Google Acquires Nest for $3.2B, Now Knows More About You Than the NSA

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Yesterday, home automation company Nest–makers of the infamous $250 learning thermostat and a suspiciously intelligent smoke detector–announced that they had been acquired by Google for $3.2 billion in cash. In a statement about the acquisition, Nest said that while they had been doing great on their own, Google’s “business resources, global scale, and platform reach” were basically just too tempting to turn down.

The statement is also peppered with reassurances that this wholly unexpected announcement was, well, sort-of, kind-of expected. Ish. Google Ventures invested in Nest during the B and C rounds, and Googlers are “big dreamers”, just like the Nest team. But really, this is pretty unprecedented stuff. Google bought Motorola Mobility for an admittedly heftier $12.5 billion. But Motorola makes smartphones, a key product line for Google. Nest is Google’s second largest acquisition ever. So what do they want with a company which makes fancy thermostats and smoke detectors that talk to you?

In a blog post this morning by Marcus Wohlsen at Wired, Wohlsen speculates on the question. His answer (which should be obvious to anyone who knows the teensiest thing about how Google operates) is that they want data on how their users behave, not just in front of the screen but out in the real world. The goal? Show you more ads (like the lovely one at the bottom of this post…thanks, guys). With Google, “You are the product.” And since the Nest devices know everything from when you go to sleep at night to when you leave the house each morning, Google just bought their way into a whole lot of extra info.

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As it is quick to do, the Internet exploded with conspiracy theories immediately after the acquisition. Before Google could just read your email, but “if your house is burning down you’ll now get gmail ads for fire extinguishers”, according to one especially choice tweet from Sam Biddle at Valleywag. Nest was quick to respond, assuring users that their privacy policy (which prevents them from using data for marketing purposes) would still stand. But really, Google just paid $3.2 billion for the company. How long will that policy hold?

So what’s my take on all this? I think the privacy question is a bit misguided. Anyone who voluntarily connects a large, confusing appliance which burns explosive natural gas and sits just below their living space to the Internet should realize that Google selling them targeted advertising is hardly the nightmare scenario they should be worried about.

Personally, I’m just thrilled to see movement like this in the home automation space.¬†Plenty of big, unwieldy companies (Honeywell, anyone?) have been throwing money into home automation for years. The fact that Google graced a sexy, young hardware company like Nest with its second largest acquisition ever is an implicit signal that home automation’s time has arrived.

As I reported before, VCs are putting more and more money into home automation companies. Now that Google has shown you can make a neat HA product and get offered more cash than Snapchat, I hope we start to see lots more home automation startups, rather than the plethora of Instagram clones and half-baked niche social networks currently clogging the startup space.

Home automation is hot and now potentially insanely profitable. It’s a brave new world, people.

 

 

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