Google’s Nest Acquisition Is a $3.2 Billion Bet on the Internet of Things

This deal is about far more than thermostats and smoke detectors.

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Nest Labs

Nest's Nest Protect smoke detector

News broke this afternoon that Google is buying Nest — the maker of Internet-savvy thermostats and smoke detectors — for $3.2 billion in cash. It’s a big acquisition by any standard, and the money involved is less interesting than the future implications — for Nest, for Google and maybe for the entire tech industry.

Nest was co-founded by Tony Fadell (the man who instigated the iPod and turned it into a company-changing business for Apple) and Matt Rogers (also an Apple alum). Google says the Nest brand will stay a distinct brand and that Fadell will continue to run it. But it’s a safe bet that Google isn’t plunking down $3 billion because it has a hankering to get into the thermostat and smoke-detector business. What it’s getting is the team that’s done as much thinking as anyone about what happens when almost anything in a home might be a polished, connected, downright pleasant smart device.

Once you’ve used Nest’s products, it’s a lot harder to think of the Internet of Things — also known as the Internet of Everything — as a mere tiresome buzzword. It’s an epoch-shifting development that’s going to change the world at least as much as the PC, web and smartphone did in their day. If I were Google, Apple, Samsung or Microsoft, I’d find the prospect both exciting and scary, and I’d want to do everything I possibly could to avoid being left behind. By snapping up Nest, Google adds enormous brainpower to its efforts — and, perhaps just as important, prevents those brains from winding up at a competitor.

I confess to at least some trepidation about the deal: Nest was already doing great things on its own, and there are far more stories about startups stumbling after being acquired than there are ones about them flourishing. (Then again, the most obvious example of a buyout working is Google’s own 2006 purchase of YouTube.)

There’s also the question of whether a Google-owned Nest will try to make money off the data that Nest devices collect about their users, as riffed upon in these tweets:

For the record, Nest says that Nest data will only be used to improve Nest products. But even if Nest remains sacrosanct, the notion of Google — and other companies — seeing the Internet of Things as an opportunity to end up with far more information about consumers than they’ve ever had before doesn’t sound so implausible. One way or another, we’re going to have to deal with the issues that raises, and this acquisition will likely speed that process.

Despite today’s emphasis on Nest remaining a stand-alone entity within Google, it’s fun to think about Fadell and Rogers’ fingerprints showing up elsewhere in the company. They know how to give even the most prosaic devices an Apple-like sheen, with hardware, software and services that blur together in a way that’s inventive, aesthetically pleasing and humane. Everything from Google Glass to Motorola phones to Chromecast to self-driving cars can benefit from what Nest already knows, and knows how to do.

So rather than worry that the deal will leave Nest looking more like Google, I’m hoping that it’ll result in the rest of Google feeling more like Nest. Let’s give this a couple of years to percolate, and then judge the results.