In 2012 I was at a company doing IoT. They have downsized a lot since. We had the phone app controlled thermostat, outlets, and power monitoring in devices.
The Nest seemed like a prettier version of our products. Ours looked like a thermostat.
This sounds more like a "who you know" than "what you do" aquisition. Nest was privately held so no numbers are available. The founders are from Apple and Google, so they had the inside track. Maybe Google is blocking Apple or Cisco?
Kudo's to the founders for a nice exit. We are just jelous because we did not think of it first, or did and could not get the fat payoff.
Three billion does seem a lot for what must be the meager earnings of Nest right now. But Google is speculating that Nest has a much brighter future ahead of them. And they may be correct, especially if they can leverage Google resources into future products. Nest will need to produce Android apps for their thermostats as well as ios :-)
@dougwithau: Kudo's to the founders for a nice exit. We are just jelous because we did not think of it first, or did and could not get the fat payoff.
Kudos indeed -- it's not everyone that wangles $3.2 billion for a thermostat (no matter how cool it looks). I know that if I had been one of the founders, I would be walking around with a great big smile on my face round about now LOL
The fact that your wife is already plugged into the Nest marketing hype says quite a bit. I wonder how much of it is "let's switch all the nest stuff over to Google phones." rather than a quest for technical know-how. The concept is pretty simple. This is a marketing decision...
Think again - they were selling 40-50,000 per month at the beginning of last year, and were hoping to get to 1 million per month by summer. At that point they were at about $10 million per month in revenue. Let's say they only made it 1/2 way to their goal, to 500,000 units per month. That means 100 million per month in revenue, which comes out to 1 billion per year in sales. Valuation is 3 years revenue. I've also assumed an average price of $200/unit, which is conservative considering it usually sells for $235-249.
This doesn't take into account their Protect product which is a whole new revenue stream.
The other value is google gets all that data. I'm sure they'll offer a google dashboard so that your Nest is linked to your google account. Think of the advertising! They can tell when you are home, when you're not, when you're on vacation at home vs. vacation away... All of this is a double edged sword.
500,000 units a month??? give me a break...I will happily send you $500 if they ever reach that goal...what's wrong with normal thermostats? I have a few at home, why would I spend hundreds of dollars to get Google thermostats? so I can control the temperature when I am away or don;t feel like getting up from my bed? Kris
I appreciate the comparison and I am flaterred...but I am not Steve Ballmer, I wish I could had his stock options at least...there is thousands or perhaps millions of people who said silly things in the human history...I am not sure what that has to do with the thermostat purchase issue though...are you suggesting that everyone in teh world is rushing to convert their standard thermostats to Google thermostats? (for those who have thermostats, I am guessing few people in Africa don't have them)...Kris
I heard there were some issues with power companies that gave away nest thermostats if you would switch. Seems there were overriding circumstances that caused consumers to pay more and a contract that did not allow them to end the relationship. Seems like a black eye for Nest. I haven't used a Nest, but my programmable thermostats are fine for what I need. I don't ever want to control them from away from home. Good luck to Google.
@Krisi: do we want a hacker from some place in North Korea (or somewhere else) to hack into your thermostats and change the temperature in your home?
Why would said hacker bother?
In the old days, the hacker motivation was bragging rights - "Look what I can do!"
These days, the motivations are political and/or monetary.
I can't see a reason for J. Random Hacker to take the trouble to hack your house, even if he can.
And if Google is involved in the connectivity, you may assume he can't if Google can possibly prevent it.
This is an extension of concerns over the Internet of Things. Just because it can communicate via TCP-IP, it doesn't mean the Thing should be visible on the public net. If I have a smart house, with devices from Nest or anyone else, all taking to each other over a LAN, it will be a seperate sub-net, hidden behind my router, and not visible to the outside world.
There could be hundreds of reasons...first for the fun of it, "let's crank out temperature to the max in this city block"...ranging to co-rodnated attack by a rouge force on whole cities or countries causing power failures etc...apparently large portion of PCs are infected and many serve their hacker masters already...why would that be any different with thermostats? (or IoT in general)
@Krisi:apparently large portion of PCs are infected and many serve their hacker masters already...why would that be any different with thermostats? (or IoT in general)
Lots of PCs are inected with malware and can be remote controlled. The usual usage is DDOS attacks against target sites, and the current motives are usually political.
The other motive for hackers these days is money, and an increasing amount of hacking is aimed at getting it.
Neither applies to the IoT. And DDOS attacks are effective against single points by overwhelming them with traffic. That's not applicable to large numbers of devices, like a housing block.
And as I said, the target has to be publicly visible to do that. There's a IPv4 mapping tool out now that can scan the entire IPv4 address space. The author intends it as a security tool, to help folks catch things that shoudn't be publicly visible, and whose owners didn't realise they were.
What Nest is doing for homes has existed for a while for businesses - look at Honeywell and Johnson Controls product lines.
If I'm a bad guy and want to cause trouble, I can think of far more effective ways to do it than targeting Nest devices.
I don't share your concern at all. It would be too much work for too little gain.
I'm just saying - they are moving units and people like them, so don't just write them off as expensive thermostats. I also like my programmable thermostat, and since I work from home, there is not yet a compelling enough reason for me to switch.
My point is that a lot of people laughed at the iPhone, thinking it was way overpriced, and they would never garner more than a very small percentage of market share. But when something is designed well, it catches on. A big difference I see is that most people don't have programmable thermostats. This one could actually save you money, and pay for itself. If I didn't already have a programmable thermostat, I would probably buy a Nest.
I think the price needs to come down, and should not be more than $150. Google has the money to make that happen, and when they price compete with regular programmable thermostats, I think the tilt will happen.
