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Google Buys Nest, The $3 Billion Distraction

Jan 15 2014, 8:51am CST | by

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Google Buys Nest, The $3 Billion Distraction
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Google Buys Nest, The $3 Billion Distraction

One of the most surprising things about Google and its purchase of Nest is the price. Over $3 billion! That’s what you’d pay for a fast growing social network. But seriously, Nest hardly has the kind of defensible technology with massive barriers to entry that justifies a $ 3 billion outlay.

With customers like utilities the market will remain fragmented globally, because the majority will opt for local product champions. This felt to me a bit like Google’s fiber investments. So some argue it’s about data or a home platform. Here on Forbes, Parmy Olson opted for data:

“We know how many people are home during those times,” he (Nest CEO Tony Fadell) said “We know which homes have cooling, we can go through the data and we can say we believe we’re a five megawatt power generator or 10 megawatts in this county. That’s what we can deliver – 50-60% of the energy that was consumed in that window has been shifted away.”

Google is one of the kings of innovation. In a league table of innovators that I published earlier this week Google ranked 2 in the world, scored by innovation capability. The reasons why have nothing to do with its sometimes misguided acquisition strategy (think Motorola). Much of it came down to its extraordinary platform and ecosystem skills. So back to Nest.

Wired.com believes one of the big catches is Nest co-founder Tony Faddell:

Fadell is an engineer with demonstrated mastery over all aspects of the hardware process, with a high-design sensibility to boot. From supply chain and components to fit and finish, Fadell has shown he can manage a product for a company with Apple’s global reach.

Strange how the credit for revolutionizing Apple’s business is now being more widely distributed. The big question though is, does he do platforms and ecosystems the way Andy Rubin does?  Because with Rubin Google is doing things that make a lot of sense.

In its wide range of acquisitions Google has some impressive platform plays. Remember WAZE, a platform for consumer-driven insights and information on real-time traffic data. Lending Club - well that peer-to-peer lender is now accepting capital from the banking system making it an interesting hybrid lands platform. Google is an investor.

But the Android model is surely Google’s second major disruptor after ads. In autos Google just set up the Open Auto Alliance , an echo of the Open Handset Alliance that laid the foundation for Android in smartphones. Cars though are a small market, topping out at under 100 million new products a year.

Far more important is the robotics arena where Google looks poised to be the major participant in an Android style platform,  in a market that we will measure in billions of products.

Some people, including Venture Beat, are calling Google’s entry into robotics a moonshot – but in fact it looks more like a second Android.

Create a platform around a common robotics operating system, and maybe even find indirect ways of monetizing different classes of robot, accelerate robotics in autos, goods handing and delivery, personal assistance, hey maybe even make it, eventually, the home OS.

Ex-Google engineers started Willow Garage where the open source ROS resides. Google has now purchased two companies with close Willow Garage links , Redwood Robotics and spin-off Industrial Perception. Google collaborates closely with Willow Garage in facilitating Android apps for robotics.

(By the way, some of Willow Garage’s latest work is in remote presence. Sounds like fun, a kind of tactile Facebook?).

Unlike in self-driving cars where Google is up against a system of car-makers and road infrastructure, in robotics it is fairly greenfield and nobody knows how to accelerate a greenfield ecosystem like Google does.

Set against this, Nest is another hardware purchase, an area where Google has struggled.

$12. 9 billion spent on Motorola is turning to dust, the one hope being that Google can create a ecosystem for modularity in smartphones with Project ARA (just as the smartphone is fragmenting into wearables – interesting!).

From search engine optimization and Ad Words onwards Google’s genius has lain in ecosystems and peer groups. Nest is hardware with some data possibilities in an environment that will draw in competition from every consumer electronics company out there currently nursing frail balance sheets. Don’t look to Nest, look to robotics, Project ARA, Lending Club, WAZE and more instances of Google the catalyst.

Follow me on Twitter @haydn1701 or join me on Facebook. I am here on Google

Source: Forbes

 

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