Google Drops $3.2 Billion on a Company That Makes Fire Alarms and Thermostats. Here's Why.

Google Drops $3.2 Billion on a Company That Makes Fire Alarms and Thermostats. Here's Why.Image via 9to5 Google

Google doesn't fly the nest, it buys the nest.

The Internet giant announced that it's buying Nest, a company that gained fame for making Internet connected thermostats users can control with their smartphone, and fire alarms that use light and verbal cues to tell users when batteries are low and when its detected carbon monoxide. Google is purchasing it for $3.2 billion, but Nest will still continue to work independently of Google in the sense that it will only use customer data (as of now) and won't be integrated with things like Google+ and Gmail.

"Nest will be even better placed to build simple, thoughtful devices that make life easier at home, and that have a positive impact on the world," said company founder Tony Fadell, who was also a part of the original Apple iPod team.

Why did Google buy a company like this seemingly out of the blue? Partly, because, they have close to $50 billion in money to do so, as of last year, and in an industry where it's almost a daily occurrence for companies to be bought out by Facebook, Microsoft, Yahoo, Google, or others, they wanted to be the ones to pull the trigger. Right now, fire detectors and thermostats may not sound that fun, but in the future, Google will be able to participate when company ventures into more exciting products. Once these devices take off and are installed in the homes of thousands or even millions, they'll do what they were built to do: collect data. For example, the Nest thermostat collects information about the times when owners leave and enter the house, turn on lights, and their energy use. Nest might not be using data like your Google+ profile, Google were certainly use Nest's user data like this for their advertising. 

Advertising is Google's primary money making strategy: almost 97 percent of its revenue come from the personalized ads you see in Google search results and the like. In 2011, $32 billion of almost $33 billion in revenue came from ads. Once the company has access to your home through products made by Nest, those ads will become more tailored than ever before thanks to the data they will gather, and that $3.2 billion will almost certainly pay itself back.

[via USA Today]

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