It is a bit different than an iPhone. Before the iPhone, most of us were struggling with a lot of frustration to access the Internet from our phone using very slow and difficult to use interfaces. I haven't heard of anyone having frustrations with their thermostats.
The talking/gesture controlled smoke alarm looks pretty cool, though. I think it can message you if the alarm goes off. I would consider getting one of those.
Still--$3 billion? Maybe they have some interesting products in the pipeline.
@Max: With all the talent at Google -- are you seriously telling me they couldn't have developed somrthing like this in-house?
My mind is well and truly boggled.
Could they have? Probably.
Should they have? No.
It's the same underlying question any company has when considering a move into a new market. "Do we build the capability in house, or do we buy someone who is already doing what we are interested in, and add their capability to our portfolio?"
The answer is almost always "Buy someone."
Nest Labs has been around since 2010. They make hardware as well as software, and have installations in 90 countries.
Google decided it saw opportunities in the business. How long would it take Google to build a capability equivalent to what Nest has? What would Nest be doing while they did it? (Or more likely, what would someone else who bought Nest instead be doing?) How much would Google have to spend to do it?
$3 billion is not an unreasonable price given the opportunities I suspect Google sees.
I agree DMcCunney although I think the price is a little bit excessive. That said, what matters for Google are the opportunities they can capture out of this acquisition, and here I think $3.5bn can be justified, yes. It's an opportunity for them to get into the home automation market with all of the rich information they can capture and harness to cross-sell, up-sell and develop new products and services altogether. What Google are buying is not just a connected Thermostat but an existing customer base, patents, know-how etc.
Someone already mentioned the link with Google Mail, Google +, Google online advertising etc. Also do not forget that $3.5bn for Google is not that much money, they are sitting on a lot of cash, and they will get a good return on this investment eventually (one way or another).
PS. Perhaps some people are just jealous of Nest founders and shareholders :-)
I'm baffled at the number of people who are baffled by this acquisition and the price paid. This will likely prove to be a very smart move by Google, and not just because of some popular, connected & cool looking thermostats.
I agree Max. That's why you and I need to form a company to make the next big widget. How about a high tech doorbell or an electronic welcome mat. That should be worth a couple billion, don't you think?
Our family went to see this movie one Sunday afternoon, as I recall. It's coming to life!! Egad!
Well, we've seen sci fi movies depicting talking appliances, for decades now. Some of these ideas are probably not bad. Some remote monitoring and control makes sense. Others are just forced. For example, a refrigerator has absolutely no reason to wonder whether you're going on vacation, or just going to work. Design it right, and it will save power whenever it gets a chance.
Much like the article on cars, sometimes the marketing types just get too ambitious to make a lot of sense.
Like the iPhone design and functionality, the Nest creates an engaging intuitive user experience. Remote access thermostats have existed before but they were better suited to engineers than home users. Perhaps Google sees this kind of a user interface as an entry point into the Internet of Things. Maybe in 5 years when our houses finally do have a number of responsive devices, this will be seen as a turning point. I wish them luck - we'll all be the beneficiaries after decades of remote controlled lights and devices that were more trouble to configure and maintain then they were worth.
DrQuine, I couldn't agree with you more. You wrote:
Remote access thermostats have existed before but they were better suited to engineers than home users.
We do tend to underestimate the ease of use issue. We always say how important it is and yet, very few actually comes through with that promise.
But beyond that, as many in this forum already suggested, this aquisition isn't just about thermostats. While IoT seems to be still an evolving (and elusive) market concept, there is something to be said about "a conscious home," Fadell is talking about.
I know a handfull of people who own Nest thermostats. This is admittedly a very small sample size, but they all seem to like them - a lot. So Nest founders have taken some of the Apple product design know how with them. I know one person in particular who has them installed in each of his three family residences. He especially likes to be able to check on the ones at his beach house from his iphone. During this last blast of extemely cold weather on the east coast he was able to remotely dial up the temperature there in order to help prevent the pipes from being frozen.
The nest has confused me since it first appeared. I keep feeling like I'm missing something. I understand that what it does, it does well. There is value in that.
However, it doesn't appear to have any magic stardust or anything. There doesn't seem to be some amazing proprietary tech or anything keeping anyone else from eating a chunk of the market at any point.
The folks at google aren't stupid (well, google wave might make you think otherwise), but I'm just confused as to why they paid so much for nest instead of investing in their own team on similar endeavors.
I am, however, looking forward to nest equipped big-dog robots.
I am not surprised that Google is getting in to the "connected home" market. In fact I am quite glad. This makes it more likely that we will see something good and useful and resonably priced in the near future.
Having said that, I can't belive the price of acquisition. Nest Labs are worth maybe a tenth of what Google paid, optimistically. This sounds a like a sucker deal to me.
Over-paying for something is just a sign of how much you value it. Google clearly sees Nest Labs as an opportunity to enter a completely new space. They want to open it up forceably and create an enduring legacy for themselves. This is an area that has gone fairly untouched to this point. I don't think that over-paying in this case is unreasonable--unless you by definition say that over-paying is paying an unreasonable amount.
FYI: Business Insider reports: "In this case, hackers broke into more than 100,000 everyday consumer gadgets, such as home-networking routers, connected multi-media centers, televisions, and at least one refrigerator, Proofpoint says. They then used those objects to send more than 750,000 malicious emails to enterprises and individuals worldwide."
IoT seems like the next big thing to have if you own your own home. If you rent, or plan to sell your home, de-installing or releasing all the appliances you can't take with you seems like a big pain. Across-the-internet owner validation is a whole new security challenge. But once IoT is essentially commoditized, it will be everywhere.
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