There are things you expect from a tech company like Google, including fast and reliable online searches, glasses that feed you the internet, and even balloons that offer connectivity to remote areas from the stratosphere. The self-driving car may be a little off the beaten path, but the fact that it links up to Google Maps really ties it all together. What you might not anticipate is a Google thermostat. And yet, that didn’t stop the ever-expanding and diversifying tech giant from spending $3.2 billion to acquire Nest Labs, Inc., a company that specializes in smart thermostats and smoke detectors. What is unclear at this point is what they plan to do with their latest acquisition, which can hardly be seen as a feather in their cap when compared to more compatible purchases like Motorola, YouTube, and Waze, just to name a few, especially when you consider that they spent more on Nest than on YouTube and Waze combined.
In a recent press release, Google stated that their purchase of this company will “enhance Google’s suite of products and services”, although it’s anyone’s guess how they plan to integrate this strange puzzle piece into their growing empire. Interestingly, however, they also said that the acquisition will “allow Nest to continue to innovate upon devices in the home, making them more useful, intuitive, and thoughtful”, as well as mentioning their goal to take the products to “more users in more countries”. So far, they have not announced any specific plans where Nest and its products are concerned, but when you stop to consider the potential future of smart home devices, you might begin to see what they’re thinking.
Juniper research recently released a report entitled ‘Smart Home Ecosystems and the Internet of Things’ in which they estimated that the annual revenue from smart home devices and services will hit a whopping $71 billion by the year 2018. Last year saw $33 billion in revenue from products and related services that allow homeowners to control alarm systems, lighting, temperature, and other electronics in the household with computer programs and even mobile devices like smartphones and tablets. And it appears as though Google wants a piece of this growing pie. While it may look like the tech company has overpaid for a company that was recently valued at just $2 billion, they may have made a very smart move by snapping them up now.
Of course, pundits have also speculated that the deal could have something to do with acquiring the talent currently on payroll at Nest. In a move that is not typical of this type of acquisition, Google is allowing the company to continue operating independently under the direction of current CEO Tony Fadell. And it is rumored that Nest will continue to develop the projects already on their schedule, as well as potentially taking charge of all consumer hardware. Still, it’s not entirely clear what Google was going for with this pricy purchase or how it will pay off for them in the long run. If what they’re looking for is iPhone and Android thermostats, they probably could have found a cheaper way to do it. But if buying into the market for smart home devices, including the talented experts needed to develop it was their idea, perhaps they’ve made a wise decision. It’s hard to tell at this point, what with the deal only finalized last week. But it’s probably safe to say that Google has something in mind for Nest.