Originally a maker of smart thermostats and smoke detectors, Nest’s market potential substantially expanded when Google acquired it in early 2014 for over $3 billion. The acquisition not only made analysts take note, but also helped warm consumers up to having their homes annexed by the Internet of Things (IoT).
At the time of the buyout, journalists joked about Nest displays becoming a point of placement for Google ads. But the move reveals Google’s interest in making Nest much more than a thermostat with name recognition. Exhibit A: in June, 2014 a “Works with Nest” developer program was unveiled, allowing third-party products to integrate with Nest.
Nest boasts a growing number of partners who have integrated since the program was launched. Coinciding with CES 2015, Nest has just introduced a dozen more brand-name partnerships, including August, LG, and Phillips. How these products integrate vary; some use Nest-triggered automation (e.g., lights changing color when Nest’s smoke detectors respond to stimulus or refrigerators entering energy-saving mode based on thermostat patterns) while others connect to Nest’s hub for easy access to user controls. There are also plans for multiple third-party vendors to interact directly with each other through Nest.
This suggests that consumers are getting comfortable with pursuing a modular approach to building a smart home. This attainable, piecemeal strategy represents a relatively new shift in thinking. Consider the smart home that Microsoft pitched back in the ‘90s that wound up going nowhere. Their turnkey solution probably looked like a home run at the time, but hindsight reveals unacceptable usability, questionable applications, and an absence of partner-delivered brand-name products and services.
Despite some accurate predictions, Microsoft seemed to be implying that it wouldn’t just deliver the smart home—it would be inextricably involved with engineering a line of generic products. While an interesting mock-up of future potential, Microsoft’s vision was too far ahead of its time, too ambitious to generate real demand, and lacked a strategy that could be executed.
Times have changed, and so has the plan for taking over the smart home. Nest’s open-development platform provides some key benefits. Nest lends the cachet of a next-generation smart ecosystem, and vendors populate it with name-brand products that people actually want.
The strategy also enables a common interface instead of forcing users to accumulate separate apps or hardware controls for each product, and it provides a compelling invitation for consumers to shop, test, and build their own smart home in the direction that they want, rather than dive headlong into a deep and untested investment. Nest has also correctly timed their incremental smart home road map, having built a reputation around a mature, relatively off-the-shelf solution.
People are still buying Nest primarily for the smart thermostat, but the difference is that Nest is planting the seeds a build a smart, connected home. In doing so, the Nest strategy is clear: become the brand synonymous with smart home ecosystems, supporting whatever smart, connected products that consumers decide to purchase.
Photo courtesy of Nest Labs Inc.