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QuickPanel: Google Buys Nest

by Mary Jean Babic
7 min read
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Andy Polaine, Laura Weiss, and Marc Rettig weigh in on Google’s recent acquisition of Nest for $3.2 billion in cash.

As Nest says on its website, “We take the unloved products in your home and make simple, beautiful, thoughtful things.” Those things felt the love in a big way last week when Google announced that it was acquiring the company, which makes smart-grid thermostats and C02/smoke detectors, for $3.2 billion. We asked three Rosenfeld Media experts to weigh in on Google’s latest purchase.

$3.2B in cash is a pretty huge price tag. What’s in it for Google? An opportunity to get better at making physical devices? A new trove of user data? Talent? Or something else?

Andy Polaine: I think it’s easy to see that the data could be amazingly useful to Google and, if they wrap it in the right services, to everyone else. Smart grids, hyperlocal weather and energy usage, the connected house, home security—the list is very long and probably has some still-unimagined uses.

Laura Weiss: I suspect that the main driver is Google’s desire to build more hardware. The more hardware they have out in the world, especially consumer products (the more pedestrian the better!), the greater the opportunity to send and receive data. In that respect it feels like a good old-fashioned “razor-blades” model. Apple did it with the iPod/iTunes combo. Amazon did it with the Kindle/books combo. Secondarily, I think there was a talent acquisition driver—who wouldn’t want the guy who helped birth the iPod on their executive team?

Marc Rettig: With my strategic design hat on, I find the questions below the surface—the questions under things like revenue and talent—to be more interesting. Google is a systems company, and they think in terms of systems and platforms. To justify the price, there has to be a systems answer to the question, “Why?”

You quoted Nest’s statement of purpose. On the Google corporate site it says, “Google’s mission is to organize the world’s information and make it universally accessible and useful.” If you put that together with $3.2 billion worth of “simple, beautiful, thoughtful things in your home,” that’s a pretty strong clue about the strategic story behind this acquisition. It suggests a vision for elegant delivery of information into lots of little corners of life, through devices other than the usual. Google has delivered its goods mostly through general-purpose computing devices: desktop, laptop and tablet, phones. Nest is about thoughtful design of information-specific, context-specific, use-specific devices. The computers are disappearing into the environment, and this is a step for Google into the edge of quality for that trend.

How will this impact trust in or excitement about Nest products?

Marc Rettig: My gut reaction was disappointment. I own a Nest, and feel real affection for the product and the company. But Google has taken a lot of hits on their trustworthiness lately. So when I heard the news of this acquisition my first thought was, “If I decide to get rid of my Nest, what would I replace it with?”

What we call “user experience” is a bigger umbrella than service, interaction, interface–the “experience journey.” It also includes the soft, invisible stuff like trust. Belief. Those relationship words. Maybe we should say UX is deeper than the physical and digital qualities, and even deeper than organizational structures and processes. That feeling I had is about identity. My identity in relationship to their identity. Trust is partly/largely a story of identity, and I don’t like the feeling I have right now.

It’s kind of how I felt when Disney acquired Pixar: “Please build a big wall around Pixar to keep the Disney people out.” If Google can support and expand the work of Nest without disturbing the sense of quality, care, and generosity that has characterized Nest products so far, maybe my initial gut reaction will prove unjustified.

Andy Polaine

Andy Polaine: Google appears to operate on a “we do it because we can” basis, which does not seem to often be tempered by, “But should we do it?” It seems fairly clear that Google (and the NSA) believes data is there to be mined and is fair game if it’s just out there in the open. It has been interesting to see many people’s uncomfortable reaction to this, which should be a worry to Google, but probably isn’t. Their interpretation of privacy and “don’t be evil” is clearly different from that of many people’s. It demonstrates how fragile trust is with products and services and how important it is to remember that people’s lives, families and homes are involved. People have strong emotions about those kinds of spaces.

It is essential that user-experience and service designers understand the human and cultural experiences of personal privacy and don’t just focus on the technology and UI out of context.

I have conversations with people all the time in Germany and Switzerland where privacy is considered a much bigger deal, in part due to the history of the Nazis and Stasi, and in part due to cultural norms about private and public realms. Many are paranoid about Google, yet still feel comfortable about owning store loyalty cards that track all their purchasing data. It all has so much to do with context.

