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Smart home

Google has acquired Nest, an ‘Internet-connected home products’ company. Will consumers buy the idea of digitising personal life?

January 26, 2014 3:18:42 am

The home of the future — complete with helper bots and automated appliances — has long been the stuff of science fiction. The tech world is determined to make it a reality. Soon, the vision goes, everything from garden products to bathroom appliances will be controlled by the touch of a smartphone. Without setting foot in the door, a person headed home could turn off the security system and turn on the shower and begin preheating the oven.

The concept of outfitting everyday objects with sensors and connecting them to the Web, often called the Internet of Things, has been brewing for several years. But the announcement that Google was paying $3 billion to acquire Nest, a maker of Internet-connected home products, put a sort of Good Housekeeping seal of approval on this nascent market.

“Google is showing that the Internet of Things is not a passing fad,” said Jason Johnson, the chief executive of August, a company that makes smart locks controlled by a smartphone app. “It is a legitimate industry, and I’m excited to see big companies taking it seriously.”
So far, many of the major strides have been made by smaller companies. SmartThings, a startup in Washington, DC, sells a kit of small sensors that can monitor moisture levels and detect motion. Canary, a New York company, is working on a video security system that sends alerts when it notices a drastic change in temperature, air quality, motion and more.

And as the Google deal suggests, big companies are positioning themselves to be players as well. Many cable companies, including Time Warner Cable and AT&T, offer connected home systems that include appliances and lights. Even Staples, the retail chain, is selling products like light bulbs that are controlled through a smartphone application.

The motivation behind all these companies is clear: the global market for connected home products could be as large as $40 billion in the next five to seven years, said Gene Munster, an analyst at Piper Jaffray.

But there is more than just money at stake. It’s the chance to carve out a place in the next wave of computing and possibly become a household name in consumer technology products, perhaps the next-generation equivalent of Apple or General Electric. In order to do that, however, each of these entrants must overcome several hurdles to gain traction in the fickle consumer market.

One challenge is that a connected home is expensive to set up. For now, at least, “smart” products cost several times more than their traditional counterparts. For example, the Nest smoke and carbon monoxide detector costs $129, while many typical detectors cost $40 or less. Nest has estimated that its $249 thermostat, its most popular product, is in less than 1 percent of households.

Many people have also shown a reluctance to add more apps and digital services to their lives. And many of the products already on the market do not work together seamlessly because each parent company is vying to become the dominant service.

Still, many companies believe that the wide array of products and the wealth of possible data is a selling point and that consumers will eventually come around. The idea of digitising parts of one’s personal life “has captured a movement of people that are keen to put metrics on everything and analyze any aspect of their lives and improve it,” said Cédric Hutchings, the chief executive of Withings, a company that makes Internet-connected healthcare products like scales and sleep monitors.

Smart-connected devices also face concerns about security and privacy. A hacker could theoretically target a smart lock or home security system, for example, and many questions have been raised about how the data collected by the products might be used by the companies that make them.
August, the company that is working on making smart locks, has held off on shipping until it is certain that its system is safe from breaches. Although the company says that tens of thousands of people have placed orders, it is delaying release of the system for a round of vigorous testing by security researchers, who will scan for weaknesses in the software.

Despite all these doubts, the tech industry remains confident about the possibilities. Google’s purchase last week made that clear, and the deal sent a shudder through the entrepreneurs and startup companies that have been competing for a piece of the growing market.

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