Google-owned Nest purchased Wi-Fi video monitoring company Dropcam for $555 million late last week.

The news, which had been swirling around as a rumor for weeks, comes as the land grab for connected home products starts to heat up. Apple launched HomeKit at its Worldwide Developer Conference earlier this month, a platform that will allow the iPhone or iPad to become the remote control for an entire home ecosystem of products.

The Dropcam, which sells for $150 to $200, allows users to remotely monitor their home. A cloud-based archive service is available for $10 to $30 per month.

“Eventually, the plan is for us to work together to reinvent products that will help shape the future of the conscious home and bring our shared vision to more and more people around the world,” Matt Rogers, CEO of Nest, said in a blog post on Friday. 

Rogers took pains to note that Dropcam data, like Nest data, will not be shared with anyone, including Google (Nasdaq: GOOG). But the acquisition is as much about having a product for home security and monitoring as it is about having a more robust data stream that can be used to build robust analytics that add value to Google’s coming connected home platform.

It was clear when Google bought Nest for $3.2 billion earlier this year that it was not purchasing just a thermostat company. Instead, Google was investing in a connected home platform and the design pedigree of the Nest founders.

“Nest and Dropcam are kindred spirits,” Greg Duffy, founder of Dropcam, wrote in a blog post. “Both were born out of frustration with outdated, complicated products that do the opposite of making life better.”

The Nest thermostat only has one motion sensor, and depending on where it sits in the house, it likely does not pick up nearly as much information on the comings and goings of the household as a Dropcam could. The Dropcam family of products also includes Dropcam Tabs that can keep tabs on doors and windows. That information could, in turn, help to fine-tune the algorithms for the Nest thermostat to provide even more tailored temperature settings.

Data for New Energy Services

Utilities might like the idea of a sensor-laden home to wring as much energy savings as possible out of houses that have signed up for energy efficiency or demand response programs, but most homeowners are buying these products for security and comfort, and not necessarily because they’re looking for another avenue via which to interact with their utility.

Family security overwhelmingly tops the list of most important features of a smart home, according to some recent consumer surveys. Comfort is also high on the list, and energy considerations rank somewhere in there, but energy consciousness is not the sole driver for investing in devices, even smart thermostats.

So far, most utilities seem happy to sit back and let other providers dive into providing smart home services, such as security and connected lighting. Others, especially in deregulated markets, would probably like to get involved, but are still limited by regulatory oversight.

For those interested in being a provider of more than just kilowatts, the time is now -- or they may miss the boat. A new study from Accenture (NYSE: ACN) found that although only 7 percent of U.S. households have already signed up for monitoring and control products, more than half of those surveyed said they would within the next five years. More than half of global consumers also said they’d consider buying solar panels in the next five years.

Should Utilities Partner Up Fast in the Smart Home Space?

More than half of respondents in the Accenture survey said they were interested in getting connected home services from their energy provider, the only more popular choice was a company that specializes in connected products and services, although that term is vague since security companies and telecoms were listed as separate options.

“It was quite surprising, and encouraging, to find that customers still prefer their energy provider for new energy products and services, such as solar panels and connected-home solutions, over and above new industry entrants such as retailers or phone and cable companies, despite the latter’s much publicized push into the energy market,” said Greg Guthridge, managing director in Accenture’s global utilities practice and lead author of the report.

But while utilities could be players in the market, there are many factors holding them back, from regulation to corporate culture. Furthermore, the willingness of customers to choose their utility over other providers could depend on how the question is presented and what services are offered.

Accenture asked U.S. participants which functions they would want from a connected home service their energy provider might offer, and safety features came in fourth, even though security has been the top-ranked driver of connected home in other industry surveys.

When it comes to utility-provided services, respondents said they are mostly looking for offerings that would help them save money on their energy bills and increase the comfort of their home. Some of those services are currently offered, such as smart thermostats like the Nest.

But other, more bundled offerings that might include solar generation and EV chargers are not allowed in many areas due to utility regulations. However, about two-thirds of consumers surveyed by Accenture in the U.S. said they were interested in new product and service bundles from their energy provider.

"While consumers have shown an interest in receiving various bundled products and services from their energy providers, it is a real challenge for energy providers to respond,” said Guthridge. “They lack regulatory support, scale and core competencies that are critical for success. This dynamic will invite new non-traditional competitors and cross-industry convergence.”

Utilities will have to partner, as they simply don’t have the expertise to build out robust ecosystems of products that consumers crave in the same way that Apple or Google does. Deregulated energy providers will likely be the first ones to push into these partnerships. Comcast (Nasdaq: CMCSA), which has its Xfinity home service, partnered with NRG Energy (NYSE: NRG) earlier this year to offer bundled cable and energy services in Pennsylvania.

Many utilities already have a partnership with Nest to leverage thermostats that homeowners have purchased as part of demand response programs, which Nest calls Rush Hour Rewards.

It is possible to envision a future in which utilities not only offer a discount on Nest thermostats to entice customers into those programs, but also partner up for bundled services. Such a move could build goodwill with customers, even though the utilities wouldn't have to actually take on the heavy lifting of managing the ecosystem of products within the home.

“In these nascent, rapidly expanding and converging markets, the opportunity to capture market share is a wide-open field,” said Guthridge. “Success will come down to those providers who perfect the digital customer experience.”

Tags: connected home, dropcam, google, home area network, intelligent home, nest, smart home