The word is out, Google has bought connected thermostat and smoke detector maker Nest for $3.2 billion in cash. But why did Google want Nest? And why did Nest choose to go with Google instead of, say… Apple?
Why Google Bought Nest
In case you were unaware, Nest is a company whose aim is to make household objects smarter via advanced design and internet-connected features. Currently, it is best known for its Nest Thermostat ($249), a smart home thermostat controlled by your mobile device, and the Nest Protect ($129), a smoke and carbon-monoxide detector.
The company was founded in part by CEO Tony Fadell, a former Apple employee who is known as “The Father of the iPod.”
Google’s acquisition of Nest immediately puts Google in first-place in the race for in-home smart devices and appliances. While Nest has never released sales numbers, some estimates say the company is shipping upwards of 50,000 smart devices a month. I’m thinking any other company in the same marketplace would be hard pressed to match numbers like those.
Mashable humorously echoes the thoughts of many:
Will you have to log into Google+ to activate your smoke alarm? Will audio versions of Google’s paid search advertisements blare throughout your home via the speaker of your carbon-monoxide detector?
While Google’s announcement of the deal says that Nest will continue to operate as a separate and distinct entity, with Fadell still leading the way, it is still not hard to imagine how Google could use the Nest technology in the future. Despite any privacy implications – and there would be more than a few – Google’s powerful data crunching capabilities combined with Nest technologies could breed a new generation of smart home appliances that could be just what the market has been waiting for.
Why Nest Picked Google as a Partner
Well, besides the logical reason, “because they asked,” there are numerous attractive qualities Google holds for a company like Nest.
In an interview with GigaOM’s Om Malik, Nest co-founder Fadell noted how he has been wanting to refocus on designing product experiences instead of spending his time on scaling and infrastructure — something Google is very good at.
I was spending nearly ninety percent of my time on building the infrastructure of the company and I wasn’t able to spend enough time and cycles on what I love doing: products and creating differentiated experiences for our customers. That is where my love is and Google offered to let us focus on that, but with scale that will help bring our horizon closer to us, faster. Google offers to bring that scale to us. For me, ultimately building great products is key.
Fadell went on to explain that while the Nest lineup of products has done quite well in the U.S. and Canada, the company needs to expand to other markets. Google can help with that.
Fadell says Nest will be increasing its marketing spending to get more people to use Nest products. He thinks the deal with Google will prime other companies to build around the “internet of things,” bringing previously ignored products to the limelight.
Why Not Apple?
Who knows if Nest ever had talks with Apple for a deal similar to the one with Google. Apple certainly has the cash at hand to easily pull off such a deal. Nest’s co-founder Tony Fadell worked for the Cupertino firm. And, Apple sells Nest thermostats and smoke + carbon monoxide detectors in its stores and online. Why didn’t these two companies make a deal?
Turns out the relationship between Apple and Fadell may have been strained for quite awhile.
“Tony got canned,” Leander Kanhey writes in his new book, Jony Ive: The genius behind Apple’s greatest products. “He was paid off with his salary for a number of years plus so many millions to leave. Tony was canned because he was battling with Jony.”
Kanhey’s book suggest that Fadell and Apple parted on less than good terms. It seems that Fadell had originally conducted talks with Google when he decided to found Nest.
“This decision wasn’t made on a whim – Google has been in the mix in some way or another for about three years of our almost four-year history,” Fadell said in a blogpost about the deal. “In fact, my first meeting with Google as a Nester was before we’d launched.”
Google’s support and interest from the beginning may have meant it was the only feasible partner in Fadell’s view of things.
It will be interesting to sit back and watch what technology sprouts form the union of Nest and Google.
Will Google completely swallow the tech startup, assimilating its technology into Google branded products, or will we see Nest stand on its own as a leading brand in home automation tech?
What’s your opinion reader? We’d love it if you’d share your thoughts with us in the comments section below.