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Why Google paid $3.2 billion for thermostat startup Nest

Zach Miners | Jan. 14, 2014
Google is moving into your home. On Monday, the Internet company said it was acquiring Nest, a maker of smart smoke alarms and thermostats, in a move that gives Google a strong foothold in a hot new market known as the "connected home."

Among the movers, Samsung announced it was developing a software platform for connecting home appliances. Samsung has a head start in some ways, since it's the leading smartphone maker — the device through which many appliances will be controlled — and it's a huge maker of appliances like refrigerators and washing machines.

By acquiring Nest, Google will get its hands on one of the most-talked-about connected-device startups of the past year, which was thanks largely to its Apple pedigree.

Google is already working to connect other types of devices. It recently announced its Open Automotive Alliance, which would bring Google's Android system to cars this year, making them smarter.

But if Google also has better information about how we interact with household appliances, imagine the possibilities. The home is "a big piece" of the connected-devices puzzle, said Roger Kay, president at Endpoint Technologies Associates.

Imagine how much more relevant Google would be able to make its ads, if the company had more information about people's habits in the home. "Google is an advertising company and it's collecting as much data as possible," said Creative Strategies' Bajarin. It would make sense, he said, for Google to look closer at what people do in the home.

"It's about building that in-home relationship with the consumer," said James McQuivey, an industry analyst at Forrester Research.

A bigger presence in the home could raise more questions around data privacy. Shortly after the announcement, Nest co-founder Matt Rogers took to the company's blog to address that issue.

"Our privacy police clearly limits the use of customer information to providing and improving Nest's products and services. We've always taken privacy seriously and this will not change," he wrote.

To what extent Google will try to expand its footprint in home appliances, and how it will use that data if it does, remains to be seen.


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