No longer under Google, Nest hopes to take flight
Aim of smart home biz: Build its brand
When Google announced it was restructuring into an umbrella company called Alphabet, the news raised more questions than it answered. For some industry watchdogs, several of those questions revolved around Google’s smart home subsidiary Nest.
As part of the restructuring, Nest will no longer be a subsidiary of Google. Instead, it will be a direct subsidiary of Alphabet — the “N” in the lineup — just like its former parent.
According to Alphabet CEO Larry Page’s introductory letter, the goal is to help grow new businesses such as Nest, and eventually turn them into highly recognizable and profitable brands, just like Google.
However, it’s unclear how this will affect Nest products in the short term. Nest itself declined to comment, while Google reps deferred to Page’s letter.
“With Nest broken out, I can see product coming to market much faster and decisions being made quicker — it’s only natural,” said Paul Everett, director of building technologies at industry analytics firm IHS.
Nest’s partners reacted positively to the news. Mark Walters, vice president of Strategic Development for the ZigBee Alliance, which recently partnered with Thread, the Nest-backed Internet of Things standard, said the announcement “highlights the explosive growth in the tech sector and the growing importance of smart home and IoT investments such as Nest and Thread.”
But given past privacy concerns about Google’s use of Nest data (and the EU’s general wariness of the search giant), the move could cast doubt on Nest’s continued relationship with Google.
“Given that Nest has already been successful in the market selling cameras, thermostats and fire alarms, in my opinion I don’t think privacy concerns are standing in the way of consumers purchasing Nest devices,” Everett said.
In fact, Everett said he believes the relationship between the two subsidiaries will only improve.
While the company might have an easier time releasing new products, Everett said he expects Nest will be under increased scrutiny regarding its financials, which won’t be as easily concealed while operating as a standalone business.
“Sold at a much higher price point than conventional manual or programmable thermostats, Nest has shipped a large number of these devices, generating significant revenue in the process,” Everett said. “This information will soon become clear as the dust settles from the new structure.”
Regardless, Nest stands to profit even further from the restructuring.
“Under Alphabet, Nest has the chance to acquire more IP if it needs to, partner with whom it wants to, move faster when it needs to, and all under lower operational expectations than under the previous structure,” said Steffen Sorrell, Senior Analyst at Juniper Research.