News

Google buys smart thermostat startup Nest for USD3.2bn

January 14, 2014

Google is making its first big acquisition of the year, scooping up connected thermostat and home automation startup, Nest, for USD3.2bn. Created by a team of former Apple engineers, Nest’s connected home devices include smoke and carbon monoxide detectors, as well as its flagship smartphone and web-controlled thermostat. The company is reported to be shipping some 50,000 devices every month and says will continue to operate as a separate entity post purchase. The acquisition is Google’s largest disclosed take-over since Israeli mapping startup Waze, which it bought for a reported USD1.3bn last year.

The sale comes as a big win for the company’s investors, who pumped USD80m into the startup last January, led by Google Ventures, after two undisclosed rounds. Nest raised the Series C round at an USD800m valuation, making Google’s USD3.6bn pay out seem steep. That said, Google reported USD56bn in cash and marketable securities at the end of Q3, so it has money to play with. The size of the deal is significant in that it highlights the scale of Google's ambitions to take over consumers' homes, as everything from TVs to microwaves become increasingly connected.

What Will Google Do With It?

Unlike its acquisition of robotics firm Boston Dynamics, Nest gives Google a mainstream piece of hardware that is already shipping to customers, rather than technology in search of a consumer use. While Nest will continue to operate as it has done, it gives Google a foot inside the living door, a space attracting an increasing amount of competition from tech companies, but which Google has yet to see any great success in, with Google TV and Chromecast failing to gain significant traction. Nest allows Google to begin showing consumers what a Google controlled home might be like.

Google could be looking to make Nest users log in through Google+ or integrate the product with Waze, potentially turning heating on once users are almost home. But the real value of Nest is the data. In an announcement by Nest, the company addressed concerns over user privacy by saying: “Our privacy policy clearly limits the use of customer information to providing and improving Nest’s products and services”. But Google might find user home energy data hard to resist as a catalyst for new products in the space.

The purchase also brings fresh talent into Google’s reach, with many of Nest’s team being former Apple staffers including CEO and founder Tony Fadell, who is credited with being one of the iPod’s main designers.

Internet-Of-Everything

The connected appliance space is gaining an increasing amount of interest, with this year’s CES event showcasing everything from connected toothbrushes and doorbells to cars. While Tweeting fridges (thanks Samsung) have been on the market for a while, the introduction of granular data analytics is creating more useful home devices. Nest is one of the sector’s frontrunners and Google is looking to leverage its acquisition to take an early lead in the fast-developing market.

 

Source: StrategyEye