Why has Google decided to acquire home automation company Nest? It's a good story to think of it that way but we prefer to think of it as Nest having acquired Google for itself. Nest will now be truly well positioned to potentially drive some aspects of the Internet of Things (IoT) within consumer markets, to protect itself from lawsuits from the likes of Honeywell, to press forward with advertising it could not otherwise afford, and numerous other related things.
We've been interested in Nest since early 2012. Not as a tech company but as a, well, thermostat vendor. We were never quite ready to jump on the Nest thermostat bandwagon early on however - for one thing we weren't able to really spend any quality time touching the thing and getting a feel for it.
The first time we wrote about Nest was back in April of 2013, in connection with the possibility that Apple board member Bill Campbell had spilled the beans on an Apple iWatch. Campbell took note of how Nest and former Apple inventor Tony Fadell had taken the "humble" and rather boring thermostat and had managed to raise some non-trivial interest with it, suggesting Apple would do the same for wearable tech. As for ourselves we speculated a bit on how a Nest device could work with an Apple iWatch.
Further, back then in April 2013 we decided to finally give the Nest a whirl - we had a thermostat in our house (and still do) that we had not yet upgraded to a current and fully programmable Honeywell. Honeywell, most homeowners know, probably makes 90 percent of the thermostats out in the real world. Honeywell, along with a number of what we could refer to as old school home device makers have long dominated the market for thermostats and smoke and carbon monoxide detectors. Anyway, we ultimately didn't buy one yet again.
Why? Because Nest had just released a second generation of its design and the reviews on Amazon were not exactly stellar. Many first time users who wanted additional devices were not enamored of the redesign. So we held off.
Since then Nest has added a smoke and carbon monoxide detector to its line, and further, Nest's two devices are now available at Home Depot, so we could finally touch them and play with them in the sort of environment where such things should be evaluated (Best Buy or the Apple Store seem wrong for such). The Nest Learning Thermostat remains pricey at $249 while the smoke and carbon monoxide detector, dubbed Protect, sells for a far cheaper (though still ridiculously expensive for what it is) $129.
Our state of the art Honeywell thermostats never cost us more than $60 each, and our current smoke detectors, all 10 of which are internally hardwired together into a smoke alarm network, each cost about $17.50 to replace. Though not quite ready to plunk down $129 for a single smoke alarm (let alone ten of them), we have been taking closer and closer looks at the thermostat at Home Depot. In fact we're just about ready to replace that old Honeywell mentioned above with one. Why now? Who wants a feature phone when you can have the equivalent of an iPhone 5s, HTC 1, Galaxy S4 or Nokia 1020?
Why the long story here? Because we fancy ourselves the typical Nest buyer. The device is sleek, cool, and downright sexy relative to the staid Honeywell products that pass for state of the art. The Nest feels fantastic and of course it will interact with our iPhones and it will learn our personal behavior patterns and (supposedly) adapt itself to them.
The best our Honeywells can do is autosense how long it takes to heat or cool the various zones in our house each of them is responsible for to our preferred ranges and will adjust themselves to turn the heating and cooling systems on and off only as is needed. In fact the Honeywell is energy efficient and truly does everything it needs to do - it just isn't cool, trendy tech and can't be controlled from our iPhones!
But the bottom line here - and Honeywell's real problem - is that the Nest is downright sexy in that certain tech way new devices, new build materials, and what they can do can be alluring to us tech geeks, and we are going to make the purchase. And the fact that we are going to make that purchase even though the Honeywell nicely does everything it needs to bring us around to why Nest has caused Google to want to spend $3.2 billion to acquire the company.
The deal is all completely straight forward. Google announced through a blog post late yesterday afternoon announced that it reached an agreement to buy Nest Labs for $3.2 billion in cash. Pending the usual customary federal and justice regulatory checks and receipt of regulatory approvals the deal should close within several months.
It doesn't hurt of course that Google Ventures has been one of Nest's major backers, having led both Nest's B and C rounds of financing. Other investors include Shasta Ventures and Kleiner Perkins. Sergei Brin in fact had been briefed by Fadell on what Nest would be up to before the company launched - Nest has obviously been on Google's radar for a long time.
Google CEO Larry Page laid out his usual sterile comments on this sort of thing in noting that, "Nest’s founders, Tony Fadell and Matt Rogers, have built a tremendous team that we are excited to welcome into the Google family. They’re already delivering amazing products you can buy right now - thermostats that save energy and smoke/CO alarms that can help keep your family safe. We are excited to bring great experiences to more homes in more countries and fulfill their dreams!" The exclamation point there is Larry's but it doesn't get much more generic than this quote where Page is concerned.
Tony Fadell, Nest's CEO said, "We’re thrilled to join Google. With their support, Nest will be even better placed to build simple, thoughtful devices that make life easier at home, and that have a positive impact on the world."
