January 14, 2014, 4:09 PM

Google cozies up to consumers in their homes

The search engine giant says it will spend $3.2 billion for Nest, a seller of web-connected smoke alarms and thermostats that was co-founded by an Apple legend.

Lead Photo

Google CEO Larry Page just bought a lot of smoke detectors

Google Inc.’s planned purchase of web-connected smoke alarm and thermostat seller Nest Labs Inc. gives the search engine giant access to technology and patents, and, according to one observer, potentially another way to reach consumers at home.

Google this week said it would spend $3.2 billion to buy Nest, which runs the Nest.com online site and the store.nest.com e-commerce site.  

Nest is “already delivering amazing products you can buy right now—thermostats that save energy and smoke [and carbon monoxide] alarms that can help keep your family safe,” says Google CEO Larry Page.  “We are excited to bring great experiences to more homes in more countries and fulfill their dreams.”

Google expects to close the deal in the “next few months.”

Nest co-founder and CEO Tony Fadell will continue to lead the company, which will operate as its own brand. Before Nest, he worked at Apple Inc., No, 3 in the Internet Retailer 2013 Top 500 Guide. Widely regarded as one of the executives who birthed the iPod, he worked from January 2001 until March 2010 as senior vice president of Apple’s iPod division.

He has said that Nest holds some 100 patents.

“Like many good acquisitions, the actual strategy is focused on acquiring new technologies and capabilities for the long term,” says Stuart Rose, managing director at Tully & Holland, where he leads the firm’s Multichannel Merchant Group.  “Nest has the capability of learning your environment and adapting systems based on your individual needs—similar to a search engine which divines your information needs based on your inputs. Google which entered the telephony market with smartphone technology, now enters the house with smarthome technology.”

The acquisition likely has little to do with direct online shopping, says John Doyle, managing director of investment banking firm Peachtree Capital Advisors. “I do not believe the acquisition was to place a chip inside of a product to let someone know when the toaster is broken, so that a new one can be purchased [online] automatically,” he says.  “I think they are trying to collect data to help customers better target their marketing—i.e. this person lives in the Midwest, it’s winter, they do no not have cable, they are single and they eat lots of microwave food. The next time they use their smart phone this information will help decide which ads will more likely be effective.” 

Nest.com in November 2013 attracted 109,933 unique visitors in October, according to web site analytics firm Compete. That was down from 128,100 in October, which is National Fire Safety and Prevention month for many areas in the United States. According to similar web-measurement firm, Alexa Internet Inc., the daily time on the Nest.com site stands at 3 minutes and 18 seconds per visitor. The bounce rate—the percentage of site visits that consist of a single page view—stands at 45.1%.   

For the e-commerce site, store.nest.com, 31,946 unique visitors went there in November, Compete says. That traffic appears poised to drop well below 10,000 over the next few months when judging by 2012 site traffic trends.

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