Google’s acquisition of smart thermostat (and smoke detector, and who knows what else) startup Nest Labs for $3.2 billion is sure to send waves through the VC community, where to date we’ve seen nothing quite this big in terms of a successful payback on a home automation investment.
And it’s certainly sending waves of anxiety through the world of privacy advocates worried that it’s a stepping stone to Google starting to track our household behavior to fill in the gaps of the company's already intimate knowledge of our online lives.
But what does the deal mean for the world of digital home-device makers, smart home platform vendors, and the myriad players large and small seeking to bring always-on connectivity to the domestic front?
That’s a much harder question to answer given the uncertainty of the emerging competitive landscape, and Google’s shrouded -- and decidedly mixed -- track record on its own home automation ambitions.
Nest, meanwhile, has kept its system largely closed, with its September pledge to open its platform to third-party developers backed up by only one publicly announced partner, home automation vendor Control4. But Google is a big proponent of openness, with its Android platform for smartphones laying out a roadmap for its move into hardware, raising the question of which route a Google-owned Nest combo will choose in the future.
And then, of course, there’s the energy angle. Nest’s smart thermostat is meant to integrate a homeowner’s habits and comfort preferences into a home heating regime that helps reduce energy use. While Nest has just begun to tap that functionality for demand response and other utility-centric home energy control, it has formed partnerships with retail energy providers (Reliant Energy) and home solar providers (Sunrun) that could lay the groundwork for deeper energy management capabilities in the future.
No doubt Google and Nest are planning their next moves in the ever-widening array of devices aimed at delivering security, convenience and entertainment to homeowners -- think remote-control door locks and smartphone-enabled security cameras, smart appliances, wearable monitors for children or elderly relatives, and the like. That’s just tapping the potential for an “internet of things” that links about every device imaginable in the home.
Growing a Connected Home From the Nest Up
So where do Google and Nest go next? First would be the inside route: putting together Nest’s ability to get upscale homeowners to invest $250-plus in a sleekly designed, digitally connected thermostat, and its roadmap of products to come, with Google’s plans for a home connectivity platform. On that front, Google hasn’t had much success, whether in energy management or home automation.
In 2009, Google.org, the nonprofit arm of Google, launched one of the first big corporate attempts to bring energy management to homeowners via its PowerMeter platform. But that effort was shelved, along with Microsoft’s Hohm platform, in 2011, after garnering minimal interest from the public. That was a common problem for platforms that sought to engage homeowners on energy awareness alone.
Google’s next step was firmly in the connected home realm, via the launch of its Android @Home framework in 2011. The idea here was to connect smart appliances, gaming platforms, CD players, and LED light bulbs via a new IPv6 low-power wireless standard. But once again, Google seems to have jumped the gun -- Android @Home has since faded into obscurity, with no reports on new partners or projects.
Last month, new reports surfaced of Google’s latest play on home awareness, known as EnergySense. While details remain obscure, they include screenshots from the Google Play Store of home thermostat management apps, as well as a report from The Information (subscription only) that Google is testing the app with internet-connected thermostats in St. Louis and possibly other cities.
It’s almost certain that Nest’s thermostat was among those Google was testing in its EnergySense effort -- and now, with Nest in its stable, Google no longer has to worry about hardware that it can rely on to run its software capably. A person with knowledge of the matter tells me that Google has been working for at least a year on EnergySense, and has approached other third-party device and software players with overtures to get involved.
Even so, it seems rather limiting for Google to limit its home automation aspirations solely to Nest products. That raises the question of how the company might choose to expand its ecosystem. While Google’s foray into smartphones has been all about openness, Nest’s approach to smart home devices has been more like that of Apple, the former home of Nest founder Tony Fadell. That’s to say, it makes sleek and smoothly functional devices -- and keeps them closed to outsiders.
Opening the Nest to New Home Automation Hatchlings
Nest’s September announcement that it would open its platform to third-party developers was the first indication that this approach could be changing.
In its announcement, the company plugged some of its device's capabilities, such as its “Auto-Away” feature that changes thermostat settings based on daily work schedules or vacations, as the route to a totally connected home: “What if Auto-Away could turn off your lights? What if your dryer knew not to run when energy prices were high? What if your robot vacuum knew when you were gone and cleaned up before you got home?”
Of course, of those examples, the networked lights on the market aren’t yet connected to Nest’s platform, the “smart” dryer envisioned is just barely available for commercial purposes, and the “robot vacuum,” if we’re talking about products like the Roomba that actually exist, certainly don’t interoperate with any other devices in the home.
