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Google’s Nest Labs Acquisition Signals Strategy Shift

Already a dominating presence on the Internet, Google is making its way further into people’s lives when it agreed to buy Nest Labs for $3.2 billion in cash. It represents a big push into the “Internet of Things.” Amazon, Apple, and Microsoft take note.

Nest Labs specializes in re-inventing common household gadgets, such as thermostats and smoke alarms, in the same way that Apple reinvented the music player and the mobile phone with its iPod and iPhone devices. The company was started in 2010 by Tony Fadell and Matt Rogers, members of the teams that built the iPhone and iPod at Apple. Many of its gadgets are internet-connected, so they can communicate with other household devices or learn the user’s habits and adjust themselves accordingly.

The $3.2 billion cash offer is $100 million more than Google paid in 2007 for ad network DoubleClick, arguably the company’s most financially meaningful transaction, according to Information Week. “Nest Labs becomes Google’s second most expensive corporate purchase behind its 2012 acquisition of Motorola Mobility. Google has been on something of a buying binge lately. It disclosed the purchase of eight robotics companies in December and has acquired two companies so far in January, the other being mobile app maker Bitspin.

The company will continue to operate independently under its own brand and expand its portfolio of connected versions of what it told The New York Times are “unloved but important devices in the home.” Nest Labs’ CEO Fadell, will report to Larry Page, co-founder and chief executive of Google.

According to Times reporter Claire Cain Miller, “Internet companies are vying to be the gateway through which people live every aspect of their lives — whether searching, socializing, reading, shopping, exercising or sleeping. Their businesses, particularly advertising, are built on watching the way people behave online. For Google, gaining visibility into people’s habits beyond computers and phones — whether watching television using Chromecast, taking a walk wearing Google Glass or managing their homes using Nest products — will provide a fuller picture of users.”

A major goal of the technology industry has been entering the so-called connected home through products like Nest’s even though barely 2 percent of current U.S. homes have such devices. So although the market is far from mainstream companies such as Apple, Philips, Bose, Dropcam and Lively, among others, make Internet-connected devices to dim lights, close garage doors, listen to music or monitor family members or pets with sensors or live video.

According to Miller, “Google has talked about connecting home devices, known as the Internet of Things, for several years, but has made little traction. Still it has been expanding beyond its search engine roots into hardware, including through its $13 billion acquisition of Motorola Mobility and its development of devices like Google Glass, the Internet-connected eyewear, and Chromecast, for Internet-connected television. It also recently acquired companies that make robots and gesture-recognition technology.”




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