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Google and the internet of things

2014-01-16 12:43:42

Feathering its Nest

Jan 14th 2014, 8:34 by M.G.| SAN FRANCISCO

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.

Home 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.

Some had 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.

The deal 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

data-privacy issues. Nest says its existing privacy policy will 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.