Sizing up Google’s smart home play

Experts say the security industry should pay attention to the Internet services provider’s multimillion-dollar buy of a maker of intelligent thermostats and smoke alarms; they don't rule out a Google security offering
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Wednesday, January 29, 2014

YARMOUTH, Maine—Security companies should take note of Google’s recent expansion into the connected home with its $3.2 billion buy of smart thermostat and smoke alarm maker Nest Labs, industry experts tell Security Systems News.

“I think it’s an indication that change could well be on the way,” Jonathan Collins, principal analyst for ABI Research, a New York-based technology market intelligence company, told Security Systems News.

The deal alone won’t have a large direct impact on the security industry, said Collins, co-author of an ABI report titled, “Taking the Temperature of the Smart Home Market with Google's Nest Deal.” 

However, he said, it signals that “major companies like Google see the potential in the smart home.” He also said in the report that the deal underlines how important network application integration is.

George De Marco, chairman of ESX and managing partner with DECO Ventures, a technology consulting company based in Irvine, Calif., told SSN, “As far as I’m concerned, Google didn’t buy Nest Labs just for the smoke detector or thermostat products. They invested in a team of disruptive technology innovators.” The founder of Nest is a former Apple executive.

De Marco, who for some time now has been predicting Google’s entrance into the connected home, said, “I don’t think it will impact the security industry directly, but I think it will [have an impact] on the home. I think their goal is going to be to make well-designed connected devices for the home … and it’s something that the security industry needs to take notice of.”

Google announced the purchase of California-based Nest Labs on Jan. 13. The startup’s products are a smart thermostat and Nest Protect, a new smoke/CO detector so intelligent it can talk to home residents and tell them if there’s a fire or dangerous levels of carbon monoxide.

The Wall Street Journal has reported that “analysts and executives see Nest as a beachhead for Google to expand its place in the home.”

But Collins cautioned, “it doesn’t give them the beachhead in the consumer home market that ADT, for example, already had by being a security player, or Vivint already had, or Comcast had with its subscriber services. There’s obviously a disconnect there between what [Nest] has brought to Google and what some of the existing players already have.”

He continued: “Clearly Nest has a role to play in the home automation market, but it’s really more of a point product. … It’s a long way away from the kind of integrated home automation systems that we’ve seen both traditionally and more recently from players like ADT with Pulse, or players from the cable industry, like Comcast, or players from the telecom industry, like AT&T and Verizon.”

But he noted that this is not the first time Google has indicated an interest in home automation. He said the company announced an Android@Home software program a few years back, although he said nothing came of that. And when Google acquired Motorola Mobility in 2012, a 4Home home automation platform came with that, Collins said. 

“Further out,” he said, “there’s clearly potential that Google could do a lot more in the market than it’s doing.” And it’s a fast-growing market; ABI has predicted that home automation system deployments will increase from 5 million units in 2013 to 27 million in 2018, a CAGR of 49 percent.

Collins added: “It remains to be seen what Google will do. Obviously, they have enormous resources and enormous reach and if this is first part in a strong strategy then yes, further down the road, that clearly does have an impact on many of the players, not just the security players, but players that have looked to home automation to fill out their services.”

Will Google eventually offer a security product? Collins and De Marco wouldn’t rule it out.

Collins said, “It’s not an obvious step.” However, he noted that players such as Comcast and AT&T have included monitored security options with their home automation packages.

“So, it wouldn’t be unheard of,” Collins said, “but it would be quite dissimilar to the way Google operates now. And perhaps that monitored security isn’t the key part. We’ve seen an appeal for monitored security, but it has not had the breadth of appeal that Google has now when it comes to the number of consumers that it touches in a market, so maybe that piece remains a bit too niche or a bit too specialized for a company like Google. It remains to be seen.”

De Marco said, “I don’t think it's a huge leap to go from connected devices for home control to connected devices that help provide security. … I don’t know if I would put it past Google or another huge provider not to get into the security space.”

De Marco agreed, however, that “it’s too soon to tell” what Google’s long-term strategy will be, but said some things are obvious right now. 

“I believe that Google is entering the space with eyes wide open,” De Marco said. “I think they’re excited about getting into the home and I think they’re going to be a player that the industry needs to pay attention to, whether it’s Nest Labs or any other player that they may look at down the road. That way I look at it is, competition is competition, no matter where it’s coming from, and I would say, ‘Take your competition seriously.’”