Google, Nest, and the Internet of Everything

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Globe image via Shutterstock

I was surprised and excited to read earlier today that Google bought Nest for $3.2 billion in cash. If you asked yourself, “Why would a search engine that serves ads want to buy a thermostat company?” you’re not thinking broadly enough about either company. This deal has transformative implications.

Google Wants to Know What You’re Doing All The Time

If you have to categorize it, Google is media company, and they have the scale, capital, intelligence, and daring to go to incredible lengths to achieve unprecedented reach. Google wants to have a presence anywhere and any time they can have your attention. Why do you think they’re working on self-driving cars? Because people spend 16 hours per week in the car and this is infinitely cooler than buying radio ads.

You probably spend most of your work day interacting heavily with Google—using their browser, search, email, productivity suite, and mobile devices to get your job done. But when you go home, the story changes. You probably search and email less, and spend more time on Facebook—that dark spot in Google’s universal map of the Internet. Maybe you’re not on your computer or phone at all. You watch TV. Cook. Do laundry. Read a book. Play with your kids. The point is, the further you get from traditional mobile devices like laptops, phones, and tablets, the more obfuscated your behavior is to Google—and they hate that.

Enter Nest.

Nest Offers Unparalleled Home Insights and Hardware Prowess

Nest can see into homes, or rather, see what people are doing in their homes, more accurately than Google could before the deal. Nest knows when I wake up in the morning, cook breakfast, walk my dog, and leave my house for the day. The Nest devices in my home can tell when I take a shower, get home from work later than I normally would, or get up in the middle of the night.

They do it all with just two devices: a thermostat and a smoke/CO alarm. In less than 4 years, Nest built a hardware company (a hardware company) worth over $3 billion dollars. I don’t have the stats to confirm, but I suspect they’re the fastest growing hardware company ever. Founded by iPod creator Tony Fadell, Nest brings world-class user experience and hardware design to typically “ignored” objects in the home. I was only with the company for a few months, but the one indelible impression left on me was that everyone in the organization understood and cared passionately about what the experience of the user. It was staggering.

With Nest, Google will improve its UX and hardware chops, areas where it needs help. (What did Google do after a few partnerships on Nexus phones? Buy Motorola.) Over time, I expect Tony could become Google’s Jony Ive and start advising on the design of other Google hardware like Android phones, Chromebooks, Chromecast, and all the products they haven’t even announced yet.

Google’s Plan for World Domination

Which brings us to the big picture. Google is aiming for world domination. The fantastic article “Google Wins Everything” gives an optimistic but attainable glimpse into Google’s future. In addition to the self-driving cars, this is the company that’s exploring Internet-generating balloons, quantum computing, and human life extension. Ambitious pursuits, no doubt, and they’re building just as ambitious of an infrastructure to get there. Google Fiber is piping superfast Internet to Provo and Kansas City, with more cities sure to follow. Google has committed over a billion to clean energy generation, buying several solar power plants in California and Arizona. Nest’s sensors, algorithms, and domain expertise will certainly be helpful in deploying and managing that power. Think about this: if Google can make itself energy independent and establish its own currency—not impossible—Google is essentially free to conduct business however it likes as a kind of corporate nation state. (Maybe that’s what the barges are for? Move HQ out to international waters?)

So yeah, Google is more than a search company, and Nest is more than a luxury thermostat.

Other Implications of the Deal

In addition to what this means for Nest and Google, the acquisition is great news for several industries. It boldly validates the home automation space and the broader Internet of Things megatrend (something Google is also exploring through Glass). Once Nest is integrated with Google Now, we can start expecting Iron Man-level home management. Your home can start to pre-heat/cool when your cross-country flight lands. If your Nest Protect senses dangerous levels of carbon monoxide, your Google Voice account on your Android phone could alert the authorities. Your Nest Protect could alert you when you’ve got a new Google+ follower (kidding).

The Google/Nest combination will take home automation beyond the gimmicky/hobbyist world in which it exists today. The new normal will be filled context aware devices that communicate with each other and experiences built around intelligently anticipating the needs of the user. It’s going to generate unfathomable amounts of data about human behavior that Google will analyze and redeploy to make the entire system better (while generating a tidy profit along the way).

It’s also great for the hardware industry. Clearly, the pace of hardware design and manufacturing is accelerating. To keep up, competitors will look to 3D printing and other collaborative design platforms. It’s always encouraging to see stuff getting made.

And, of course, this is good for the energy industry. Nest has already saved enough energy to power all the homes in Hartford, CT for a year. Google’s access will significantly accelerate their placement in homes and offices around the world, reducing energy consumption and reducing load capacity at peak times, which is good for the power grid.

I’m excited for both companies, and optimistic for a smarter future.