Nest Labs: How iPod creator’s smart thermostat became a top Google brand – CNBC

In this weekly series, CNBC takes a look at companies that made the inaugural Disruptor 50 list, 10 years later.

Apple iPod executives Tony Fadell and Matt Rogers recognized over a decade ago that there was a simple piece of technology in need of an eye-catching, high-tech upgrade: the home thermostat.

Generally, consumers viewed thermostats as an eyesore in the house — a requirement yes, but not an opportunity for innovation. In 2011, a year after founding their smart device startup Nest Labs, the Learning Thermostat hit the market, with the ability to control a home’s heating from a phone app. It was such a hit that a second generation edition followed a year later.

“A thermostat for the iPhone age” was how Fadell described it to the New York Times in 2011.

The Nest Labs founders quickly moved on to additional products, including Nest Protect, a smoke and carbon monoxide detector which also could be controlled by a phone app. 

The Nest smart thermostat was a milestone in the rise of smart home devices linked to smartphone apps, and the concept of mass market adoption of the internet of things, in their case, through a rethink of the most common, utilitarian home instruments. It also presaged a new era of “remote control” innovation, giving consumers the ability to control their homes without even being there — which now extends even to barbecues in the backyard — and to control certain parts of their home through the tap of a button while sitting on the couch.

Routers and security systems, locks and alarm systems, speakers and cameras and doorbells are all part of what the company has become today as the smart home and internet of things space has grown into a major consumer technology market. But what started as an independent startup ended up in the eyes of a top Apple competitor within a few years of the Nest founders’ launch.

In 2014 — the same year Amazon launched its first Alexa-powered Echo home speaker — Google acquired Nest for $3.2 billion, its second-largest acquisition at that time behind Motorola.

Nest Labs remains a home automation specialist company in Google’s home electronic product suite now marketed under the brand Google Nest. But it wasn’t exactly a straight line up for the company’s successes, or corporate structure.

Approximately 440,000 smoke detectors had to be recalled in 2014 at a time when the company’s early successes still dominated headlines about it.

In 2015, under the Google umbrella, Nest’s original thermostat and Protect saw new generations come out, and the company introduced the Nest Cam Indoor, entering the home security market. A year later, Nest Cam Outdoor, a weatherproof version of the original camera, debuted. But the camera efforts also resulted in some negative press, after Nest bought Dropcam for $555 million to help build its Nest Cam line, and Greg Duffy, that startup’s CEO, clashed with Fadell. A back and forth in the press and in personal blog posts between the two got nasty, with Fadell’s comments about staff defections being interpreted as a dig at Dropcam, and Duffy writing on Medium in 2016, “If you knew what percentage of all of Alphabet’s ‘other bets’ revenue was brought in by the relatively tiny 100-person Dropcam team that Fadell derides, Nest itself would not look good in comparison.”

Fadell has recently said of himself in an interview with Forbes that “there comes a point in a project, for example, when I can get loud and pushy. But that’s because …….



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