Google's Nest deal pushes mobile as remote control for everyday life
By Chantal Tode
January 15, 2014
Nest Lab's smart thermostat
Google’s proposed acquisition of Nest Labs for $3.2 billion is reflective of how the definition of mobile is changing as operating systems originally built for smartphones and tablets increasingly integrate wearables, connected cars, smart appliances and other hardware into their services.
The deal is the latest move by Google to extend its mobile business with an eye toward making smartphones and tablets the mechanism for enabling users to connect with other devices throughout their day. With consumers already spending significant stretches of time in front of their mobile devices and as more devices become available that can interact with smartphones, tablets and/or mobile networks, Google and others want to enable these engagements.
“Google's acquisition of Nest makes the mobile phone a consumer's remote control for everyday life,” said Andrea Wilson, Fort Worth, TX-based vice president, strategy director and luxury practice lead at iProspect.
“Everything someone would need - including both a direct link to the Internet and a direct link to the tangible home,” she said. “This becomes especially true for consumers with a Google phone.
“Now, all the things that flow into a home can and will be pushed into Google management — i.e. music, movies, air temperature. By allowing Google to understand more about their home base, consumers will have access to their physical spaces via the on-the-go convenience of mobile.”
Building a nest
The news closely follows recent moves by Google to gain a foothold in the connected car market, with Google forming the Open Automotive Alliance to bring the Android platform to cars, with Audi, GM, Honda, Hyundai and NVIDIA all signed on.
The data about consumers that Google is able to gather from such pushes will help it further enhance its advertising offerings.
“This development makes Google’s monetization strategy more effective — short term and long term,” Ms. Wilson said. “This is all about data and utilization of Google platforms in every part of life.
“As data becomes more robust and available, and the whole picture begins to take shape, Google advertising will become even more targeted and effective,” she said. “I have no doubt Google will find even more strategic ways to advertise across these additional technologies in the home.
“As an example, battery companies being able to advertise when the Nest recognizes the smoke alarm battery is low, or skincare brands advertising as heaters get turned up in winter months and dwellers need more moisturizing products. The sky is really the limit.”
The news is the latest example of how the definition of mobile is expanding to include a wider array of devices.
Going forward, companies in the mobile space will be looking to make strategic deals such as Google’s acquisition of Nest Labs that will enable them to play a key role in the future of mobile.
“This deal is definitely indicative of a new definition of mobile,” said Dan Roche, vice president of marketing at TalkPoint, New York. “Mobile is moving towards complete connectedness with phones and tablets becoming the mechanism for this connectedness.
“At the end of the day, the smartphone or tablet is the one thing that almost everyone has with them at nearly all times,” he said. “By that interpretation, it is logical that more and more applications are focused on mobile for convenience and immediacy.”
Android is already the most widely used mobile operating system in the world. A recent report from Gartner found that Android accounted for nearly 82 percent of all smartphone sales during the third quarter of 2013.
The Nest deal points to how hardware is playing a bigger role in Google’s strategy to broaden the reach of its Android software. Google announced in 2011 that it was acquiring Motorola for $12.5 billion dollars in order to bring to market best-in-class examples of how the Android software can be applied to smartphones and tablets.
Nest's smoke detector
“Google continues to diversify into the hardware business with the purchase of Motorola Mobile and now Nest,” said Matt Witt, executive vice president and director of integrated marketing at Tri3ct, Chicago. “The challenge will be to unify the user experience across all devices.
“Integration into our daily lives with tools and services that people come to rely on is key,” he said. “Home internet connected devices, wearable tech and self-driving car technology are clear examples of the ‘Google Everywhere’ strategy.”
Until now, Apple has been the company with the reputation for innovative design, although more recently there have been claims that the company may have lost some of its creative spirit.
Interestingly, Nest's co-founder Tony Fadell was previously a senior vice president at Apple and reportedly worked closely with co-founder Steve Jobs on creating the iPod and iPhone. This suggests that perhaps Google is not just checking the box on hardware and, instead, is interested in making a splash with more innovative, groundbreaking devices.
Another Nest co-founder, Matt Rogers, also comes from Apple.
“Google's acquisition of Nest again evidences the mobile ecosystem's expansion,” said Ryan Martin, associate analyst at Yankee Group, Boston, MA. “While a major asset of the deal for Google is the potential to gain IoT [Internet of Things] mindshare, the fact that it'll also have some clout with existing Nest users on the iOS platform is a plus.
“I'd expect Google's mobile strategy, particularly as it pertains to Android, will draw on Nest's resource regardless of whether or not the company operates as a wholly owned subsidiary of its new parent,” he said. “The recent unveiling of Google's Open Auto Alliance exemplifies one of such initiatives likely to fuel the Android brand.
“Meanwhile, automakers such as Mercedes-Benz have already expressed an interest in Nest-compatible infotainment systems for future car models.”
Competition to grow
Palo Alto, CA-based Nest Labs makes Wi-Fi enabled thermostats and smoke detectors that borrow from Apple’s playbook by combining eye-catching hardware design and smart software. For example, the thermostat makes automatic temperature adjustments based on users’ heating and cooling patterns over time.
For Nest Labs, the deal means being able to leverage Google’s resources, scale and reach to help it build its hardware, software and services on a global basis.
“Google's foray into secondary and tertiary areas of the mobile landscape won't go uncontested,” Mr. Martin said. “That said, end-to-end services offerings provide an attractive framework often worth the investment.
“Google and the like will need to put their marketing dollars to work so consumers are given a clearly-defined value proposition,” he said. “A slew of new entrants in some of the more nascent mobile sectors - such as connected cars, wearables and IoT - could cloud the message.”
Implications for paid search
The deal may not have much of an initial impact on Google’s mobile paid search business but over time, Google could start to deliver highly targeted ads directly to consumers through these connected devices.
“The implications for paid search are real and positive ones,” said Ken Burbary, chief digital officer at Lowe Campbell Ewald, Warren, MI.
“At a simple level, the more devices connected, the more data is generated, the more necessary search will be to find what someone is looking for,” he said. “That's good news for Google, as they do that better than anyone else. More volume means more revenue.
“That said, this is really about expanding beyond search advertising business. Keep in mind, Google doesn't consider itself a search engine or an advertising company. It's a product company that uses its massive sums of cash and technology expertise to develop products that billions of people use daily.”
Chantal Tode is associate editor on Mobile Marketer, New York
Related content: Software and technology, Google, Android, Nest, Internet of Things, TalkPoint, Dan Roche, Andrea Wilson, iProspect, Tri3ct, Matt Witt, Yankee Group, Ryan Martin, Lowe Campbell Ewald, Ken Burbary, mobile marketing, mobile
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