What’s more, Nest’s pledge to open the hood to third parties has so far led only to one publicly revealed partner. That’s Control4, the Salt Lake City-based home automation company, which displayed some Nest compatibility at the CEIDA show in September. Susan Cashen, senior vice president of marketing, told me Tuesday that Control4 will be launching a driver in the first quarter of 2014 to “make it super-easy” for dealers to link Nest thermostats to the Control4 platform.
That will allow homeowners to do things like link their Nest thermostats to Control4’s automation options, such as temperature settings that take daily schedules and comfort-vs.-energy efficiency options into account -- things that Nest already does, and that Control4 also does with a number of wireless thermostats available today. It could also allow data from the Nest device to inform other home automation decisions. For example, it could tell the home’s automated window blinds to close when sunlight coming through the windows is raising heat above preferred temperatures.
“We do that with a lot of other thermostats, but in North America particularly, Nest is growing in popularity, and we have a very similar customer demographic [to Nest],” said Cashen.
In other words, both companies price their products for well-heeled homeowners and those interested in technology -- a pretty good description of the market for most home automation products and platforms today.
How quickly Nest will open itself to other home automation platforms remains to be seen. As Cashen noted, "Before, it was more of a closed platform, and Nest wanted to make sure that their customer experience was preserved, and rightly so. They set out developer guidelines to make sure the integrity of the experience was maintained.”
Nest is taking applications for its developer program, which it has promised to launch in early 2014. No doubt other home automation players would like to see a Google-style openness prevail in Nest’s future. That could be a nice change in the balkanized world of home automation technology, where an array of proprietary technologies hold sway with few standards to ensure interoperability.
Google’s acquisition “brings up an interesting aspect of the industry regarding systems which are open or proprietary,” said Mike Harris, CEO of Zonoff, a home automation company that’s been partnering with Marvell for its networked LEDs and Staples for its home networking hub.
“Google, for the most part, has represented open systems, whereas Nest has chosen to create its own proprietary closed system," said Harris. "Nest is also very hardware-driven as opposed to Google's software-focused model, so we'll be keeping an eye on these developments to see how they evolve and what kind of path they decide to take.”
Another big question is whether Google intends to build its own home energy networking platform, perhaps based on Nest or its previous internal efforts or turn to partners to make that happen. There are plenty of home automation vendors out there, with companies like GreenWave Reality, iControl, Alarm.com and MiOS providing the core network and system management, and customer-facing companies moving to market via channels including installers and dealers (Control4), subscription models (Vivint, Comcast, AT&T, Alarm.com), or home improvement retail channels (AlertMe with Lowes).
Opening the Home Front to Google’s Data Mining?
Whichever path Google and Nest end up pursuing in the home, the mere presence of Nest thermostats, smoke detectors, and what devices may come will yield a significant value in the data they represent. Indeed, if you were to take the comments sections of news stories over the past few days at face value, you’d believe that’s the only reason Google is interested in Nest.
But beyond the paranoia, there’s certainly a good reason to consider the value of Nest’s data to Google. Intuiting people’s daily habits around the home, knowing what choices they make regarding comfort versus energy efficiency, tracking how often they interact with their devices to get a sense of their interest in technology -- all of these are imaginable insights that a data analytics expert like Google could draw from a simple set of home automation devices.
Multiply these kinds of insights by tens of thousands, hundreds of thousands, or even millions of homes, and that data begins to take on an even greater value as a demographic resource. That could even apply to energy: utilities are increasingly turning to store-bought smart thermostats and the companies that manage them for demand response and energy efficiency resources.
Household data will likely be part of the value of a whole host of growing home automation companies. According to GTM Research’s report Home Energy Management Systems, 2013-2017, five HEMS vendors have publicly announced passing the 1-million-customer mark: Alarm.com, Tendril, Opower, Vivint, and ADT. Others, such as GreenWave Reality and iControl and EcoFactor, are past the 1 million home mark through their telecom partnerships . On the smart thermostat side, Nest was set to pass the million-home mark as well by the start of this year, report author Kamil Bojanczyk noted.
The flip side to this, of course, is the need for these companies to keep their customers’ data private, or at the least, well protected. There’s a definite danger that overly aggressive uses of home data could scare off future customers and alienate existing ones.
As the Los Angeles Times reported Tuesday, some critics of Google’s data policies are threatening to return their Nest thermostats after its acquisition. No doubt that’s a response limited to a small proportion of Nest owners, and less worrisome than those who return it because they can’t figure out how to make it work. Still, it hints at the fine line Google will be walking between creating value out of home data and being driven out of the home.