Even if people never do it, they always have the option to turn off their computer or phone. Nobody is going to turn off their Nest Protect smoke alarm or Nest thermostat. There is a level of persistent presence and monitoring required to make those devices useful, and they are long-term purchases. Hooking them into data harvesting may make people very uncomfortable indeed, especially as there is very little UI to show you what is going on. Some people won’t care or will have already given up on privacy; others will decide against them because they don’t trust them. I find it interesting from a brand communication point of view that the same device can suddenly switch from an object of desire to an object of suspicion, just because of who now owns it.

Laura Weiss

Laura Weiss: I don’t think it will have an immediate impact. The average consumer who buys a new home smoke detector, or the average contractor who installs a new home thermostat, may never know the connection to Google (remember, Nest will remain a distinct brand–or so say the initial press releases). Tony Fadell and his team made a strategic decision to launch the smoke detector before the Google deal was consummated, thus endearing the brand to the public on its own. (I counted at least five large-scale posters advertising the new product on a recent walk from Union Square to my home in the North Beach neighborhood of San Francisco.) And if people love the product enough the odds are they may not care. However, as the public becomes more attuned to “the Internet of Things” and hears about recent hacks that hit close to home (e.g.bTarget, Neiman-Marcus) they will start to become concerned that their benign but connected household appliances make them increasingly vulnerable.

It will be less about “Nest” or “Google” and more about who is ultimately responsible for ensuring data security.

Nest Protect and Thermostat It will be less about Nest or Google and more about who is ultimately responsible for ensuring data security

If it’s Nest today, any predictions of what’s next on Google shopping list?

Andy Polaine: Predicting the future of technology is a mug’s game, but I’ll be a mug for you. I’m not convinced that there is a master plan at work beyond scooping up things that might be interesting or useful in the future. Clearly, for $3.2 billion, Google must think it very interesting indeed, and Nest is a well-established, ready-made solution with lots of interesting data output.

The tipping point is not one particular technology, but several that get to a point where hooking them all together creates something greater than the sum of the parts. This is what happened with “Web 2.0”, which was really a bunch of existing technologies that conglomerated into a way of doing things that launched a new era on the web. It’s what happens when several villages grow to become a city. That kind of thing can sneak up on those not looking. Google certainly has the ability to hook together a lot of previously passive devices with a standard set of protocols,infrastructure and presences that would outpace every other manufacturer. Localized clean energy production is something both Google and Apple have been working on. Perhaps energy is the new advertising. You can get cheaper electricity in return for giving them your data.

Marc Rettig

Marc Rettig: Predictions? Not from me. If I’m on track with my previous comments, then we might see more activity in ways to deliver Google’s accessible-information expertise into new corners of life through new platforms and devices. Google in the woodwork rather than Google in our phone. Which would be okay with me (so long as they stick to their “do no evil” ethic), because as we’ve long observed without really acting on it, attention is the rarest and most valuable bit of both economics and life.

So instead of a prediction I’ll offer a request: Google, please use your powers to give us back our attention.

Laura Weiss: As long as Google’s business model is primarily dependent on advertising revenue, future acquisitions could be anything that provides a lucrative pipe for gathering and disseminating consumer information. And whatever they don’t or can’t acquire, they’ll invent themselves via the super-secretive Google X operation.


Like what these Rosenfeld Media experts had to say? You can have them bring their brains to you. Andy Polaine, Marc Rettig and Laura Weiss are available for consulting and teaching through Rosenfeld Media.

post authorMary Jean Babic

Mary Jean Babic, Mary Jean really enjoys drawing on her journalism and writing background to help tell the Rosenfeld Media story. After graduating from Northwestern University, she was a daily newspaper reporter in Michigan for six years. After that, she embarked on a life of fiction and freelance writing, earning master's degrees from Johns Hopkins University and Warren Wilson College. She's a frequent contributor to university publications, counting Michigan, Columbia, and Cornell among her clients. Her short fiction has appeared in the literary journals The Missouri Review and The Iowa Review.


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