Top 4 Reasons Why Google Bought Nest

Google bought Nest because of consumer data that no one else has. Google bought Nest because they wanted Fadell on their team. Google bought nest because they want to enter the home automation market. There are a number of rumors going around about why Google just spent $3.2 Billion dollars on a company that seems to have nothing to do with their core business of search and advertising.

Being in the home automation industry myself, this acquisition got me thinking about a million different directions Google COULD take depending on their goals. The Nest is a revolutionary product in the consumer electronics industry, but has also been a pain point for what we’ll call the ‘higher end integrators’, as it was originally a product that couldn’t be combined (legally anyways) with all the other more integration friendly devices on the market. However, I don’t want to go off on a tangent – that is for a later blog. So back to the original question:

Why Did Google Buy Nest for $3.2 Billion? Why did they invest so much money into a small piece of hardware that probably costs more to make than what it’s selling for right now? What on earth does a Nest have to do with Google’s core business?

My Thoughts on Why Google Bought Nest

I think Google bought Nest Labs for the data stream, for the talent, for an unknown technology which we will find out about later, and for the fact that the Web is evolving to what I’ll call Web 4.0 – or Web4Reality.

Here are some details to fill you in on my thought process. Contact me through the form if you want me to elaborate on future posts, and I will.

Google bought Nest for Data – To sell us stuff or to power the Negawatt Revolution?

Google may be acquiring Nest because of the data streams that it would then own. Your presence, your preferences, your patterns and your habits are tracked by the Nest. Could Google use this data and use it to generate revenue? Absolutely. With all these data points, they are inching closer and closer to creating the ultimate profile of their end users – in many cases knowing more about end users than they know about themselves. Knowing your end users lets you sell to them more effectively, and this may be one of Google’s many reasons for buying Nest Labs.

On the other end of the spectrum, this data AND control over a homes HVAC system gives whoever is in control the ability to conserve energy on a massive scale. Thermostats control the biggest energy hog in most peoples homes – your air conditioning and your electric heating. Forget about the privacy and legal issues for a moment. The ability to turn on and off this energy hogging gear across thousands (or millions of homes) in a single geographic area suddenly gives Google the ability to take down an entire electric grid, or perhaps save it (and charge for that power – literally and figuratively).

These are 2 completely different uses of the data and ways to monetize it – and trust me – there are many many more which Googlers will figure out – after all they have some of the most brilliant minds. They will amaze all of us with what they come up with.

Honestly – I was upset when Google closed down Powermeter (and I really want to meet the guys behind it someday), as it made me think that Google wasn’t thinking about the future, and where talent/brilliant minds should be expending effort right now, in this era of waste. However this whole acquisition makes me realize that Google could be back on track to help with one of our nation’s biggest problems – if they stick to their motto ‘Don’t be evil’. The web isn’t the be all end all – it is just a tool we’ll use in the future to make incredible networks of machines we interact with. Google is at least using its money to line itself up for good and hopefully keep some technologies out of the hands of the evil. = ).

As of Jan 20th, I read a new article which states that Fadell is going to make sure that the data stays out of Google databases. We’ll see what happens there – opt-in doesn’t necessarily mean that it keeps the data away – it may just mean that you HAVE to opt-in in order to use your Nest. You can read more about the article discussing Nest’s plans here: http://arstechnica.com/ business/2014/01/nest-ceo- promises-opt-ins-for-data- policy-changes-even-under- google/

Did Google Buy Nest for the Talent? Where else can you find people who know how to dominate in the consumer smart home market?

Google is buying Nest for its talent, and not just Fadell. Ex-Apple engineers, leadership with proven success, and a team of marketing and supply chain experts who already have the relationships needed to bring more innovative products into homes around the world. The pipeline is already built, and the people who maintain that pipeline are already at Nest. Google has struggled in my opinion with physical product. (Ask me about my customer experience the first time I purchased a Nexus). Nest can handle all of this, and IF Google wants to get into our homes, there are few other companies who could be better vehicles. Note that I said ‘few others’ – not ‘no other’.

Did Google Buy Nest for The Unknown technologies at Nest? What is Nest cooking right now in their Labs?

Only Google and Nest know this right now, and potentially Google doesn’t even know everything about what Nest has tucked away in the minds of their engineers. The Nest Protect came out of left field to the home security/fire protection industry. Completely unexpected. To think that this is the end of the line of innovation that we’ll see out of nest would be a big mistake. We’ll find out in the future what Google finds locked away in Nest’s vault of innovative ideas – they may not even realize what they’ve bought into yet.

Google Bought Nest To Extend Their Reach Beyond the Web – What I call Web4Reality

So this is something I’ve been thinking about ever since the term Web 2.0 came out. Web 4.0. There is already a shift from people browsing the web through a computer’s web browser using a keyboard and mouse over the coming years. This ‘new web’ will simply be a way for internet connected devices to communicate with each other. Once we evolve to move away from the keyboard and mouse, this ‘Web 4.0’ will connect devices and buildings in the real world, and will allow the built environment around us to communicate with us through sounds, colors, motion, robots, and more!.

I think Google realizes that people will shift from the web as well, and they are trying to look beyond our office desks and our laps. It’s about data. It’s about customers. It’s about innovation talent. It’s about connecting with people where the technology world connects with the physical world – the new frontier. I’m happy that Google bought nest. I’m happy because the world just might stop focusing on web and app development, and mass talent will start to focus on the next piece of connected hardware.

Thank you Google. Thank you for showing everyone that a hardware device and the people/relationships behind it can have as much value as an app. It is the combination of applications AND hardware platforms that will shape our future.

Further Readings

Why Did Google Buy Nest? Here are some other articles which attempt to answer this question:

Daniel Terdiman at CNET implies that Google is on a mission to create the ‘conscious home’: CNET.com

Parmy Olson of Forbes thinks it is a foray into Energy Management:

(By the way – Parmy – The Nest isn’t a ‘Leaning Thermostat’, its a ‘Learning Thermostat’ ☺ )

Forbes.com

Haydn Shaughnessy, a Forbes contributor brings up some interesting ideas, like a robotics platform or even a Home OS.

Forbes.com

Dan Hon of Wired brings up the best point I’ve seen yet, and explained it better than I could have on my own. Dan, you are the Man. Customer relationships are the most crucial part of this equation and they aren’t something that can be bought so easily with money. I agree with his monoculture point as well. Innovation will be boring if all paths lead to being bought out by a massive organization.

Wired.com

Ari Levy and Jon Erlichman at Bloomberg discuss their ideas here:

Bloomberg.com