Google Inc. (NASDAQ:GOOG) is in the news today after Google’s Nest Labs launched new products. The products release shows that Google is getting serious about developing the home automation space through its daughter firm.
Google has been skirting around the Internet of Things (IoT) concept for a while. Google involved itself fully in IoT about 18 months ago when it acquired Nest Labs for $3.2B. Google started working on an IoT software codenamed “Brillo” for Android smartphones last month.
Yesterday in San Francisco, Nest announced its Nest Cam. The Nest Cam is a wireless home camera with a price tag of $199. The Nest Cam shoots video in 1080p HD and it has a 130-degree vision field. The camera has inbuilt infrared night vision and a microphone. It has an in-app alert for Android and iOS to notify you if there’s a strange motion/sound in your home.
The Nest Cam completes the existing product offerings of the Google venture. Nest already has the Nest Thermostat and the Protect smoke detector in the market. The Thermostat and Protect also got new updates that include better sensors and a higher degree of communication between devices.
Nest also unveiled Nest Aware, a cloud service for saving footage recorded by the camera. Nest Aware has a $10 monthly subscription and you can include another camera for $5 per month. You can also chose the $30 per month service for 30-day storage of footage from one camera.
Nest is Google’s Answer to IoT
The purchase of Nest Labs at $3.2B was hard to understand for most people outside the tech space. For one, the $3.2 billion price tag for Nest Labs was about 10X the firm’s annual revenue. In addition, the $3.2 price tag was much higher than the $800M valuation of Nest when it obtained $80M in funding a year earlier. Hence, it would appear that Google spent so much on Nest because it had cash to burn.
However, Nest purchase is now making sense in light of recent events. Firstly, Google got valuable expertise when it bought Nest. Nest co-founder and current CEO, Tony Fadell is an Apple Veteran. In fact, he is often credited as the brain behind Apple’s iPod. Google also got Nest’s immense patent portfolio. Nest had a number of patents and patent licenses that would eventually make Google’s IoT push a reality.
In addition, Nest already has products in the market; hence, Google won’t be creating hardware from the scratch. Nest already had its Protect (smoke detector) in the market as when it was acquired by Google. Google has not had much success with making consumer technology hardware as the Google Nexus shows. Hence, Google could hit the ground running with IoT products.
Why is Google Serious about the IoT Space?
The amount of revenue that Google will generate from Nest looks very negligible considering the scope and size of the tech giant. However, the $8.9 trillion market potential for IoT is enough motivation. In addition, the data that will be gathered from IoT enabled devices hold much value for Google’s core business. Hence, even if Google doesn’t directly make a dime from IoT, the data mined will be valuable for generating ad revenues.
