Nest Is Joining Google’s Alphabet Company – What Does This Mean For Independent Acquisitions?
Unified technology systems have become a commonplace desire among new homeowners and renters alike. Thanks to smartphones, more and more people are looking for the kind of interconnectivity that the phone provides elsewhere in their lives. Companies like Nest, which Google acquired in 2014 for an estimated $3.2 billion, have aimed to bridge the gap between intuitive, well-designed tech and the industries in dire need of innovation. For Nest, their insurgence began with redesigned thermostats that blended aesthetics—clear-cut, rounded silhouettes—with function, with a minimalist interface that uses both a physical and digital interface.
The company then began to transition into other territories, all with the distinct intention of turning once-disparate home systems into a single, functional body of tech: for example, cameras patrolling the grounds and watching the doorbell. Once the company moved into home security in September 2017, they were predicted $1 billion in revenue by the end of the 12-month cycle.
Google’s purchasing of Nest came with a specific caveat: while the company would benefit from the funding and broad market control that Google has built through its acquisition, it would still remain an entirely independent operation. Now that all seems poised to change, as Rick Osterloh, head of hardware at Google, announced that Nest will be officially merging with Google’s Alphabet umbrella corporation.
The news follows an announcement earlier this year that hinted at Google’s bigger plans to bring hardware more firmly into the fold. One way the company has planned to do this is by merging their wide array of talent in an effort to keep them under one roof. The company’s $1.1 billion acquisition of HTC’s hardware operation proves that they are aiming to push their Android platform increasingly through their own hardware. But it also provides some insight into how much the company might be interested in pushing into hardware as a whole.
Their recent announcement regarding Nest is a sign that Google is beefing up their Google Home brand. By more significantly integrating the company’s existing acquisitions, it’s almost guaranteed that products like their voice-activated Home devices will be designed to control Nest systems as well. This is a huge step for a company finding itself at an inflection point regarding innovation, thanks in large part to Amazon’s growth into a major competitor. Amazon’s Echo and Alexa systems are wading into the public consciousness at an increasingly high rate, thanks largely to availability in markets such as Whole Foods, which Amazon acquired in 2017 for $13.7 billion, as well as the company’s own line of quick-shop grocery stores.
Anticipating Nest Changes
It remains unclear what this might mean for Nest. The company’s privacy FAQs still make reference to an independent relationship from Google, no doubt to quell any nerves about what the tech giant might be doing with the data amassed from the Nest system. So far, no role reductions, layoffs, or headquarter shutdowns have been mentioned. Nest co-founder Matt Rogers has announced his exit from Google, though his decision seems to have been born out of a desire to focus mostly on Incite.Org, a VC firm and product development lab he co-started while still at Nest. Regardless, the timing of his departure does not seem entirely inconsequential.
The “how” of Nest being assimilated under the Google umbrella remains murky. But it tells those watching that many of these acquisitions may be bound for similar results. Autonomy is, in many ways, a utopian dream in a tech era ruled by bigger and bigger purchases. The announcement that Nest is to become more bundled up with Google is a sign that companies bought with similar promises of independence may find themselves forced to acquiesce in the face of stiff competition. The news serves as a good move for Google, doubling down on its desire to both strengthen its Home system and push hardware into the forefront of their product line. Apple has just launched its Homepod speaker system, powered by Siri, giving Google a further run for its money. For Nest, its independence might be the one feature that’s since turned into a bug.