Google couldn’t make its own home energy management platform work. So rather than try to invent its way back into the burgeoning market, the internet giant decided to buy its way in.
Google just announced that it will buy Nest Labs — the intelligent thermostat and smoke detector company founded by former Apple engineers — for $3.2 billion in cash.
We recently reported on speculation that Nest was nearing closure of a $150 million financing round that would value the company at $2 billion. Turns out it was a full-on acquisition from Google that values Nest at more than $3 billion.
Larry Page, Google’s CEO, issued an excited quote in the announcement: “Nest’s founders, Tony Fadell and Matt Rogers, have built a tremendous team that we are excited to welcome into the Google family. They’re already delivering amazing products you can buy right now — thermostats that save energy and smoke/CO alarms that can help keep your family safe. We are excited to bring great experiences to more homes in more countries and fulfill their dreams!”
Before starting Nest, Fadell and Rogers were engineers who worked on the iPod and iPhone. They now bring their Apple-influenced design philosophy to Google, which tried unsuccessfully in 2009 to break into the residential energy monitoring sector with its PowerMeter.
Rather than produce an overly complicated monitoring system, Nest broke into the market by producing a simple, sleek thermostat that was more attractive to consumers. The strategy paid off. Nest has been shipping tens of thousands of thermostats each month, and recently released a new smoke detector based on the same learning algorithms.
GTM President Rick Thompson commented on the Google acquisition: “This is a highly impressive exit. I’ve got to believe they have a lot more up their sleeve that the public isn’t aware of to warrant such a valuation. I’m hoping this turns out to be a good pairing and looking forward what this can mean for the nascent but growing connected home market at the Grid Edge.”
The partnership will create plenty of channels for Nest, which will now be able to beef up its engineering team and use Google’s reach to sell and monitor its products in new ways.
Google has also been toying with its Android @Home concept to connect smart devices onto an internet-of-things platform. But it hasn’t publicly announced much since the idea was announced two years ago. Nest’s products may provide some muscle to that effort.
As the story went to press, GTM analysts were busy (jokingly) speculating on what “unloved” products in the home Google will help Nest tackle next.