Why has Google bought Nest?
14th Jan 2014 | 13:08
Why Google is turning up the heat with its latest big buy
If you hate the phrase the Internet of Things, then you are not alone. Tony Fadell, founder of Nest, isn't a fan either.
He told TechRadar back in November that items that should never be 'connected' include fridges, toasters and kettles. And this is from the guy who made both smoke alarms and thermostats 'smart'.
According to recent news, he has every right to be picky. His company Nest now belongs to Google – the web giant acquired it this week for a whopping $3.2 billion.
But what does Google want with Nest? The answer is simple: Google just bought itself a first-class ticket into your home, something it has unsuccessfully been trying to do for years.
Google has been gearing up for this moment since 2009, when it launched its web energy management tool PowerMeter.
The idea was ahead of its time. PowerMeter essentially enabled its users to monitor and also manage the energy they consumed online through an iGoogle widget (yup, remember iGoogle?).
The problem was that Google couldn't convince the world that energy consumption was data that needed tracking. Oh, and it also couldn't convince the energy companies to buy into the service either so closed it down in 2011.
By buying Nest it just solved both of those problems.
And then there's the Android@Home initiative. At its I/O developer conference in 2011, Vic Gundotra talked about how the perfect home was one that was run in part by Android. The centrpiece to this presentation was a strang black orb – a prototype that ended up being the much maligned Google Nexus Q. The eventual product was officially shown off at Google I/O 2012.
The idea was that the Nexus Q was to be a social media player, one that would connect to both your living room's television and speakers. It would connect up the home entertainment parts of your home like no other product since could.
Google at home
Much to Google's disappointment, it didn't connect with audiences at all and now lives only in the homes of Google I/O attendees (who all got one for free) and those who pre-ordered it – who also eventually got the device for free.
Since the Nexus Q, Google's plans to dominate the home has, well, stuttered. At the same time the home automation market has started to show its true worth, with a trickle of stand out products taking advantage of the connected home idea – one being Philips Hue lighting system and the other being Nest's thermostats and smoke alarms.
Until its buyout of Nest, Google has only been on the cusp of the home. Its Android system is being used sporadically in refridgerators and the like – typically the products that Tony Fadell believes shouldn't be connected – but with Nest, Google has hit the home automation sweet spot.
In a way, Nest's relationship with Google has come full circle. Google Ventures was at the front with its wallet out when Nest went through a new round of funding this time a year ago.
And now it is paying for a company it helped fund more than double what it paid for YouTube in 2006. But what is it actually getting?
Well, unlike YouTube, it is buying a product and service that doesn't need fixing. The day Google bought YouTube was the day Google's lawyers let out a deep, synchronised sigh. It was a service mired in copyright clashes that needed fixing fast.
Turning up the heat
With Nest, Google has picked up two products that are universally praised by reviewers and the people that use them.
Nest Protect is a smoke and carbon monoxide alarm that gives you peace of mind even when you are away from your home.
The Nest Thermostat has revolutionised how some US homes deal with energy consumption. It helps level out energy bills – a massive problem in some areas because of air conditioning use in the summer – and allows you to regulate the temperature in your home when you aren't there.
These are the smartest smart products around and, as Fadell explained to us, they are products that up until now nobody really cared about.
"Nest is all about getting those unloved things in your home, reinventing them and making you reawakened to them and make you embrace them in a whole new way," he explained.
These are everyday products rethought and a perfect way in for Google to take over our homes.
And take over our home is precisely what Google wants to do. It was no coincidence that in November, Google showed off a 'home of the future' in London, where it invited journalists to sample all the products Android is used in and where it can be used in the future.
Show and tell
Each room in the posh Fitzroy Square house was taken over by Google, where it showed off how you can stream media with the Chromecast – something that is still lacking in the UK – how Google Now is more effective than Siri in offering information and how YouTube can be used for recipes in the kitchen... it was Google showing off how it can run the home but it was a showroom lacking real substance.
Nest is the substance that Google was lacking. It brings with it the products that were truly needed to furnish Google's home of the future.
Being that this is Google, though, there are those that will take issue with this. The world has been, quite rightly, critical of Google's apparent nonchalance about the data of its users. It's been drummed into those who use a Google product that, rightly or wrongly, its services may be free but those who use them pay with their data.
Now Google has Nest - and when the deal officially goes through it will have a huge amount of data on the thing Fadell hates, the 'internet of things'.
We all have to remember that the internet of things isn't just about products linking together – the key part of that machine ecosystem is us, the user.
Your kettle may link up to your fridge in the future, but all the data inputted is about you – how you use these products, when you use them - all these snippets of data will eventually connect up so that when you turn off your smart TV, turn on your smart kettle, turn down your smart thermostat and open your smart fridge someone somewhere will know about this.
Google wants to be that someone.
This is all laid bare in Nest's post about the sale, where it explains: "From the beginning, our vision was to create a conscious home. A home that is more thoughtful, intuitive."
The only way to do this is through data – data Google will soon have control of, as the post continues: "Google will help us fully realize our vision of the conscious home and allow us to change the world faster than we ever could if we continued to go it alone. We've had great momentum, but this is a rocket ship.
"Google has the business resources, global scale and platform reach to accelerate Nest growth across hardware, software and services for the home globally."
Google buying Nest shows that the home is where the heart is for Google's future growth. Of course it will continue to advance smartphones but this is a market it already has a massive grip on. Of course it will continue search but this is a market it... well, you get the idea.
For Google to grow, it needs to expand into other areas. It failed once in the home with the PowerMeter, it failed again with the Nexus Q - but if you don't succeed just buy, buy and buy again.
Don't be surprised if Android@Home makes another appearance at this year's Google I/O. But this time front and centre of its plans will be one huge, valuable Nest egg.