Google's Purchase of Nest May Have Been a Defensive Move

When The Financial Times reported that Apple was planning to unveil a home automation platform during June's World Wide Developer Conference (WWDC), the company characterized the move as coming in the wake of Google's January purchase of Nest Labs for $3.2 billion. While technically accurate, the first thing that I thought was that Google's move was actually a defensive play.


The Purchase of Nest Was about Apple, Not Ads

Here's what reporter Tim Bradshaw wrote in his excellent FT piece, "Apple plans to take on rivals Google and Samsung and make a 'big play' in the world of smart home technology," and that, "Apple’s coming move follows Google’s $3.2bn acquisition in January of Nest Labs."

The question is which came first, Google buying Nest or Apple planning a big play in home automation. We have one example of Apple turning on a dime and bringing an incredible product to market—the original iPod—in less than a year, but the rest of Apple's track record shows that it spends years developing a product or service to get it right before releasing it.

I think it would take just that, many years, to develop a major home automation platform. Not only would Apple need time to develop the tools and infrastructure to ensure that it works, Apple will also have had to put a lot of time and attention into ensuring the platform is as secure as it can be. If malicious hackers hijack someone's home automation, there would be hell to pay, both in the marketplace and in the courts.

With that in mind, one would think such a platform has been in development for some time, probably years. That's my take, at the very least. If so, and if Google found out about it, that company's seemingly-out-of-nowhere purchase of Nest Labs makes a lot more sense.

When the Nest purchase took place, there was a lot of commentary about why Google wanted the company. Did it want a new revenue stream? Did it want Tony Fadell and the other talented engineers and designers at Nest? Does Google have delusions that people will tolerate ads on their thermostat? (Note that Google denied that it planned to deliver ads on Nest devices after a regulatory filing said exactly the opposite.)

All of those things may be true to one degree or another, but I think Google may have wanted to position itself against a move by Apple into that space, and that it snapped up Nest before anyone else could.

Next: Other Possibilities

Other Possiblities


A variation on that theme is that Google itself wants to participate in what will surely be a massive boom in home automation once Apple launches its platform. In this scenario, Google saw what was coming, knew Apple would be far more successful any other players in this space—home automation has existed a long time—and saw a way to make money within this ecosystem.

If Google intends to compete with Apple using an Android-based solution, Buying Nest kept that company from supporting Apple's platform. If Google wants to make money in Apple's space—and collect more data on we, the product, in the process—Nest will announce support for Apple's platform either at WWDC or shortly thereafter.

Whichever way things go, the Nest Labs deal reportedly happened fairly quickly. When compared to Apple's usual development cycle, I think there is a good chance that Google knew about this new platform and acted as fast as it could to preemptively enter the space on its own terms rather than being seen as acting in a reactionary manner.

It's always possible that I'm wrong, and that Apple decided, ZOMG! GOOGLEZ HAZ TEH THERMNOSTATS! WE HAZ TO HAZ TEH TEHRMONSTATS 2! To say I strongly doubt that is an understatement of epic proportion.

It's also possible that great minds think alike and that Google and Apple have independently looked to home automation as the next step in the Internet of Things. As noted above, this industry has been in a nascent state for many years, and Google would know about an increasing interest in the topic better than any other entity on the planet thanks to its search engine.

The simplest answer, however, is that Google was preemptively positioning itself against Apple, a company that Google knows is able to open up new markets in ways that no other company can. Look to statements from former Google executive Vic Gundrota about how Google thought it was important to develop Android to keep Apple from owning the entire mobile industry.

“If we did not act, we faced a draconian future where one man, one phone, one carrier was the future," Mr. Gundrota said in 2010. "That’s a future we don’t want.”

Change out "one phone, one carrier" for "home automation," and the Nest Labs purchase falls into place.