Google's Motives to (Acquire) Nest

One of the leading M2M/IoT verticals, Smart Home is a field that we at ABI Research are covering extensively under our dedicated research service. My colleagues who specialize in the subject matter are currently working hard to analyze what Google’s acquisition of Nest, for no less than US$3.2 billion, will mean for the sector’s market dynamics. Meanwhile, I’ll give in the following my take on what it may mean for Google itself, as well as its IoT strategy.

The hints of Google’s earlier attempt to enter the smart home, Android@Home, were airbrushed out of the official pictures curiously soon after its announcement in 2011. It clearly wasn’t mature enough to support commercial deployments. With Nest the company is taking a different route – instead of merely enabling third parties to smarten up homes, Google is now getting involved directly. While the widely speculated “Google wants your data” angle is legit, I still believe that the deal is primarily driven by the product. Nest has had an encouraging start, and with its financial resources as well as existing technology assets Google can accelerate its development and expansion to new products. Nest’s contextually aware, learning-based approach to its thermostat and smoke alarm reminds me more than a little of Google Now, and I think that’s also the most obvious area of synergy. At the same time, Nest could also add some much-needed everyday value to Now, which in its current form is an exciting concept but one that can’t be much of use without any link to users’ homes.

The acquisition could also lead to Nest being opened up to third-party developers. This would be a particularly interesting play when it comes to Quantified Self applications that rely on wristbands and body area sensors. When last week wrote about Mother by, I brought up an idea of how something like, for instance, a good night’s sleep could be potentially formulated by combining data on relevant factors, such as water intake, physical exercise, and room temperature. Recipe for sleep quality is an example of a “problem” that is so complex that no single device – most probably – can ever own all of the key data. In that sense, an ecosystem player like Google owning a major data domain like Nest can speed up the required interoperability work. I doubt this side of things is of Google’s, let alone Nest’s, immediate interest, but I’m inclined to believe that it will become topical in two to three years’ time. Globally adopted Nest products, and their APIs, could serve as the foundation for Google’s own, semi-open Internet of Everything.

The advertising perspective, quite naturally, can’t be disregarded either. The fact that Google’s business model predominantly relies on ads doesn’t automatically mean that it will always do so, but the opportunity of being able to map consumers’ offline activities through Nest’s sensors is just too lucrative for Google to ignore. It should and most likely will tread extremely carefully, trying to over time identify the data-sharing practices that a comfortable majority of users/consumers/citizens would be ready to find acceptable. I’d expect most consumers ultimately to be willing to share their IoT data with third parties if they consider the opt-in (or -out) policies fair and transparent, and if they feel like they gain enough value from the arrangement, but right now that is still a very unchartered territory. In a way, privacy in the IoT is as a policy issue similar to privacy in the world of ubiquitous cameras. When it comes to the latter, Google is already set to test the policy and etiquette waters with its involvement in Glass, whereas its plans with Nest may well give it an equivalent dartboard role in the former as well.