Google Buys Nest for $3.2B: A Big Step Into Connected Home

Nest repurposes often overlooked but important devices in the home, such as thermostats and smoke alarms, and makes them more energy-friendly.

Google took another big step Jan. 13 in its quest to become a major player in the connected home Internet of things market when it revealed that it will buy Nest Labs for $3.2 billion in cash.

Palo Alto, Calif.-based Nest repurposes often overlooked but important devices in the home. Its first two products were sensor-driven, WiFi-enabled, self-learning, programmable thermostats (2011) and smoke and carbon monoxide detectors (2013).

The Nest Learning Thermostat is an electronic, programmable and self-learning WiFi-enabled thermostat that optimizes heating and cooling of homes and businesses to conserve electricity.

Follow-Up to Chromecast Launch

Google had made a major move into the connected home entertainment market when it came out a few months ago with Chromecast, a simple USB plug-in dongle that brings streaming video via the Internet to living room televisions.

Co-founded by former Apple engineers Tony Fadell and Matt Rogers in 2010, Nest quickly grew to more than 130 employees by the end of 2012.

"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," Google CEO Larry Page said. "We are excited to bring great experiences to more homes in more countries and fulfill their dreams."

Connected-home industry experts saw the deal as further legitimization of the idea of the connected home.

"Large appliance manufacturers previously concerned with the threat of Nest in their market must now deal with resources of Google. Manufacturers are now going to have to accelerate their plans and find technology partners," said Dave Friedman, CEO and co-founder of Ayla Networks, which make a cloud development platform for the Internet of things.

'Not a Given' Google Can Succeed in Connected Home

But Google's ability to be successful all across the connected home is in no way a given, Friedman said.

"It must now figure out how to deliver great connected products all across the connected home, and will have to complete against larger, better known brands in each respective segment. Being a great home device company is not a sure thing for a software search company."

Google's acquisition of Nest affirms the growing strategic importance of the idea of the connected home, Forrester analyst Frank Gillett said.

"It also shows Google increasingly believes in hardware-software solutions such as Nest has built, rather than building operating systems for makers of smartphones, Chromebooks and TVs," he said.

Nest will continue to operate under the leadership of Fadell and with its own brand identity, Google said. The transaction is expected to close in the next few months.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 15 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...