Why Is Google Buying Nest Such A Big Deal Anyway?

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nest-bigPhoto: Courtesy of Nest.


If you didn't notice yesterday afternoon, the massive Internet company you sorta love to hate but definitely can't live without bought Nest, a relatively small but successful startup that makes smart thermostats and other tech, for $3.2 billion. That's a lot of billions and, correspondingly, a lot of headlines on tech blogs and business pubs.

So, what's the big deal? Why should you even slightly care? The one sentence answer is this: Smart-home technology is coming to your humble abode faster than you can even imagine.

Already, Nest's two flagship products — smartphone and web enabled thermostats and smoke detectors — are in thousands of residences all over the world. The creep and adoption of this Jetson-like tech has been slow but surprisingly steady. The valuation attached to Nest (that is, the price Google paid for it) reflects not its success as a consumer-goods manufacturer but its leadership in the rapidly growing field of smart-home tech. No one is even close. The fact that there were no serious competing bids for Nest is not an indication that Google has made a huge gamble here. It's more about the fact that all the other major corporations who would have purchased Nest (and Nest Labs) — Apple, Microsoft, GE, etc. — are themselves trying to create their own native tech to compete. Now, suddenly, Google (as a corporation) is the category leader, putting them in a place to become as indispensable in your home as it is to your Internet experience. By buying the one company that's doing smart-home tech right and reportedly allowing it a measure of autonomy, Google is indicating that it expects rapid growth in this sector and can't wait years to develop its own native labs.

What does that mean for you? Simple. In order to beat all competitors to market, Nest and Google will probably undergo an intense ramp up toward other smart-home tech and also use the parent company's massive wealth to create economies of scale that will drop Nest product prices across the board. Translation: The lights, heat, air conditioning, and security of the next house you move into may be managed from a Google-developed app on your smartphone or set themselves autonomously based on knowledge of your living habits. Essentially, the home of the future just became three to four years away. Exciting stuff...if this massive gamble pays off.