Some theories on why Apple didn’t buy Nest…

By , Jan 14, 2014

Nest Protect app (iPad mini 001)

Google’s acquisition of the smart thermostat and smoke detector maker Nest Labs, which came out of the blue yesterday, has certainly set tongues wagging. And when you think of it, the shock and awe didn’t stem from the business side of things – it came from buying users of a lovable service in a non-physical space, but whose relationship with the service is part physical.

And to think it all began like a fairy-tale…

Here’s a cutesy little startup led by Tony Fadell, a former Apple engineer who used to lead the iPod’s development over seventeen generations before leaving Cupertino amid feud with design guru Jony Ive and iPhone software head Scott Forstall to co-found Nest Labs, along with fellow Apple staffer Matt Rogers.

“Starting a business focused on the lowly thermostat seemed like a crazy idea at the time,” Fadell wrote yesterday in a blog post. Turned out a lot of people fell in love with his smart thermostat. Just as Nest was about to complete another round of funding, Google swept in and bought the company outright for $3.2 billion in cash.

Sources claim Google was the only serious bidder and Apple was not in the mix. Heck, the iPhone maker didn’t even bother to put up a fight. But why? Here are some of the more popular theories floating around (feel free to add your own in the comments)…

Here we go.

Apple is overly controlling. That’s an easy one. Nest’s vision is platform-agnostic and there’s no freaking way Apple would have supported any platform other than iOS had it snapped up Nest.

Privacy concerns. Privacy advocates are already crying foul and derailing the deal on the assumption that Nest at some point is going to share customer data with Google. Perhaps Apple calculated that the risks involving privacy concerns would harm the brand and outweigh any benefits.

Apple doesn’t care about Smart Homes. Apple may have decided that Smart Home is too niche a market, for the time being. If the Apple TV is a hobby business, Nest devices would have been an even smaller hobby. And given that an influx of iPhone-controlled everything gadgets at CES pretty much cover this space – and especially with the rumored iWatch, iTV and other unknown projects – there are clearly bigger fishes to fry if you’re Apple.

Apple has a secret Nest killer in the works. Assuming Apple does care about Smart Homes enough to put out a product of its own, buying another company’s established gadget would run counter to its established acquisition strategy. When was the last time you heard of Apple spending billions to buy a niche startup?

Feud with Jony Ive. According to Cult of Mac editor Leander Kahney’s bio book on Jony Ive ($11.99 on the iBooks Store), Tony got canned due to lingering bad blood between himself and Ive, here’s that excerpt:

He was paid off with his salary for a number of years plus so many millions to leave. Tony was canned because he was battling with Jony. He went to Steve so many times bitching about Jony, but Steve had such a tremendous amount of respect for Jony and their relationship that he sided with Jony not Tony.

Assuming Ive, who now runs both hardware and software design at Apple, indeed got Fadell fired, there’s no chance on Earth Ive would want Tony back and agree to work with him on future products.

Nest Thermostat and Protect (lifestyle 001)

Google Ventures. Nest raised about $80 million in venture funding. The Internet giant led the initial investment and backed Nest again in a subsequent round through its venture capital arm called Google Ventures. It would have been out of character for Apple to had bought a startup backed by its fiercest competitor.

Google’s been involved since the start. Fadell confesses in a blog post that he personally showed an early model of the Nest Learning Thermostat to Google’s Sergey Brin before it launched. Do you really think Apple would buy a firm in which its competitor has been involved since the start? I also wouldn’t rule out that Google may have had an exclusive negotiating window to begin with.

Apple isn’t “a rocket ship”. Fadell called Google “a rocket ship” that would help fulfill Nest’s vision of the conscious home a lot faster. Fadell & Co. didn’t leave Apple on good terms so it’s conceivable they would feel Apple lacked the scale and huge resources to build out their vision. Perhaps that’s why the fruity company wasn’t in the mix at all. Maybe Fadell felt only Google could help build a smarter home, one innovative product at a time?

