Skip to main content

Why is everyone disappointed by Google buying Nest?

Why is everyone disappointed by Google buying Nest?


It's a match made in heaven, unless you're on the outside

Share this story

If you buy something from a Verge link, Vox Media may earn a commission. See our ethics statement.

Nest report still
Nest report still

Google's bombshell $3.2B acquisition of connected-home company Nest Labs makes simple sense on paper: Nest CEO Tony Fadell says he'll gain the ability to scale his business without worrying about cash or infrastructure, while Google gets a company at the leading edge of the difficult smart-home market and a team skilled in building well-designed products that combine hardware, software, and services. (And how: before Nest, Fadell and co-founder Matt Rogers led the iPod and iPhone teams at Apple.) It's a win-win, and Nest's investors sound ecstatic. "It's a fantastic return," Lightspeed Venture Partners' Peter Nieh told The Wall Street Journal.

But outside of the players directly involved in the deal, there was a second, more visceral reaction: disappointment. Nest was the first in a new wave of hardware startups built by engineers and executives eager to apply their experience building smartphones to new markets — a mission captured perfectly by Fadell's irrepressible upstart spirit in interviews and appearances. But by selling Nest seems to have undercut the optimism those companies represented, and perhaps not coincidentally, underlined a growing distrust of Google itself — a distrust shared by regular consumers, tech investors, and privacy advocates alike.

Although Fadell says Nest will remain mostly independent, with its own identity, team, and even offices intact, it will most certainly become a part of Google. "It's somewhere between YouTube and Motorola," Fadell said yesterday, describing two of the search giant's more famous acquisitions. Motorola has remained almost completely independent, "firewalled" away from Google's Android team, while YouTube has become more and more integrated over time — with a recent outpouring of anger when its comment system was tied to the niche Google+ social network.

So what will happen to Nest? Fadell called any speculation "totally premature" yesterday, but that hasn't stopped customers from worrying — and most seem to think Google will "ruin" Nest in a variety of ways, with Google+ integration standing in for a host of potential sins. Others worry that Nest will fall victim to the ongoing platform war against Apple, although Fadell says the company will continue to support iOS.

Still others wondered, perhaps a bit facetiously, if Nest would become yet another in a long line of companies acquired by Google in a flurry of hype only to disappear years later.

Viewed at a distance, the reaction is similar to Avis buying Zipcar: the fear that a slower, less innovative giant will kill the spirit and pace of a beloved startup. The difference, of course, is that Google is itself one of the richest and most innovative companies in the world. That it carries even the whiff of a lumbering giant is odd — especially since for tech investors, the Nest deal smacks of coldly efficient dominance.

Consumers aren't the only ones feeling some angst over Google's purchase of Nest. Yesterday's news caused a big question to boil up among Silicon Valley venture capitalists. How do you play the game when Google is one of the biggest investors in tech and also one of the biggest buyers of tech startups? "The purchase of Nest was a big win for us, of course," said one of the company's investors, who asked to remain anonymous. "But at the same time you have to wonder, could this company have been 10 times bigger had it continued to go things on its own?"

can Google Ventures be trusted to keep its founder interests separate from its backers?

Entrepreneurs face a similar pickle. Google has said that its venture arm is completely independent from core business, but that always seemed like wishful thinking, and yesterday's purchase will only strengthen the perception that taking an investment from Google Ventures ties a startup closely to Google itself. "It sends some really mixed signals," said another Nest investor. An entrepreneur might look at this and see the upside: an investment from Google Ventures means an acquisition by Google is more likely down the road. But for the truly ambitious entrepreneurs who want to take on tech titans like Google and Facebook the question now is, can Google Ventures be trusted to keep its founder interests separate from its backers?

The question of trust is perhaps most important of all. Fadell once described the Nest thermostat to me as nothing more than an on / off switch with a lot of nuance — nuance gained by collecting huge amounts of data about your living patterns and energy needs. Adding that data to Google's formidable collection of information about nearly everyone who uses the internet struck immediate fears with privacy advocates and a growing base of skeptics who contend Google's ad-supported business model creates an anti-privacy culture.

And the timing wasn't great for the counterargument: hours before the Nest announcement, Google clarified that a controversial plan to let Google+ users easily email nearly anyone on Gmail would be more private for "high-profile" users. It's another in a long string of confusing messages about privacy from Google, and the Nest team did little to alleviate the concerns.

give Google the chance to acquire more data, and it usually will

Co-founder Matt Rogers wrote that the company "takes privacy seriously," and that its privacy policy limits the use of customer data to "providing and improving Nest's products and services." But those services could arguably be improved by integration with other Google products, and the implications are unclear — give Google the chance to acquire more data, and it usually will. Fadell wouldn't rule out future changes yesterday. "At this point, there are no changes to our terms of service, and that's it. That's all I can say."

It's a strange set of affairs: an innovative young company led by some of the best engineers and executives in the business being acquired and validated by one of the great American businesses of the past 20 years should be a slam dunk of good PR. Instead, there's a chorus of concern — some sincere, some contrived, but all of it grounded in fear of an unchecked Google.

Additional reporting by Ben Popper