Google Buys Nest Labs, Inc.

Nest’s mission is to reinvent unloved but important devices in the home such as thermostats and smoke alarms. Since its launch in 2011, the Nest Learning Thermostat has been a consistent best seller--and the recently launched Protect (Smoke + CO Alarm) has had rave reviews.

The search engine operator was an early investor in Nest Labs. The thermostat is designed to learn how inhabitants like their homes to be heated and cooled. Once it learns the consumers’ preferences, it automatically adjusts the temperature on its own.

Nest Labs, based in Palo Alto, CA, was founded in 2010 by Tony Fadell, a gadget guru who helped design the iPod and original iPhone while working at Apple.

Larry Page, CEO of Google, said: “Nest’s founders, Tony Fadell and Matt Rogers (also has an Apple background), have built a tremendous team that we are excited to welcome into the Google family. They’re already delivering amazing products you can buy right now — thermostats that save energy and smoke/CO alarms that can help keep your family safe. We are excited to bring great experiences to more homes in more countries and fulfill their dreams!”

Tony Fadell, CEO of Nest, said: “We’re thrilled to join Google. With their support, Nest will be even better placed to build simple, thoughtful devices that make life easier at home, and that have a positive impact on the world.”

"Why did we decide to partner with Google?" Fadell wrote in a blog post. "Google will help us fully realize our vision of the conscious home and allow us to change the world faster than we ever could if we continued to go it alone. We've had great momentum, but this is a rocket ship. Google has the business resources, global scale, and platform reach to accelerate Nest growth across hardware, software, and services for the home globally."

In an interview on Monday afternoon, Fadell told the Financial Times that he sold the “smart home” company to Google because he wanted to focus on new product innovations, not worry about managing the behind-the-scenes infrastructure that handles all the data generated from its “Learning Thermostat” and “Protect” smoke alarm, and to ensure the company stays ahead of mounting competition.

What Does This Mean to the HVAC Industry?

"Remote access and control thermostats are arguably the most hyped trend impacting the HVAC market currently," says Omar Talpur, a market research analyst with IHS Technology, Austin, TX. In a news commentary sent to ContractingBusiness.com — a leading HVACR industry publication that reaches more than 40,000 HVACR contractors through a printed publication and website — Talpur was optimistic about the growth of this sector.

"This news is likely to help further fuel interest in the growth in the connected thermostat market, which was worth an estimated $190 million in the Americas, in 2013," Talpur says.
 
According to Talpur, Google’s venture into the thermostat market is likely to promote connected thermostats outside of North America which he says have developed much faster in comparison to other regions of the world.

Talpur: "With smartphone and tablet popularity increasing, consumers are demanding the ability to connect with and control their home equipment from their mobile devices."
 
The thermostat has long been an HVAC industry "wallflower" (just ask anyone which thermostat brand they currently use; odds are they won't know). Talpur adds that while connected thermostats have been on the market for a number of years, there has been a surge in popularity, with companies such as Nest Labs and EcoBee entering the market, and new products hitting the market from Honeywell, Venstar and others.
 
"Although much of the technology existed on the market in some form before these new entrants, the marketing and promotional effects of the features and functionality available in these thermostats has pushed market growth which is likely continue at least in the medium term," Talpur concludes.

From a Nest Perspective

Nest will continue to operate under the leadership of Tony Fadell and with its own distinct brand identity.

Fadell, via his blog, adds, "Nest will continue to be Nest, with its own distinct brand identity. We will continue to reimagine and reinvent the unloved products that proliferate in our homes, just as we have since we started. We are simply going to get our products into the hands of people around the world – faster."

The transaction is subject to customary closing conditions, including the receipt of regulatory approvals in the US. It is expected to close in the next few months.

The purchase of Nest Labs, Inc. by Google sent ripples through the connectivity industry, with questions about Googles mssion, motives, its competitive position relative to Apple, and protection of individual privacy. — compiled by Terry McIver

Ari Levy, Bloomberg TV: "Internet search, for Google, has been the core business: desktop search and other forms of desktop advertising. Increasingly, the Internet is not based on search, it's not based on desktop, it's not based on what you're doing at a computer. It's based on everything else: what you're doing on your mobile home while you're watching TV, what you're doing in your living room, and what your thermostat is doing. Those aren't areas where Google is a leader; those are areas where the Internet is going. Google knows that, if it's going to continue to be 'the' Internet company, it has to be in places where the Internet is being used. The data that comes from these connected devices — in this case, thermostats — is crucial to Google's business. We haven't seen Apple spend this kind of money on companies. They may very well be interested in Nest, just not willing to pull the trigger because they don't like to spend the cash, or the hubris of the company doesn't allow them to. We don't really know."

Marcus Wohlsen, writing for WIRED said Google is interested in the next frontier of data collection. "The key lesson from the just-ended Consumer Electronics Show in Las Vegas is that serious innovation in core gadget lines like smartphones and televisions is coming to an end. Google itself has never managed to make a mark in either category," Wohlsen says. According to Wohlsen, this is the "next big leap in hardware."

Robert Hof, Forbes: "Nest, which had financial backing from Google’s venture arm, has been lauded for its elegant takes on common household products, and it seems clear that it has no intention of stopping at thermostats and smoke alarms. As Internet-connected smart devices continue to proliferate in the home and beyond, it’s likely that they will create, or disrupt, multibillion-dollar markets in much the same way Apple did for smartphones and tablets."

Davindra Hardawar, Venturebeat.com: "For Google, Nest could serve as its gateway into the connected home, the notion that all of our appliances and gadgets will soon communicate with one another. That’s a concept that we’ve seen breathlessly promoted at CES and other big tech events over the past few years, but Nest remains one of the few companies to deliver on its promises."

Claire Cain Miller, New York Times: Mr. Fadell said in an interview that he was aware of concerns among customers about Google having so much data about people, and that Google agreed that Nest’s privacy policy — which says that Nest will use customer information only to improve its products and services — would remain unchanged. “That was a major concern or question we had, and they have done an amazing job of convincing us that our privacy policies are going to be well-respected in their organization,” he said.

Benedict Evans, technology and telecommunications analyst, quoted in an article by Dave Lee, technology reporter, BBC News: "Google missed social, and so is clearly not going to miss drones, and is not going to miss robotics, and is not going to miss home automation as major trends of technology."

M.G. blog in The Economist online: “HOLY cripes, Google just broke into my home”, was a typical reaction on Twitter to news on January 13th that the internet giant had splashed out $3.2 billion of its cash pile on Nest, a startup that makes smart thermostats and smoke-alarm systems for houses and apartments. The deal is striking not just because it represents a massive pay day for a hardware company that is only a few years old. It is also a landmark deal that signals the coming of age of the internet of things, or “Thingternet”—a world in which everything from household gadgets to cars, clothes and pets are connected wirelessly to the web.