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Why Did Google Buy Nest For $3.2 Billion?
At Blue Corona, we specialize in two main categories: online marketing (that’s our industry) and home contracting (the industry of many of our clients). While we may be pros at getting our plumbers, HVAC techs, and remodelers to maximize their online real estate and get more leads from the web, it’s not every day that the two industries collide as a whole. Yesterday was one of those days, however.
Yesterday (Jan. 13, 2014), Google announced that it has entered into an agreement to purchase Nest Labs, Inc. for $3.2 billion in cash. What? Google is supposed to focus on search engines, pay-per-click campaigns, and endlessly trying to get Google+ accepted by all. Why would it buy a company that makes smart thermostats and smoke alarms?
While the answer might not be immediately evident, it’s a very smart decision on Google’s part. Let’s break it down by introducing Google Ventures.
Google Ventures Overview
Google Ventures, started in 2009, is a separate branch of Google that provides seed, venture, and growth-stage funding to what they consider the best companies. Over 200 entrepreneurial companies make up their portfolio—Nest being one of them. Through Google ventures, these companies—ranging from mobile, consumer, health, data, and science industries—receive support in design, recruiting, and marketing (including online).
While Google says its goal is not strategic investments for Google itself, but rather supporting these companies that have the power to make a big impact on the world and consumers’ lives, you have to remember that the grand entity of Google is not just a free search engine.
Just like any other company, Google needs consumers to remain brand loyal, needs to find new market opportunities for growth, and needs to fully integrate itself into the lives of its consumers.
So let’s look at Nest and why Google might feel the need to have this company in its back pocket.
About Nest Labs, Inc.
Nest was founded with the intent of bringing innovative technological advancements to important home devices, especially thermostats and smoke alarms. Since its launch in 2011, Nest has revolutionized home energy use with a smart thermostat that learns a homeowner’s patterns and schedules itself to maximize energy efficiency with thermostat settings. The company has also taken the hassle and loud screeching out of regular smoke alarms with a talking smoke alarm (Nest Protect) that can be controlled with the wave of a hand.
Google: Integration into Your Everyday Life
In the press release announcing the acquisition of Nest, Google’s boiler plate (a fancy phrase for the few sentences at the bottom of a news release explaining the company involved) said the following:
“Google is a global technology leader focused on improving the ways people connect with information. Google’s innovations in web search and advertising have made its website a top internet property and its brand one of the most recognized in the world.”
Nest itself could also be considered a technology leader that uses information and innovation to better the lives of its consumers. But rather than improving online information and user experience (like Google search), Nest allows Google to actually go into (and improve) the homes of Americans. This integration is crucial for Google’s future growth beyond smart search.
Google and its logo may be recognized worldwide as a search engine giant, but I believe they will grow to be much more. Aside from purchasing Nest (which has the possibility to integrate its brand and data into homes nationwide), Google has already integrated itself into the lives of consumers with:
- Immediate search capabilities on computers, laptops, mobile devices, and tablets
- Google Glass—allowing users to capture their lives through instant actions (like search, photos, videos, calls, and more) right from the tip of their nose
- Personalized maps and directions that learn a consumer’s favorite locations, routes, and more
- Google Fiber—an internet service provider available in select U.S. cities that has become fully assimilated and is 100x faster than the average broadband speed
- Gmail—providing email services (along with tools like Calendar, Drive, Chat, and more) to more than 425 million users
So Why Did Google Buy Nest?
Spending $3.2 billion in cash on a company is more than giving Nest a “pat on the back” for its success within the Google Ventures portfolio. It’s more than an investment that Google can later “bank” on. It’s about further integrating Google’s reach into consumers’ lives. It’s about using mass personalized data to improve the way people do things and use technology—intertwining Google into every aspect of your life.
You Might Also Be Interested In…
- Web Insights from Google Ventures (Part 1)
- Web Insights from Google Ventures (Part 2)
About The Author: Hannah is the Organic Team Lead at Blue Corona. If she's not busy daydreaming about the training session for her team, you can find her improving client conversion rates and planning her next trip.
View more blogs by Hannah Nelson
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