Here’s Nest co-founder Matt Rogers discussing the updated Nest Learning Thermostat, his early days working at Apple and more.

On a final note, Apple’s and Google’s acquisition strategies are worlds apart.

Whereas Apple prefers acqui-hires, acquisitions of small startups for their talent and technology, Google goes all out and isn’t afraid of dropping billions of dollars to bring companies like Motorola under its wings, hoping some of them would pay off big time.

The Nest deal is Google’s second most-expensive to date, only trailing its $12.5 billion Motorola Mobility deal. All told, Apple bought thirteen companies last year and Google went successfully after twenty hot startups, among them seven robotics companies in December alone.

Can you say “moon shots”?

Again, this is all pure speculation (that’s why they call it a thesis).

Anyways, I’m wondering about your theories so don’t be shy to sound off with your thoughts down in the comments.

And here’s Tony Fadell telling us about a bunch of other things he feels are ripe for disruption in the house and some thoughts on the Smart Homes of the future.

Surprisingly enough, Apple continues selling Nest products in Apple Stores.

I wonder what could trigger their removal. Maybe first-class Android treatment post-acquisition? Google+ notifications? A user policy change allowing for harvesting and rolling of Nest customer data into Google+ ?

While Nest assures it won’t share people’s data with Google because its privacy policy doesn’t allow for this, who’s to say privacy policy won’t change down the road?

Nest Thermostat and Protect with family (lifestyle 001)

Nest’s devices with built-in sensors could enable Google to know when you’re home, when you’re out, what rooms you’re in, if you’ve been sleeping, if you’ve been awake and lots, lots more – and that must be a scary thought for Google haters.

By the way, Nest had over a hundred former executives, software engineers and product designers who previously worked at Apple, according to a LinkedIn analysis by Quartz.

And now, all these bright people will get to work on a smarter home under Google’s roof.

If anything, the Google-Nest deal is a reminder that Google seems to be getting better at what Apple is best at faster than Apple is getting better at what Google is best at, as Daring Fireball’s John Gruber summed it up nicely.

Wrapping up, this is how Fadell explained the decision to sell out to Google:

I was spending nearly ninety percent of my time on building the infrastructure of the company and I wasn’t able to spend enough time and cycles on what I love doing: products and creating differentiated experiences for our customers.

That is where my love is and Google offered to let us focus on that, but with scale that will help bring our horizon closer to us, faster. Google offers to bring that scale to us. For me, ultimately building great products is key.

And he also reminded critics in an interview with The Verge that “our customers come in both iOS and Android flavors” and expressed hope that folks can still “buy the products they want to purchase wherever they want to purchase them”.

I’m guessing most of you won’t be asking for a refund of your Nest thermostats and Protects just because Google now owns Nest, no?

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  • Framboogle

    Or maybe because there is no temperature related term that starts with P.

    • Sean Clark

      “iPuck” doesn’t quite roll of the tongue, either.

    • Guest

      -DELETED-

    • I Didn’t Do It

      iBooks?
      iTunes?
      iMac?

  • 123bob

    Really nice article. Thanks.

  • Dan

    I’ll go with…

    • philad3lphia

      I don’t think I would call them overly controlling, they just have a standard for form and function that they will do what’s necessary to maintain it. Apple also reports profits of billions of dollars a year so I’m not so sure there’s anything wrong with their business model.

  • Solowalker

    My vote would be for the more simple “They don’t have a need and don’t want to mess with them.”

    Apple doesn’t need to buy every company. Would you want them to? They only buy companies they have a need for, whether it’s IP or talent. And even then, they only resort to that if they don’t feel they can build what they want with what they have in a reasonable amount of time. Apple is now and always has been one to prefer homegrown solutions, where possible.

