Nest Labs – POTs and PANs

The Early Battle for the Internet of Things

There are already a number of players aiming to become the primary player in the residential market for the Internet of Things. I think all of them see that this as a numbers game and that whoever can gain customers the fastest has the opportunity to become the largest. And so we are going to start seeing fierce battles in the marketplace. As you would imagine, every competitor is going about this in a different way.

Google is probably making the most news in the area, because with their billions they are buying themselves into the business. Google paid $3.2 billion for Nest, a maker of smoke detectors and thermostats. Last week they announced the purchase of video camera maker DropCam for $555 million. Google also acquired Boston Dynamics and DeepMind, two firms whose robotics research is aimed at developing artificial intelligence. And one can expect Google to continue to buy the piece parts needed to put together a fully integrated suite of IoT products.

This week Google also announced their primary strategy which is to open up their IoT platform to outside developers. They envision a world where the apps have as much or more value than the hardware. Google wants to sell hardware and control the base platform over which others develop apps to provide customization for customers.

Apple is taking a very different approach and wants to become the software platform that makes everything work together. Apple believes there will be numerous manufacturers of smart devices (in fact, most of the things in our homes will become smart over time) and they don’t believe consumers are going to want to be tied to one propriety package of devices, but will want anything they buy work with everything else. So Apple is trying to put together that platform, which they call HomeKit that will connect your garage door opener, your door locks, your thermostat and everything else together to give homeowners a customized suite of products that suit them. Apple is also an open platform that allows outside developers to create apps.

Honeywell just announced that it plans to offer significant competition to Google. Honeywell is the largest manufacturer today of thermostats and they announced a slick mobile-controlled thermostat they called Lyric. But Lyric is not just a thermostat and is going to be the base of a full suite of home automation products – all DIY and all controlled by smartphones. Honeywell is not only building their own platform, but they are also hedging their bets by working with the Apple HomeKit Program.

There are also smaller companies trying to crack into the market and who are hoping that by being early they can gain market share. For example, Lutron is the largest manufacturer of lighting control systems and they are expanding that platform to become the hub for integration to other devices. They think they have an edge since they already having lighting platforms in millions of homes.

And there are a number of start-ups chasing the market. Revolv has introduced a slick box that does a pretty good job today of integrating different devices into a coherent package. ALYT is a crowd-sourced start-up that plans to provide a full suite of communications technologies from Bluetooth through cellular making it easier to communicate with any device or the outside world.

This is going to be an interesting battle to watch. Each of these firms has taken a different approach. I certainly don’t have a crystal ball, but I am going to bet that the one that makes all of this work the easiest is going to have the best chance of winning the battle. But one can also suspect that for decades that multiple companies will own a decent segment of the market as they appeal to different groups of customers. But it’s hard to bet against Apple and Google not being two of the largest players. Each is creating an open platform for developers to create apps, and those apps are likely to give them an edge over any proprietary systems.

Google and the Smart Home

Google made a bid for $2.3 billion to buy the smart home appliance maker Nest Labs. In case you have never heard of this start-up, you can see their website here. Nest Labs currently makes smart thermostats ad smoke detectors and has plans to make a lot of other smart home devices.

From a pure business perspective it makes sense for Google to get into the smart home business. After all, John Chambers of Cisco has projected the industry to be worth a cumulative $19 trillion dollars through 2020. That is a huge number and there is a lot of money to be made in making the devices that will be in people’s homes.

But Google is an information company more than a bricks and mortar company, so one must ask why they want to get into a business that sells household appliances? The answer is obvious in that devices that are part of the Internet of Things do not just perform functions around the house. They are connected devices, and an IoT thermostat does not just control your homes temperature, but it’s connected to the web so that you are able to communicate with your thermostat from anywhere. Looked at from that perspective every smart home appliance is also a data gathering portal.

Google already gathers more data about people than anybody else. To the extent you use Google products they know what you search for on the web. They know who you write emails to and what you say in them. They know what you do with your android smartphone including where you are 24/7. They know the games you play and what makes you laugh and cry. Google is the first step towards the big brother that George Orwell warned us about.

By getting into the IoT device business Google is going to multiply its data-gathering capabilities many fold. They probably don’t even know yet what they are going to do with all of this extra data, but they are certainly are going to be able to profile you even better than they do today. They will know how you move around your home or what temperature you keep your various rooms. They will know you are up with insomnia at 2:00 in the morning. As Nest Labs branches out into more devices they might know your blood pressure and body temperature and red blood cell count throughout the day.

All of this extra knowledge is going to allow Google to be better at their core business, which is selling data about you to advertisers. Google is going to be able to understand things about you that you may not even understand about yourself. They will be watching little details about people’s lives 24/7 and they will be able to profile you in amazingly accurate detail. They will often know what you want before you know it. What more could an advertiser want?

I read one article today that said that that the government should block this sale for antitrust purposes. But I have to be honest and I think that ship has already sailed. Google already knows an incredible amount about people. And Google doesn’t have to really buy an IoT device company to gather IoT data. They can certainly find other ways to get that data such as creating the software platform for others’ devices.

But this purchase gives them a giant laboratory to play around with to see just how useful such data might be. I must say, at least for now I am a lot less nervous about Google watching my smart thermostat than I would be if they were buying a firm that makes medical monitors. But there is no doubt that someday they will find a way to get that too.

I have read many experts who have said that people have already lost the privacy battle. Unless you are ready to move to a log cabin in Montana you are being monitored and profiled constantly today. And every year the large data gathering companies are going to know more and more about you. Some people aren’t bothered by this. I have very mixed feelings about this about this, but I might even come to like this if Google can tell me every day where I left the damned car keys.

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