Nest is rejoining Google to better compete with Amazon and Apple

Smart home appliance maker Nest, which for three years has operated as an Alphabet subsidiary, is rejoining Google to work alongside the search giant’s hardware group. The decision, which back in November was rumored to be in the works, means that Nest CEO Marwan Fawaz will now report directly to Google hardware chief Rick Osterloh, who oversees the company’s Pixel, Chromecast, and Google Home efforts. The announcement came today in the form of a blog post from Osterloh in conjunction with a series of interviews with CNET.

In his conversation with CNET, Osterloh says the move is about aligning all of the artificial intelligence-powered hardware verticals into a single unit that can more closely collaborate. “All of Google’s investments in machine learning and AI, they can very clearly benefit Nest products. It just makes sense to be developing them together,” Osterloh says. “It’s the natural thing to evolve to.”

While Apple will release its HomePod speaker powered by Siri later this week, the more looming threat and clear market leader in the space is Amazon. The e-commerce giant has so far trumped Google’s expansive AI prowess through a mix of low-cost and accessible Echo devices and an aggressive approach to putting its Alexa voice assistant in pretty much every consumer electronic device category in the industry. Competing with both companies seems to require from Google a tighter focus on integrating AI across every piece of hardware in its lineup, including devices from Nest.

Since Alphabet’s creation in 2015 — masterminded by Google co-founders Larry Page and Sergey Brin in a massive restructuring of the company — Nest has been separated from the rest of the organization alongside divisions like self-driving unit Waymo and healthcare and life sciences unit Verily. To this day, Nest represents the only profitable aspect of Alphabet’s “Other Bets” category that it breaks out in quarterly earnings, though Alphabet has never disclosed exactly how much revenue Nest drives. Fawaz did tell CNET, however, that Nest has shipped 11 million products since its smart thermostat first retailed in 2011. That figure includes sales of Nest’s thermostat, its smoke detector, its Dropcam-inspired Nest Cam security cameras, and the company’s Nest Secure home security system and Nest Hello video doorbell, both announced last September.

Google first bought Nest in 2014 for $3.2 billion, when the company was run by famed iPod architect Tony Fadell and sold only a smart thermostat. Yet Fadell left the company in 2016, a year after the restructuring, amid turmoil over Nest’s direction and increased pressure from Alphabet leadership to pursue greater profitability. Alphabet tapped Fawaz as Fadell’s replacement, as he also worked at Motorola with Osterloh, and at some point began to take the necessary steps to reintegrate the smart home appliance maker with Google proper.

“Each bet is different. We have different journeys,” Fawaz tells CNET on the subject of Alphabet’s unique structure and the pros and cons of being a subsidiary versus a part of Google. “In this particular case, Rick and I came together and said, ‘[Nest rejoining Google] makes sense. Other bets will have different journeys. They can have a different outcome. There’s not one size that fits all in the model.”

Correction: A previous version of this article misstated when Nest hired Marwan Fawaz. It was the same day that Tony Fadell announced his departure, not at a later date, meaning there was not a state of “disarray” while Nest sought a replacement chief executive. We regret the error.

Comments

So, will they put all smarthome hardware under the same brand name now?
Should Nest devices become Home devices or vice versa?

I feel like long-term one of the brands may go away but the Nest brand still is pretty valuable. I can see in the short term, something like Next by Google. I can also see them keeping it just Nest as they wouldn’t wan’t people with iPhone’s thinking their Nest Thermostat doesn’t work with their iPhone.

I know this is just some stupid psychological trickery my brain is playing on me. Up front, I want to admit that.

I’d be more likely to have a Google Home device if it were branded as the Nest Assistant or Nest Home. I really like my nest Thermostat. I think it’s well built, the interface is pretty good, and as such, the company I associate with it is a company I want to buy from consistently. I have good feelings about them. Feelings I don’t really have for Google much anymore. The product I personally use and associate with Google most is Gmail, and I haven’t interacted with that through the web interface (or app) in ages.

If they called it the Nest Home, would they have to change the wake phrase to "Hey Nest"?

The biggest brand is probably actually Google itself. Everything else should describe a product range.
Ideally, I’d like to see:

Home – Entertainment devices
Home Mini
Home
Home Max
Homecast (rebranded chromecast)

Nest – Home automation products
Nest Thermostat
Nest Protect (that’s what they call the smoke alarms, right?)
Nest Cam
Nest Lock (for smartlocks, obviously)

Pixel – Mobile devices
Pixel S (entry level phone with no AR/Daydream etc.)
Pixel
Pixel Max (bigger and with a stylus)
PixelPad (like the old Pixel C, but running ChromeOS)
PixelBook
PixelBuds (but good)
PixelWatch (that Android Wear device Google really need)

I think the to the consumer it won’t matter. Nest as a brand matters. It’ll just be better integrated into Google

I would view it as Nest devices for your Home.

Ideally the Nest app would go away and "Works with Nest" would become "Works with Google Home". The products would still be "Nest" but Home would be the software.

They should have sold it off. Nest has really floundered since Google’s acquisition.

Because they haven’t done anything with it. If they’re floundering, it’s Google’s fault.

Looks like Google is getting serious about hardware between this and the HTC staff purchase. I’ll be interested to see if lasts in the long-term.

I sure would like to buy a couple more of their smoke detectors but ever since price fixing and not allowing their dealers to accept coupons for them and allegedly giving them a 10 year self-destruct date that begins on the date of manufacture, they lost me as a customer. I could see myself paying $130 for a smoke detector if it weren’t for that other crap but sorry.

Where did you get the 10 year number from? Sounds unbelievable

It’s literally on my nest smoke detectors. I’ve got 7 of them.

All smoke alarms have an expiry date, its to do with the way they detect smoke.

I assume that the Nest will actually turn off at the 10 year mark, whereas other smoke alarms just become less effective?

Not an issue when you are paying $35 for a smoke alarm, but a problem when you are paying $200!

But I do love mine!

With the new $169 (and white!) model, I’m very close to getting a Nest thermostat for my house. I wonder how many Echo owners also have a Nest product? That is sort of like Samsung or LG making money every time a product with one of their displays is sold. Google should buy the Hue division from Philips next

Spring for the better model thermostat.

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