by Zach | January 16, 2014 9:00 am
Earlier this week Google (GOOG) announced its latest acquisition, this time coming in the home products market. The search giant revealed that it was buying Nest Labs for $3.2 billion, giving GOOG control over this maker of ‘smart’ thermostats and smoke detectors.
Obviously, this appears to be a little outside of Google’s wheelhouse, at least at first glance. However, Google has clearly been moving beyond just search in recent years, and this Nest buy fits in with this broader focus of the company.
That is because the Nest thermostat is a device that seeks to learn your habits, and then set temperatures accordingly. So if you always like to have the temperature at 72 at 6pm, Nest ‘learns’ that you like this, and automatically gets the temperature there for you.
The devices are also able to be controlled remotely with apps, and can even figure out if you are home or not. This type of capability fits in with Google’s push to learn more about users’ habits, and create smart devices and technology.
Beyond this ability to ‘learn’, the innovative thermostat has become somewhat well-known (as well known as a thermostat can be) thanks to its impressive design, and sleek look. This sharp looking device was largely the brainchild of Tony Fadell, a former Apple (AAPL) executive who is best known for his work designing the iPod. So probably at least part of this Google purchase is to get some solid R&D minds, and one of the best designers out there.
On its own, this purchase of Nest doesn’t really make much sense as it seems like an odd pick-up for a tech company. However, consider some of the other avenues that Google has been pursuing lately, and it starts to make a little more sense—though the valuation does seem quite steep no matter how much it helps Google’s long term vision.
This is best explained in a recent WIRED article, as Nest CEO Fadell detailed his vision, and WIRED author Steven Levy commented on some of the key takeaways from this technology:
In other words, Nest isn’t only about beautifying the thermostat or adding features to the lowly smoke detector. “We’re about creating the conscious home,” Fadell says. “To take a truly important device that has had no great innovation and make that device really, really great.” Left unsaid is a grander vision, with even bigger implications: many devices sensing the environment, talking to one another, and doing our bidding unprompted.
That last line is probably the biggest reason for the move by Google, especially as the company pushes further into things like Google Glass and Google Now. Glasses that can ‘sense’ your environment and learn from your daily patterns obviously have huge implications, while present day Google Now—already on many Android phones including my own—already keeps me up-to-date on a variety of things that are important to me, and any new technology that improves that seems to be a great purchase for Google.
So while getting the great design team was probably a key consideration, I think that Google is looking to the long term with this purchase of Nest. Google is looking to get involved in more devices, learn more about habits, and better connect everything in your life, Nest’s technology clearly fits in with that, and it gives GOOG a foothold in the home market on top of everything else, and a way to eventually tap into the huge ‘smart grid’ market someday too.
However, the acquisition will likely raise some privacy concerns, especially after recent news of Google working with the NSA. It also puts Google one step closer to becoming a real-life Cyberdyne Systems, especially after Google’s forays into things like Robotics, driverless cars, and the like, so some are bound to see this as another commentary of how a few companies know so much about us, and how powerful they have become.
Also, the valuation seems to be a little outrageous, even if Google does have a ton of cash. After all, Nest was valued at just $800 million roughly a year ago, and it was shipping roughly 50,000 a month, a level that makes $3 billion a little hard to swallow. We will have to see how it plays out though, and if this becomes another YouTube for Google, or another Motorola.
But what do you think?
Was the purchase of Nest foolish, or a great long-term move by Google?
Let us know what you think in the comments section below!
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