"Benedict. I agree with your thinking here, but I think one of your conclusions is at least cloudy.... "So half the ‘internet of things’ devices in your ‘connected home' won’t be on the internet or be connected to anything else. " The "things" will be connected to the cloud, but via a gateway and hub (yes both). The smartphone can play that role, So too can an Apple TV or other set top box, or even an access point. The key is to see the "thing" as being "marked" by a beacon and the marker having content that is probably cloud based. The gateway/hub provides the lookup and retrieval service. By this method the real world is "knowable" even though the "things" are not connected to the cloud or even to each other. It all becomes clear if you envisage a triangle (thing, gateway, cloud) rather than a dual structure (thing/cloud) or (thing/thing). Make sense?" - Keith Teare