    They’re also notorious (and often criticized) for their extreme product focus. Most other companies use the spaghetti method—throw everything at the wall and see what sticks—for releasing products. Apple has a relatively sparse product lineup when compared to nearly every other competitor, what’s essentially just consumer and pro variants in each category. All of their products have been computing devices so far, with the minor exception of some iPod models and a handful of accessories. The iPhone and iPad while technically new categories very much fall into the general “computing devices” classification.

    The Nest and like products are a totally separate classification. They’re great products and a great idea, solving problems that need solving. But they’re not a great fit for Apple’s current vision and product lineup. (For the record, neither is a standalone TV set.) Apple sees this and they appreciate Nest for their great hardware and software, so they gave them the best endorsement they could in giving them valuable space in all their retail stores. Just because Apple likes them doesn’t mean they have to buy the company and make the things themselves, the same way they don’t have to make printers, external hard drives, Thunderbolt docks, Bluetooth earpieces, Automatic, Pebble, Nike’s FuelBand, [insert your favorite accessory here], etc.

    Nest was making a great thing on their own but not something Apple needed or wanted to make themselves, so they let them be. That doesn’t mean Nest wanted to be let alone do their own thing, just means Apple wasn’t interested. So unfortunately and much to my personal chagrin, they found somebody else who supposedly would give them what they felt they wanted/needed but didn’t have in order to pursue their vision.

    Hopefully Google doesn’t mess it all up…

    • Kash Gummaraju

      Well Apple did buy a bunch of small map companies, authentec, and recently primesense(the company that makes the kinect sensors) It’s just that Google buy companies with talented workers. After buying the company, they get the patents, workers, resources, and new ideas. Same with Apple

      • Solowalker

        True, of course Apple buys other companies, but it’s yet to do so for already established products, just for talent and IP which fits all the examples you’ve mentioned. There’s a clear difference between those and Nest.

  • Franklin Richards

    Was thinking of getting a nest. But not anymore. It’s all well and good saying that no google stuff will be on it now. But what about later on down the road? Nest will inevitably be strong armed into including Google related crap into it soon. I mean why would a company by out another company if not to make stuff work for them.

    • Gucciipad

      i also wanted a Nest. not any more thanks to Google.

      • grumpyfuzz

        Why are all you people on this site so biased against Google? I personally like Google, but if Apple made a product that was very good I would buy it…

  • Gróf Attila

    Its time and google will put ads on it somehow…

    • ali_plus

      If your house is burning down you’ll now get gmail ads for fire extinguishers

      • rod

        lol.. Made my day

      • https://twitter.com/MrElectrifyer MrElectrifyer

        Hahaha, thanks for laugh.

    • PwnHkr

      Actually it’s the shitty developers whom try to make a profit off of ‘nothing’ by spamming their ‘free’ apps with ads or offers. Google doesn’t make those ads anymore than Apple does..

  • n0ahcruz3

    Overpriced thermostat. Not a necessity

  • Rowan09

    If Apple TV is just a hobby. What would a $3.2 billion thermostat and smoke detector be for Apple? Nest doesn’t fit into Apples ecosystem right now and if it did not for $3.2 billion.

  • El Arqui Tecto

    Nobody cares if it’s already sold…

  • Jack Wong

    I am expecting another article tomorrow – Some theories on why apple didn’t buy nest…

  • Obsidian71

    There’s absolutely no reason for Apple to add this type of hardware. Even for Apple new HW types are expensive. Their focus is laser sharp. Every product has to entice you to buy more “existing” Apple hardware. A Thermostat and grossly overpriced Smoke Detector are not going to sell more iPads and iPhones. Apple certainly isn’t going to spend a billion dollars. They give two shitz about the data that Nest has collected. Google on the other hand…

  • Alberto Espinal

    I believe its a hell of idea “product” and in the future i guess every house will have one of these but maybe Apple is concentrating more on what it is most important at the Moment which is “The IPhone” & “The IWactch”
    But its only one or two thermostat per home as of three or four iphones and ipads per household and thats where the money is, my thoughts!!