly be a fascinating way to introduce kids to technology, but it also conjures up visions of Chucky hijacking smart homes. Are smart toys are entertaining or creepy? Will a market ever exist for them?

Taking toys to the next level
Google has already merged tech with classic toys. Earlier this year, Google andMattel teamed up to update the latter's classic View-Master with VR technology. The approach was simple: Stuff the same parts used in Google Cardboard into a View-Master to introduce virtual reality environments to children.

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Mattel also experimented with the idea of cloud-connected toys by introducing Hello Barbie, a cloud-connected Barbie that can have two-way conversations with kids and download new stories from the Internet. However, a consumer advocacy group accused Mattel of using the dolls as "creepy" data-collecting devices. ToyTalk, which developed the chat technology, notably has a legal policy which states that it can "use, store, and transcribe" the recordings to improve speech recognition and AI algorithms, and use them for "other research and development and data analysis purposes."

Hello Barbie. Source: Mattel/ToyTalk

A start-up called Elemental Path is also developing similar toys, known as CogniToys, connected to IBM's AI platform Watson. The company's first toy is a prototype dinosaur made of soft rubber. Elemental Path already raised $275,000 in funding on Kickstarter, easily topping its original goal of $50,000.

The idea of virtual assistants collecting data isn't anything new. Apple's Siri, Google Now, and Microsoft's Cortana all "remember" what users ask. Amazon has been testing out Echo, an always-on speaker that houses Alexa, its cloud-based virtual assistant. But the idea of repackaging these products as toys that gather data from children is disconcerting.

Conflicts of interest
The main problem with connecting toys to the cloud is that companies monetize that data. IBM, Amazon, Microsoft, Google, and other companies are currently locked in an intense battle in the cloud services market to provide companies and marketers with valuable analytics data.

IBM and Microsoft are hoping that rising cloud revenues will diversify the top line away from older businesses with slower growth. Amazon's AWS cloud unit, which has an annual run rate of$6 billion, could evolve into a new pillar of growth alongside its core e-commerce business. Analyzing that data could also help Amazon understand users' shopping habits. Google could also improve its targeted ads by accumulating data from cloud-connected objects. All four companies have "predictive analytics" services, which use accumulated data to predict business trends for companies.

Therefore, convincing consumers to accept cloud-connected smart toys -- no matter how cute or cuddly they might be -- could be tough if parents see them as sneaky ways to gather data and monetize their children.

Market growth potential
But if the public warms up to the idea of smart toys, the market might expand along with the Internet of Things (IoT). Cisco estimates that the number of connected devices worldwide will rise from 25 billion this year to 50 billion by 2020. Most of those deviceswon't be toys, but smart objects and appliances might increase mainstream acceptance of always-on, cloud-connected devices.

Meanwhile, the mainstream toy industry is expected to grow at a steady compound annual growth rate of 4.2% between 2013 and 2018, according to research firm Companies and Markets. If companies like Mattel and Google can merge the IoT and toy markets, toy makers could see fresh interest in aging brands, while cloud-based companies like Amazon and Google could gain new ways to gather data.

Let's not get ahead of ourselves
As fascinating as that idea is, Google likely knows that the world isn't ready for cloud-tethered smart toys. The company already faces constant pressure from privacy and consumer advocacy groups about the "right to be forgotten," and its "don't be evil" image was arguably tarnished by leaked FTC documents which revealed allegations of Google employing anticompetitive practices against rivals.

A Google spokeswoman also recently toldBBC that "prospective product announcements should not necessarily be inferred from out patent applications," since only some of those ideas "mature into real products or services." Nonetheless, the fledgling smart toy market offers us a thought-provoking glimpse at a possible future filled with toys keeping watchful eyes on our every move.

The article Why Would Google Inc. Want to Get Into Toys? originally appeared on Fool.com.

Leo Sun owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, Cisco Systems, Google (A shares), and Google (C shares). The Motley Fool owns shares of Amazon.com, Apple, Google (A shares), Google (C shares), and International Business Machines. 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.