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How Did Nest Get So Lucky?

Google buys startup Nest for $3.2 billion even though it barely has two products that really aren’t that special. What gives?


How Nest got $3.2 million from Google.
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Somewhere out there, executives from home automation and energy-management companies like Control4 (CTRL), HAI, RCS, Crestron, Alarm.com, iControl and other pioneers are still puking from the announcement that Google would buy Nest for $3.2 billion.

I don’t blame them. I threw up a little myself.

Here’s a company that launched two years ago with a thermostat that learns your behavior and adjusts settings automatically for energy savings.

The technology wasn’t particularly novel, but the hype and the industrial design certainly were.

This guy Tony Fadell from Apple made a bet that people would spend $250 for a thermostat that looks kind of cool, and here we were for the past two decades thinking folks didn’t care what a thermostat looked like slapped on a wall.

You know it, I know it. These things didn’t fly off the shelves because they were “smart.” Everyone I know that has a Nest thermostat turns off the learning feature.

Then came the marketing machine, which pushed the energy-saving features of the product to an eager press that had never seen a smart thermostat before. It generated the same mystique and appeal as if Apple had launched the product itself.

RELATED: On Google, Nest and Home Automation: ‘This Changes Everything’

Meanwhile, we as an industry started embracing this new concept called the Internet of Things (how I hate that term). Like every other smart thermostat on the market, Nest can communicate over the Internet, so it kind of became the poster child for IoT, garnering even more interest from the press and the pundits.

With its new Apple-like status, Nest had everyone swooning when it announced an IoT smoke and CO detector – it’s second SKU – last year.

At the same time, the home automation stars aligned with a rush of high-profile entries into the category including Lowes (Iris) and Staples (Connect), an IPO for Control4, and greater visibility for mass-market offerings from ADT (Pulse), Comcast/Xfinity, AT&T (Digital Life) and Vivint.

TV commercials, Internet ads and bill stuffers flooded the marketplace and virtually every major tech company from Cisco to Samsung started hawking the stuff.

I think Google was caught unawares. It had nothing to show in the home automation category except [email protected], which gave us a prototype connected light bulb two years ago, and PowerMeter, which gave us a short-lived energy dashboard.

And, plus, Google has lots and lots of cash.

That’s how Nest got $3.2 billion for a thermostat.

Good on them!
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  About the Author

Julie Jacobson, recipient of the 2014 CEA TechHome Leadership Award, is co-founder of EH Publishing, producer of CE Pro, Electronic House, Commercial Integrator, Security Sales and other leading technology publications. She currently spends most of her time writing for CE Pro in the areas of home automation, security, networked A/V and the business of home systems integration. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, earned an MBA from the University of Texas at Austin, and has never taken a journalism class in her life. She's a washed-up Ultimate Frisbee player currently residing in Carlsbad, Calif. Email Julie at [email protected]

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  Article Topics


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