On January 13, Google acquired Nest Labs, Inc. for 3.2 billion dollars. The announcement incited various reactions among news outlets. Questions began with, “Why did Google pay double what it paid for YouTube for a company that makes something as bland as thermostats?” And led to “What makes these particular thermostats so special?” and, “is this acquisition more to obtain the personnel than the product?” Thoughts then progressed to “What will this mean for personal privacy?” As with most acquisitions, the answers will take some time to bear fruit. However, one can look at Google’s track record to gain insight on the direction it will take.
Google has long since dominated the search engine market. The company’s proprietary algorithm is the arguably the best in the industry; its 66.9 percent market share in 2013 is a testament to this. Leveraging these two things, Google acquires copious amounts of data to which it sorts and analyzes to sell targeted advertisements. In 2012, Larry Page & Co. collected $43 billion in ad revenues accounting for around 96 percent of the company’s total. The figures are expected only to increase. In an industry where information is power and money, Google rules the coop.
This makes it a prime target for privacy advocates, and not without merit. Recall two of former CEO Eric Schmidt’s statements: “Google policy is to get right up to the creepy line and not cross it,” or “If you don’t have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.” Not exactly a paragon of privacy. Or recall the drive-by Wi-Fi incident, where Google Map vehicles vacuumed up people’s Wi-Fi password if they were in range. Google’s recent reprimanding of the NSA’s wiretapping programs has done little to allay the skeptics concerns.
At the moment, Google is first and foremost a search company. It utilizes data to learn more about its users and makes the majority of its money doing so. But what some may be unaware of is that the company also oversees a number of other ventures. These include driverless cars, Google glass and with last year’s purchase of Boston Dynamics, advanced robotics. In fact, the search giant acquired over a dozen technology hardware companies last year alone. Nest Labs is thus only one of a number of companies swallowed up by the tech giant. What makes this company so special is that it allows Google inside the home.
Nest Labs was founded in 2010 by Tony Fadell, a former senior vice president at Apple. Fadell is credited with designing the original iPod. And it is readily apparent that his hardware and software design acumen translated well with the Nest Thermostat. The Nest is a high-tech thermostat that learns the habits and preferences of its users. It uses algorithms with motions sensors to detect and automatically adjust temperature settings to a user’s preference. This maximizes both the comfort and efficiency of a home’s heating and cooling system. With built in Wi-Fi, Nest users can remotely control settings as well as use their tablets and mobile devices to look at their usage statistics.
The company is to continue to be run by Fadell as a separate division of Google, with Mr. Fadell reporting directly to Mr. Page. There have even been internet murmurs of people claiming that they will be returning their Nest Thermostats because Google now owns the company and its devices. Quick to address these privacy concerns, Co-founder Matt Rogers has stated that “[Nest Lab’s] privacy policy clearly limits the use of customer information to providing and improving Nest’s products and services. We’ve always taken privacy seriously and this will not change.”
During the company’s 2011 tech conference, Google I/O, it announced an initiative called “Android@Home” detailing its idea of the future household. Buying Nest Labs shows that its plan is slowly coming to fruition. Tech companies have long been talking about “the internet of things,” or how every appliance from the refrigerator to the light bulb will be connected to the internet. Google’s acquisitions Gartner Inc. projects that by 2020, there will be 26 billion objects connected to the internet and Intel predicts that number to be higher by 5 billion. Taking into account all of these factors, it becomes apparent that the company wants to evolve into something more than just a search engine. It wants to become the future. But first it needs to build a nest to house its eggs.
