Analysis Google’s proposed $3.2bn purchase of Nest Labs, a maker of internet-connected round-the-home devices, shows that the online advertising giant considers the Internet of Things a serious proposition. A very serious proposition.
It’s easy to be dismissive of the move. Nest is best known for an internet-enabled thermostat and a likewise cloud-connected smoke detector, both snazzy looking but ultimately prosaic devices. Why the heck, you might wonder, is Google willing to spend $3.2bn on a thermostat firm, especially when it values that company at more than 10 times its sales, derived from shipment figures?
Because Google doesn’t really care about the thermostat or the smoke detector, useful though they may be as devices and as products to sell. What it’s after is the platform Nest has created and upon which these products are based - where many, many more can also be built.
Nest has core hardware at the heart of its devices. Its founders are too smart to re-invent the wheel every time they develop a new product. It also has the server technology which bridges all the Nest devices out there in people’s homes - a fair few of them Google homes, according to Google’s Larry Page - and ties them to the apps on users’ smartphones. That server technology can undoubtedly scale far beyond the traffic Nest currently handles.
Together these elements form a platform that Nest, or Google, can sell as the foundation for other firms’ Internet of Things offerings. Imagine Google allowing anyone access to Nest’s core hardware and the software that runs on it, as it already does with the Android operating system, but retaining the server smarts, forcing anyone using a product based on Nest technology to adopt Google as a service provider (again as Android users must).
Nest founder and VP of Engineering Matt Rogers insists the Google grab won’t see users’ domestic data being mined on Google’s servers, which will undoubtedly be a key concern among many owners of Nest kit - as it should be for anyone embracing Internet of Things devices.
The question of data ownership is going to be of increasing importance in the Internet of Things world, especially as the technology evolves beyond basic hardware-talks-to-phone into broader hardware-talks-to-commercial-servers setups. And this is an approach - whatever Nest says about privacy - which has now been given 3.2 billion endorsements by a company that is all about drawing business intelligence from ordinary folks’ data (albeit willingly given).
Internet of Things coverage tends to centre on the essential novelty of linking "non-technology" products, like thermostats, to the cloud to give them extended remote control. But these devices can also host sensors which feed back environmental data about the location in which they are situated. Google’s servers can crunch those numbers to analyse usage patterns and thus extract information to, say, allow homeowners to use their heating more efficiently, reducing their energy costs.
Whether Nest continues with its current approach - making cloud-connected devices that it sells under its own name - or it attempts to become a foundation technology upon which other companies construct their devices or Internet-enable existing devices remains to be seen.
This is what some rival Internet of Things players, most notably Electric Imp, are trying to do: to become not a branded device-maker along the lines of Apple or Samsung, but a technology provider styled on Intel, with their own "inside" sticker placed alongside the manufacturer logo on the connected fridge, car, oven, thermostat, bike lock, burglar alarm, electricity meter et cetera.
Nest may very well try to have both cake and a full belly, and adopt both approaches, especially if Google wants to give the device-side technology away in order to buy itself a massive market share, just as it has done in the smartphone market with Android.
Google’s ownership of the Internet of Things starts here. ®