CNET

Home automation company Nest Labs will acquire the video-monitoring startup Dropcam, which makes Web-connected home security cameras, in a deal worth $555 million in cash. The deal, signed Friday, has yet to close.

Nest will fold the company into its existing line of smart-home products, which currently includes the Protect smoke detector and Learning Thermostat. Dropcam's products will now be under Nest's privacy policy.

Despite that assurance, the deal is likely to prompt privacy concerns considering Google bought Nest in January for $3.2 billion. The deal, however, was sealed solely by Nest, the company said, and will be used to expand the Nest brand into home security and video monitoring.

Following its acquisition by Google, Nest has ballooned from 130 employees at the end of 2012 to more than 460 this year. Dropcam will relocate from its San Francisco office to Nest's Palo Alto, Calif., headquarters.

News of the acquisition was first reported Friday by Recode, as well as The Wall Street Journal.

Nest, founded in 2010, is the brainchild of former Apple executive Tony Fadell -- who headed up the company's iPod division -- and Apple colleague Matt Rogers. Hitting the market in 2011 with its thermostat and following in 2013 with the Protect smoke detector, Nest established itself early on as an industry favorite in the nascent smart-appliance market by bringing refreshing design and powerful software to once-immutable and ignored devices.

Nest has used the thermostat and smoke detector as the linchpins and starting points for its smart-home philosophy, which starts with hardware and aims to expand into a software platform layered over a web of connected home appliances.

Dropcam, which has thus far raised $47.8 million in venture capital funding, was founded in 2009 by Greg Duffy and Aamir Virani, who spun the company out of camera-software development that the two engineers had performed for Swedish technology company AXIS.

"The teams are very well aligned and we love the product," Rogers, Nest's acting vice president of engineering, told Recode. "We both think about the entire user experience from the unboxing on. We both care deeply about helping people stay connected with their homes when they're not there."

Dropcam, similar to Nest, offers a limited line of tightly integrated hardware and software. The camera company has only three products: the $149 Dropcam, $199 Dropcam Pro, and $29 Dropcam Tab. All three devices are aimed at helping customers monitor home activity through motion sensors and video recordings.

The Wi-Fi-enabled Dropcam and Dropcam Pro let users access the camera feeds and even project their voice via speakers using the company's mobile app, while the camera-less Tab can be placed on windows and doors to monitor more singular activities, like opening and closing and other types of motion.

Google was adamant when it acquired Nest that it wanted the company to operate autonomously, and Dropcam is the first major expression of freedom from Fadell and Rogers. The goal, as Fadell himself points out, is to create a family of products under a software umbrella that leverage a home full of once-disparate Web-enabled devices. To that end, Google's Android mobile operating system -- which is expanding to television sets, watches, and even face-worn headsets -- is a valuable asset in Nest's growth roadmap.

Ideally, Nest products and a Google-powered smart home will increase energy efficiency, the companies say, and allow for powerful insights into how we live, from opening doors and unlocking locks; washing clothes; eating and storing food; and flipping light switches.

Though as Google's brand seeps into more aspects of daily life and physical activity, Nest has been the subject of increasing scrutiny over the ultimate fate of its consumer-friendly privacy policy. With Dropcam under its wing, live, cloud-stored video feeds of our more intimate moments now fall under the purview of Nest and Google.