Google Testing Smart Appliance – Should Nest be Worried?

Google-New-Flat-LogoAccording to The Information, Google is currently testing a smart-thermostat. The device would presumably compete with the popular Nest Thermostat, made by Nest Labs. Google’s device would work in a similar manner, letting users view visual graphs of their energy usage, and remotely control the thermostat from a web app.

This isn’t the first time that Google has made a foray into web-connected appliances (or the Internet of Things, in current buzz-terms). The Verge points out that Google’s PowerMeter service offered similar functionality a few years ago, but was shut down in mid 2011. The service was designed to show a home’s entire energy usage via a web dashboard. It’s possible that the service was simply too early for its time. The recent popularity of the Nest Thermostat (and their new web connected fire-alarm), suggest a growing market for what could be called “personal big data.”

In a survey of key industries, research firm McKinsey found that 60% of CEOs use big data analytics to guide their business decisions and streamline their operations. However, businesses aren’t the only ones who can benefit from logging and analyzing data. As Google pointed out at the end of their PowerMeter trial, people saved an average of 15% on their utilities, once they could easily see their usage data and trends.

Besides helping people save on utilities, there’s a much larger upside for Google – getting proprietary access to rich data on how people live. Aggregate data is essentially Google’s core business. The explosion of personal health trackers, activity monitors, and smart appliances promises to yield a treasure trove of info on user’s personal routines and private activities. Advertisers will no doubt be willing to be pay top-dollar for such insights, which is likely why Google is once again exploring the area.

It’s hard to image any company not feeling nervous about Google entering their market. Worse, Nest Labs may be in a particularly vulnerable position. A Nest Thermostat runs $249. And while it has rave reviews, and a dedicated fan base, that pricing places it out of the reach of many consumers. Whether this pricing strategy is deliberate (Nest’s founder Tony Fadell was previously a VP at Apple), or not isn’t clear. Google has the resources, however, to vastly undercut Nest’s current pricing.

Google used a similar strategy to position their Chromecast streaming media connector as a rival to Apple TV and Roku. It doesn’t have the premium features of an Apple TV, it’s good enough to lure away customer’s who were hesitant about Apple’s pricetag. If Google’s business model for the device is based on reselling the collected data (or using it to raise ad prices in some way), then Google may be willing to take a loss on each device in order to gain market share. If so, Nest will have some serious competition.


Born in Alaska, Cameron is now a resident of Nashville, TN. He graduated from Sewanee: The University of the South with a degree in English and Political Science. He enjoys following emerging technology and its impact on business. Follow Cameron on Google+, or email him with any questions or comments.

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