Google has acquired Nest for $3.2 billion for the single reason of moving further into your home, both to gather more data on how you live, and to be at the heart of home automation and the “Internet of Things”.
Nest creates a handful of products for the home such as connected smoke alarms and thermostats, but most are US and Canada only at the moment, so why the very, very high price tag? To put the $3.2 billion in perspective, that is more than Google paid for YouTube and Android combined.
Google has been an investor in Nest Labs for a couple of years through its Google ventures arm, and so has had access to the company’s financials as it grows, and obviously believes the company to offering more than niche products.
What Google sees in Nest is access to data. Nest has always said that they send data back to manufacturers so that they can use this to improve their devices – but now that data will also be going back to Google. Google will know when you get home form work, when you run your errands, when you are feeling cold or hot within your own home, and this data can then be used to target ads to you even better than before. Is your boiler doing overtime because its cold outside? Google ads will show you a more efficient boiler or ads for insulation. Have you got your heating running all day and night? Google will show you ads for holidays breaks.
Google does many things and does them very well, but it makes its money from advertising – and the more data they have the better targeted that advertising is, and the more they can charge for it.
It is not just targeting ads that Google will be using Nest for, however, they will be using it to connect up your home, and bring you into its Android platform. The internet of Things is coming, where your devices will speak to each other, reducing the friction of how we react with home appliances. Nest already lets you turn up the thermostat in your house remotely so it will be nice and warm when you get home, but what if Google knows your on your way home from the time of day and GPS in your phone, and does that for you? Or maybe Google has tracked you to Tesco and knows to turn you oven on to heat up?
Nest may only currently have products for connected thermostats and smoke alarms, but they have built the underlying technology that could power the Internet of Things – and that could be licensed to all kinds of firms, from the manufacturers of ovens to washing machines to fridges. This $3.2 billion acquisition will make Google the leading player in that field, and they already have Android to link it all together.