Why Google Threw Down $3.2 Billion On Nest Labs’ Smart Thermostat

The Nest smoke and carbon monoxide alarm. CREDIT: AP PHOTO/MARCIO JOSE SANCHEZ
The Nest smoke and carbon monoxide alarm. CREDIT: AP PHOTO/MARCIO JOSE SANCHEZ

Before Tony Fadell co-founded Nest Labs, which develops smart home appliances like thermostats and smoke and carbon monoxide alarms that can connect to other devices, he led the team that created the first 18 generations of the iPod and the first three generations of the iPhone. Now he’s crossed the gamut from Apple to Google, as on Monday Google purchased Nest Labs for $3.2 billion in cash.

Smart thermostats can change the way people interact with their houses and can lead to energy and cost savings by allocating energy use and allowing for remote control using WiFi. The Nest Learning Thermostat actually learns from a household’s dwelling habits, adjusting and readjusting heating and cooling to personal schedules even as they change over long periods of time.

In a blog post about the acquisition by Google, Fadell wrote that Nest has “partnerships with some of the largest energy companies in the country to help people save energy and money.”

In an earlier interview with WebProNews, Fadell said of his smart thermostat investment that “it was unacceptable to me that the device that controls 10 percent of all energy consumed in the U.S. hadn’t kept up with advancements in technology and design. We hope it will not only save money and energy, but that it will teach and inspire people to think more about how they can reduce home energy consumption.”


Reactions to the acquisition have expressed concern that individual people might not be the ones thinking so much about their energy consumption — it might be Google that wants that power.

“Google wants to be the connective tissue for all the devices and all the services in our lives,” Jan Dawson, an analyst for Jackdaw Research, told TIME.

Google already possesses untold amounts of data on people’s online lives; the addition of Nest brings Google further into people’s offline existence.

A statement on the Nest website tried to quell concerns over this, stating “our privacy policy clearly limits the use of customer information to providing and improving Nest’s products and services. We’ve always taken privacy seriously and this will not change.”

In any case, this is a smart move by Google, as recent research has predicted that 32 million smart thermostats will be installed worldwide by 2020, up from the less than 1.4 million installed in 2013.


As of November, Nest Labs was reportedly shipping 40,000 smart thermostats per month. The thermostat currently retails for $249.

Google has been eyeing Nest for a while, and the smart thermostat acquisition bolsters the company’s investment in clean energy and a the broader deployment of smart grid technology. Google has invested more than $300 million in distributed solar companies that let homeowners produce their own solar power. A smart grid is a necessary part of any distributed energy system, and technology like Nest that can monitor, manage and collect energy-use data will play a key role in future electricity infrastructure.

This major move by one of the largest companies in the world is further evidence that last week’s 60 Minutes segment on the so-called “cleantech crash” totally failed to grasp the crucial role that clean technology is poised to play in coming decades as fossil fuels become even less appealing for environmental and economic reasons and climate change exacerbates.

Smart thermostats like Nest’s are part of the clean technology paradigm because they help conserve resources and catalyze clean energy adoption.