Analysis / Interesting

Why did Google Buy a Smart Thermostat Company?

Last week Google bought a company called Nest Labs for $3.2 billion. Nest is a startup focussed on smart hardware, specifically devices that let you control your home appliances through apps on a smartphone.  Nest’s founder Tony Fadell was one of the early creators of the iPod.  His vision when he created Nest in 2011 was to connect ordinary household electrical devices to the internet to create a conscious home. The first big success from Nest was the smart connected thermostat which works together with a conventional thermostat to create a self-learning system that saves energy and money while giving the home owner climate control from their smartphone.

So what does this have to do with Google, a search engine and advertising company whose self stated goal is to organise the world’s information?  The bigger picture here goes far beyond fancy remote controls for household devices.  The internet of things is creating a connected world where even offline, non-digital activity is tracked, controlled, measured and recorded online.  All of this measuring and recording creates data.  And data is where it’s at for Google.

It remains to be seen what Google plan to do with data from household devices, but it doesn’t take too much imagination to see the opportunity. Even with Nest’s simple thermostat product, collected data might include energy consumption patterns by household, suburb, or heating system.  From this data you can learn a lot about behaviour, preferences and lifestyle.  Who stays up all night?  Who goes away every weekend?  Who stays home all day?  The advertising opportunity – and privacy implications are immediately apparent.

Nest Data Screenshot

Some have suggested the Nest acquisition will guide the next generation of Google Now. Currently a feature of the Google Search App, Google Now is described as an intelligent personal assistant that brings you the information you want, when you need it.  More proactive than a search engine, Google Now is designed to learn your information consumption patterns and provide data the moment before you realise you need it.   It certainly makes sense to have your intelligent personal assistant in conversation with your thermostat, home security system or connected fridge.  Whether this goal justifies the ridiculously high acquisition cost remains to be seen.  Perhaps this is just Google’s way of guaranteeing a place in the massive opportunity presented by the Internet of Things.  Either way, the next 12 months should present some interesting developments.

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