The Thermostat: Google Buys Nest

There is a purchase that happened this week, and the purchase is the thermostat: the Nest Labs Google agreed to buy on Monday, the deal that is the largest for Google since Motorola Mobility. The price is $3.2 billion in cash: the news that came on January 13, the reaction that rippled through the industry. The company is the connected home, and the connected home is the category: the thermostat that arrived in 2011, the smoke detector that followed in 2013, the million devices already in homes. The acquisition is the January 2014 story, and the story is the lesson: the product that became a category, the company that became a prize, and the bet that Google is making on the home.

The Thermostat is the subject of this article: the deal announced on Monday, the founders who built the company, the product that learned the household, the privacy questions raised, and what the acquisition means for the connected home.

1. The Deal on Monday

The deal is the announcement, and the announcement is Monday: the Google that said it would acquire Nest Labs, the agreement that was revealed on January 13, the $3.2 billion that will be paid in cash. The deal is the this week fact: the purchase that is the largest for Google since the Motorola Mobility acquisition, the $12.5 billion deal of 2012 that set the scale, the number that made the industry stop. The deal is the January 2014 moment: the announcement that came without warning, the story that led the coverage, the acquisition that everyone will discuss for months.

The deal is also the context: the Google that has been buying into hardware, the Motorola Mobility that was acquired in 2012 for $12.5 billion, the biggest check Google had written before this week. The deal is the comparison that everyone made on Monday: the scale of the Nest purchase against the scale of the phone purchase, the difference between the two bets, the lesson that Google draws from the first. The deal is the January 2014 meaning: the search company that is buying the home, the giant that is becoming a hardware maker, the ambition that the price made plain.

2. The Founders from Apple

The founders are the origin, and the origin is Apple: Tony Fadell, the man who created the iPod, the former senior vice president at Apple; Matt Rogers, the former Apple engineer who built the company with him. The founders are the 2010 story: the two men who left the most valuable company in the world, who started Nest Labs that year, who set out to remake the thermostat, who believed the home was the next frontier. The founders are the pedigree: the iPod creator, the hardware veteran, the team that gave the deal its credibility, its design sense, and its story.

The founders are also the signal: the Apple people who came to Google, the hardware DNA that Google has been gathering, the message that this is a product company deal and not a software company deal. The founders are the January 2014 meaning: the talent that validates the category, the names that reassure the investors, the leadership that will stay with the business through the transition and beyond. The founders are the continuity: Fadell who joined Google's hardware leadership, Rogers who will keep building the products, the pair who remain the face of Nest from the stage and in the press.

3. The Thermostat That Learned

The product is the thermostat, and the thermostat is the learning: the Nest Learning Thermostat that arrived in 2011, the device that watches the household, that learns the schedule, that programs itself, that saves the energy that would have been wasted. The product is the sales story: the million thermostats that have been sold, the devices already mounted on the walls of American homes, the numbers that are approximate but impressive, the traction that made the company worth the price. The product is the design: the round face, the dial, the device that looks like nothing else in the whole category.

The product is also the Protect: the smoke detector that Nest launched in October 2013, the second product from the young company, the device that extends the brand beyond the thermostat, the proof that Nest is a home company, not a thermostat company. The product is the October fact: the launch that was covered as a design story, the detector that connects to the phone, the alarm that speaks, the category that was waiting for the remake. The product is the portfolio: the thermostat and the detector, the two devices that sit in every home, the foundation of the connected house Google is buying.

4. The Connected Home

The category is the connected home, and the connected home is the market: the thermostats that talk to the phone, the detectors that send the alerts, the devices that gather in the household, the vision of a house that runs itself. The category is the smart home, and the smart home is the internet of things: the sensors, the software, the appliances, the industry that believes the home is the next platform. The category is the crown jewel: the Nest that is called the crown jewel of the connected home, the company that defined the field, the prize Google took.

The category is also the timing: the moment in January 2014 when the connected home stopped being a hobby and became a market, the year when the big companies began to arrive, the window that Nest opened with the thermostat. The category is the competition: the other companies that are building for the home, the giants that will surely follow Google, the race that is just beginning. The category is the toehold: the phrase from the New York Times, the toehold that Google is gaining in the connected home, the small position that will grow, the beachhead that the deal represents.

5. The Privacy Question

The question is the privacy, and the privacy is the data: the thermostat that knows when the house is empty, that knows when the family sleeps, that records the home's rhythm, the information that now belongs to a Google company. The question is the fear: what does Google do with the home data, the sensors that watch, the habits that are learned, the profile that could be built, the uses no one has yet imagined. The question is the debate that started on Monday: the privacy advocates who asked, the company that answered, the scrutiny that will follow the deal.

The question is also the answer: the promises that Google made, the data that will be handled carefully, the thermostat that will keep doing its job, the reassurance the company offered in the first days. The question is the January 2014 tension: the search company that knows the queries, the home company that will know the rooms, the data that will meet in one place, the combination that makes people pause. The question is the unresolved part of the deal: the answers that satisfied some, the doubts that remained for others, the conversation that will continue long after the closing.

6. The Google Strategy

The strategy is the bet, and the bet is the home: the Larry Page framing, the idea that Google should build everything the consumer wants to control, the thermostat that is only the beginning, and the house that will follow. The strategy is the hardware turn: the company that was software, that became a phone maker, that bought the phone business, that now buys the home business, the pattern that is now clear. The strategy is the January 2014 logic: the data that comes from the home, the services that can be built on it, the platform Google wants to own.

The strategy is also the quote: the words of Larry Page about everything the consumer wants to control, the vision that was repeated in the coverage in the first days of the week, the ambition that the price made believable. The strategy is the comparison: the search that organizes the web, the phone that Google bought, the Nest that will organize the home, the same playbook in a new room. The strategy is the long game: the acquisitions that are measured in years, the bets that are placed before the market is sure, the patience that Google's cash can afford.

7. The Independent Company

The independence is the promise, and the promise is the quote: the words of Tony Fadell on Monday, the assurance that Nest will continue to operate as an independent business, the sentence that was repeated in every story about the deal. The independence is the structure: the company that keeps its name, that keeps its products, that keeps its culture, the unit that runs inside Google without being absorbed by it. The independence is the signal: the founders who stay, the teams who stay, the thermostat that will keep shipping, the autonomy that the deal was built around from the very start.

The independence is also the test: the acquisitions that promised the same thing, the companies that were absorbed anyway, the history that makes the promise hard to believe, the months that will prove the difference in the technology industry. The independence is the Motorola memory: the phone maker that Google bought for $12.5 billion in 2012, the largest acquisition in the company's history before this deal, the comparison that colors every promise. The independence is the January 2014 question: the autonomy that was promised, the integration that may come later, the balance that every big acquisition must find between the two.

8. The Lesson for Business

The lesson is the category, and the category is the creation: the product that creates a market, the company that defines a field, the prize that follows the definition, the sequence Nest completed in three years. The lesson is the value: the thermostat company that is worth $3.2 billion, the price that says more about the category than the hardware, the bet on the connected home, the market that will be built. The lesson is the timing: the founders who started in 2010, the product that shipped in 2011, the deal that came in 2014, the arc that every founder should study.

The lesson is also the perspective: the deal that is the January 2014 story, and the story is the lesson: the thermostat that became a category, the company that became a prize, the crown jewel of the connected home. The lesson is the Google bet: the $3.2 billion that was paid in cash, the toehold in the home, the privacy questions that must be answered, the independence that must be kept. The acquisition is the January 2014 story, and the story is the lesson: the product is the company, the company is the category, and the category is the future.

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