Nest

After launching last year in the US, Nest’s Thermostat E is finally coming to Europe. The smart home devices company this week opened pre-orders for the £199 smart learning thermostat, the fourth upgrade on the first product it commercialised in 2011, and which will start shipping mid-October.

Since it joined Google in 2014, Nest has released eight new connected products for smart homes, ranging from secure alarm systems and locks to indoor and outdoor cameras. This compares unfavorably to Amazon, who just last month released ten smart-home products - more in one day than Nest has in four years. And the Thermostat E is not even an entirely new product in the automated home market, but an updated version of Nest’s flagship smart thermostat, meant this year to simplify customer experience for a discounted price.


“You can install the device yourself,” says Chris Tran, from Nest’s product marketing team. “A professional installation brought the total cost of our previous thermostat to an estimated £314. The Thermostat E cuts that price by 36 per cent.” As with other Nest devices, the thermostat learns your preferences to set up an efficient heating schedule – something which the company claims has saved 25 billion kWh worldwide since the first thermostat was commercialised in 2011.

But behind Nest’s philanthropic undertakings, however, there is also a tech titan operating. Last July, Nest was merged with Google’s home and living room products’ team – a move that came as a continuation of Google’s gradual push in the last years to take control of the company. Back in 2014, Google bought Nest for $3 billion. At the time, the three-year-old startup company was still run by its founders, Tony Fadell and Matt Rogers, two ex-Apple employees. Nest may have been the brainchild of a duo coming straight from Google’s competitor, but it started operating as part of Google’s parent company, Alphabet.

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It is no surprise that Google saw an opportunity in Nest’s products for home automation. Last year, Gartner forecast that consumers and businesses would be spending almost $3 trillion on connected devices such as smart-home hardware by 2020. The trend is not new: at the same time that Google bought Nest in 2014, Amazon launched its first Echo smart speaker, starting its portfolio of connected Echo devices that it hoped would bring Alexa to every corner of people’s homes. Amazon showed that it was leading the way in the battle for the smart home, and Google was not willing to be left behind.

In 2016, the smart speaker looked like the best way into people’s households, the company released the Google Home smart speaker. But as yet its efforts do not seem to have paid off. Google remains way behind Amazon, with a smart speaker market share that stood at 24 per cent last August, in comparison to the quasi-monopolistic 70 per cent share held by the Echo devices.


In that light, it seems natural that Google would view Nest as part of its strategy to strengthen its position in the connected home market. Yet four years into the partnership, the lack of new launches is striking, especially in the face of ever-growing competitor Amazon.

For Daniel Gleeson, senior analyst in consumer technology at Informa, this unclear strategy corresponds to an indecisiveness within Google about the way it wants to penetrate the smart-home market.

“Google is evaluating how centralised the smart home will be,” he says. “Will there be room for an Android-like platform, with an ecosystem of third parties to which they would provide the smarts, or do they want to be the first-party provider?”

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Investing in Nest, he continues, is a way to prepare for the moment – should it come – that Amazon becomes the centre of the smart home and leaves no space for third parties. Having direct control over Nest’s hardware, which would let it be a first-party presence in homes, is Google’s safety net against Alexa.


In a move that seems to confirm this, this year Google brought Nest further under its control. The Nest team left Alphabet last February to report directly to Google’s hardware division instead of working semi-independently. And in July, it was merged completely within the home devices unit.

It remains that, despite those efforts, little has been done at Google to push product launches at Nest. Google, it seems, is only half-committing to its strategy while it waits to see if the market is evolving towards a model where Google Assistant and Alexa could sit side by side in the household.

For some analysts, this is risky. Strategy consultant at Asha Labs Seyi Fabode says that Google is getting distracted from its core identity into attempting to push smart home hardware to its portfolio. “Google’s core is software,” he says. “And creating hardware requires planning, design and distribution to place the product on the market that is not in its DNA.”

While this should be nuanced – 55 million Chromecast devices have been sold since it was launched, after all – it is evident that Google is not keeping up with its competitors when it comes to selling hardware. While Amazon, for instance, has a dedicated retail platform through which it can push its own products much as the Echo, Google’s devices struggle to get the same attention. For Gleeson, this explains the failure of Google’s Home speaker. And for Fabode, this is why Google has failed to be at the centre of the smart-home hub in the way that the Echo has. “It may have a few voice-activated products under its umbrella thanks to Nest,” he says, “but it doesn’t have a successful core hardware product that can control a hub of devices.”

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And if anything points to the fact that Google hasn’t yet secured its position as a leader in the hub of smart home hardware and software, it is that its products can actually be controlled by Alexa. Amazon’s mission is for it’s digital assistant to effectively control almost every device in the house, from Google’s Nest thermostat to now even your microwave.

In that light, in spite of its new lower price, the Thermostat E is unlikely to be a breakthrough in furthering its market share of the smart home for Google. The fact that it can be managed through Google’s own voice assistant is merely meeting baseline expectations that modern consumers have of connected hardware, more than increasing adoption of its software.

Does Nest have more product launches in store for its consumers, or will Google try to model the success of Android in the smart house? Experts are divided. While Fabode sees a commitment to hardware as a fundamental mistake for the software company, Gleeson believes Google should be tackling Amazon more aggressively: “It should be a lot more bullish in pushing Nest and other smart-home products,” he says. “Because Amazon, at the moment, has a fairly easy way in the home, and Google is not proactive enough.”

A recommendation that still has to be put to the test. In the meantime, Google and Amazon will keep bickering in a borderline comical fashion over consumer attention. While Amazon refuses to sell the Google Home - searching for it ironically directs you to the Echo - Google in turn refuses to let the Echo Show play YouTube. A battle of the titans, happening right in your living room.

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