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Google, Nest and the Opportunity for Startups

In many ways the news that Google has bought smart home company Nest Labs shouldn’t be a surprise. It has been talking to the company for some time and apparently lots of Google employees had installed the company’s sensor-based thermostat in their own homes.

Google buys nest labs

More to the point I think it fits in with Google’s overall objectives. As analysts have pointed out, Google isn’t a search engine company (and hasn’t been for some time), but is about data – collecting it (analysing search results, Google Glass, StreetView) and then using it to either sell you things (through adverts) or make your life better in some way.

With billions of sensors embedded in previously dumb objects that will be communicating in real-time, the Internet of Things promises to create a tidal wave of data. Each piece will be tiny, but if you can bring it together and analyse it you can get an even deeper view of the world around us, and the people in it. Nest’s products are much more than thermostats, and provide Google with the sensor/Internet of Things expertise it needs to add to its product portfolio. It already has Android-based smartphones/tablets to act as controllers, the mapping technology to show where sensors are located and the technology to analyse billions of events in real-time. And with Google Fiber rolling out in several US cities, it has a network to send the data through as well.

A simple example – your Nest thermostat notifies you that your boiler has gone wrong via your smartphone while you are at work. And suggests a registered tradesman that can fix it by trawling the web and any recommendations in your Google+ circles. Or alternatively gives you the address of the nearest clothing shop, so you can stock up on thick jumpers.

Many people (myself included) would find this a bit creepy, but it is potentially possible if you can knit all the technology together. What I think is interesting is how utilities will respond to the future entry of Google into the market. After all, as publishers and others have found, Googlification can squeeze out incumbents through sheer scale and by engaging more closely with customers. Utilities have to decide whether they want to partner with the likes of Google, risk losing the customer relationship and become commodity suppliers of gas and electricity or take a stand and build stronger engagement with customers. In current circumstances that’ll be difficult – people are at best ambivalent about their utility supplier, and in an era of rising prices and poor customer service many actively dislike them.

So there’s a big opportunity here – and something that Cambridge’s cluster of smart home/green tech companies could exploit. For example, AlertMe already has a partnership with British Gas, while Sentec is working with metering companies to make their products smarter. If energy companies don’t want to work with Google then they have two choices – do it themselves (teaming up with smaller tech companies), or partner with larger industrial tech companies, such as Siemens or Bosch. And these industrial giants will need the specialist expertise that smart home companies can provide.

The utility market doesn’t move fast, so don’t expect to see Google running your home in the next year, but the Nest acquisition should actually spur the whole sector on, attracting both interest and investment. The world just got more interested in smart homes, which is good news for relevant startups in Cambridge and beyond.

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  • Jan 16 Posted 3 years ago Frank Ramirez They are a search company that’s what makes them money. They have developed skills around search that they leverage to enter new businesses. New businesses those are for the most part – unproven. Without search they would not even be a shadow of the company they are today. Google's management is smart; they understand the systemic risk of having all their eggs in one basket. They are diversifying now before their core business – their Golden Goose stops laying eggs. There may come a point in time when Google is not a search company – but that time is not now. Just follow the money and not the PR bullet points. Flights of fancy about the possibilities are great fun. As you point out execution on a fully integrated vision is no small task. Also, the established companies are not going to sit idly by and let Google eat their lunch. Nor will utilities and governmental institutions tie themselves to a singular proprietary solution. They too understand the implications of systemic risk. Consumers will eventually understand as well. Choice while at times demanding, is good. I am amazed at how little competitive response we have seen to date. Platform providers, network operators, OEMs and various product/service providers are all at risk. The implications of a completely vertically integrated solutions stack that also controls the key channel for app distribution are daunting (in not a good way) . Apple's success set the example. Now Google, Microsoft are joining the party.

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