Fadell, who left Apple to pursue his Nest dream, is considered to be the father of the iPod given his former role as the iPod's lead inventor. That says a lot about Nest and its products - in fact we really don't need to say anything else, do we? Stop by Home Depot or an Apple Store and touch one of the thermostats (the Protect is far less interesting from this perspective - but it looks really good!).
IoT and the Connected Home
The real story here is about building the fully connected home. That home, from Google's perspective, will likely be tied to Android, Chrome or a future derivative, though it necessarily needs to include iOS as well. By acquiring Nest, which was for the most part an iOS camp, Google takes an Apple iOS-friendly player out of the game, brings that player in-house, and perhaps gives Google an early edge in the home automation game. Rumor has it Google was working on its own thermostat we should note, but let's face it, Nest already has the tech buzz and first mover positioning and Google gets that to itself now.
By extension it also legitimizes Google as a hands-on player on the Internet of Things (IoT) game board as well. And from another perspective, as Dave Friedman, CEO and co-Founder of Internet of Things company Ayla Networks suggests, "Google's acquisition of Nest today is an obvious legitimization of the Internet of Things for the connected home. Google's acquisition presages that 2014 could be huge for IoT."
Nest in turn gains global scale and leverage. It can now quickly accelerate its existing business to reach a far larger global customer set than it could have on its own - even with a lot of funding in hand.
Keeping Apple Away
Apple, we continue to believe, is focusing its longer term wearable tech ecosystem game plan around the connected home and home automation and other IoT extensions that may also ultimately extend into the workplace. It is worth noting that there isn't anything Nest does that Apple itself isn't capable of delivering on itself. Apple didn't need to acquire Nest because at its core it knows how to do what Nest does. But Apple won't do so until it is ready to do so.
One might speculate of course as to why Apple didn't acquire Nest. Apple isn't in the habit of over overspending for technology it doesn't really need - and in truth the concepts behind the Nest thermostat are all rather well-known. In fact Honeywell sued Nest back in early 2012 over a number of patents it holds. That lawsuit is still going on and certainly Google's legal aid and resources will be quite useful to Nest on this front.
The lawsuit is an interesting story on its own, with Nest having come up with a number of valid (we think) rebuttals on Honeywell's patents and motives (we'd say it may be running scared). But the fate of the lawsuit (and Google has recently lost quite a few of these) is still unknown and it may very well come back to haunt Google just a little bit down the road. Samsung paid a price for its Apple patent transgressions ($930 million to date), but perhaps that is, as Samsung views it, simply the cost of doing business in this case as well and getting into the game.
We could also speculate on the usual sorts of internal Apple rumors - no doubt some among us may think that Jony Ive and Fadell don't get along, for example. But the bottom line is money - way too much of it for Nest is what we think Apple believes. We won't go down the path of valuation speculation but it is worth posing the question: Does anyone really think Nest is worth $3.2 billion? We certainly don't.
Nest will continue to operate under Fadell and will continue to retain its own distinct brand identity. That makes sense - as we noted earlier, Google inherits Nest's already established tech buzz - it's all positive so no need to change anything.
It will be interesting to see what Nest might tackle next. Might it prove to be total home security? Will Nest next look to replace the home security vendors? Will the security keypad become part of Nest's sphere? How about the operation of surround view cams throughout the house (internally and externally)? The technology exists now to make these entirely pervasive, totally invisible and totally IoT connected. In many ways these cams are now handled by the same kinds of "old-fashioned" companies that Honeywell represents in the thermostat world.
Beyond these sorts of things, Google itself will need to partner with the home appliance manufacturers to extend its reach into the kitchen. Will it also look to partner with the consumer electronics folks that control in-home audio, video and multimedia? Will Google look to replace our Sonos wireless music system? Sonos is a very cool state of the art company - perhaps Google will add them to their stable next.
In any case, Larry Page is no doubt already quite smitten with Fadell. This means Fadell could end up in the driver's seat to lead all of these efforts, moving eventually well beyond Nest's current focus.
Finally, we will no doubt begin to see tech headlines start to scream out that Google will now truly own us by being able to spy on everything we do within our homes, that Google will now begin to use our in-home personal data to better serves us with hyper-targeted ads every waking moment of every day, and perhaps they'll also tap into activity monitors and systems that provide "white noise" to help us sleep better and begin to subliminally feed us ads in our sleep!
So much personal data heading out the door…so much potential advertising streaming back in!
To that we say, get over it people and wake up. It will still be an opt-in world. Read the fine print carefully and feel free to answer "NO" when your next Google toy asks - possibly more than once - if you will agree to let Google access your data.
Meanwhile, we'll soon put a Nest in our house and we'll see how it goes.
Currently we are wondering if the Nest will really be able to handle our heating and cooling systems. The Honeywell meanwhile is truly plug and play - simple to install and program, and it operates flawlessly.
But damn it, the Honeywell just isn't tech sexy!
TechZone360 Senior Editor
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