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.
automation is clearly an important building block in this next stage of
the evolution of the internet, which according to Intel could lead to
some 31 billion web-connected devices by 2020. There are already plenty
of connected televisions and personal computers in homes. But in future,
all kinds of personal appliances and gadgets will talk to their
owners—and to each other—via the web.
Hence Google’s decision to
fork out some of the $57 billion in cash and marketable securities that
it has amassed on Nest—its second-largest acquisition since snapping up
Motorola Mobility, another device-maker, for $12.5 billion in 2011. The
Nest deal, which Google hopes to close in a few months, after getting
regulatory approval, not only wins it a big foothold in the Thingternet,
but will also bring it some impressive talent. Tony Fadell, Nest’s
boss, was the creator of
the iPod at Apple and also intimately involved in the development of
the iPhone. The sleek design of the Nest thermostat, a round device with
a brushed-metal surround and a convex glass screen that displays the
temperature (pictured), is testament to Mr Fadell’s design instincts.
Nest is also home to a number of other Apple alumni.
speculated that Apple might acquire Nest, given Mr Fadell’s past history
with the company and the fact that the colossus of Cupertino seems in
need of some fresh creative blood. But it is Google that has walked off
with the prize. Mr Fadell will report to Larry Page, the online giant’s
chief executive, and the plan is for Nest to run as a standalone
business, leveraging Google’s vast resources and know-how to speed
Nest's growth. The firm says that its smartphone apps, which connect
customers to their devices, will continue to run on Apple’s iOS
operating system, which is a rival to Google’s Android.
certainly makes sense for Google, though it is hard to tell whether the
firm has paid a reasonable price for Nest, whose finances are shielded
in secrecy. Google is already deeply involved in the Thingternet via
things such as its driverless cars and the personal robots that are
under development in its secretive Google X lab.
But the move also
raises plenty of questions. For instance, does Google intend to profit
solely from sales of Nest’s hardware or does it see other opportunities
to make money from these gadgets, perhaps by placing ads on screens? And
what will happen to all of the data generated by Nest’s gizmos? That is
more than an academic question given Google’s chequered history on
not change for now, but has not ruled out modifications in future.
Expect privacy activists to turn up the heat on Google at the first sign
of any shift in position.