Browsing articles tagged with " English"
Feb 1, 2014
Christophe Lauer

Google’s NEST acquisition is not about the Internet of Things

Abstract

Forget everything you’ve read about why Google buying NEST is all about the Internet of Things. No, it’s not. This acquisition, for a mere $3.2bn in cash, is clearly rooted in the real economy. And here is why.

Foreword

Announced on January 14th, just a few days after the end of the CES in Las Vegas, the acquisition of NEST by Google had people talking a lot.

NEST CEO Fadell

The press was fast to spread and comment the news. It’s not so common that Google makes a $3.2bn acquisition.

Then, many journalists and analysts tried to explain the meaning of this acquisition and to decipher the rationale behind it.

But I wasn’t really convinced by anything I’ve read, most of these articles provided explanations that were too obvious and too easy – not to mention some of them being very simplistic. So I allowed myself some time to think about, and now I think I have a pretty decent explanation.

Google confirms the huge potential of the Internet of Things? No.

One of the easy and obvious explanations one could read: By acquiring NEST, Google is making a big bet and investing in the nascent market of the Internet of Things.

We’ve all heard from the Gartner about the huge business opportunities that lie in the future market of the Internet of Things. Their analysts are bragging on projections up to 26 billion connected devices by 2020, thus creating a global market of $ 1.9 trillion (yes this is $1900 billion!) with an incremental income of more than $300bn. This is huge.

Though it’s true that this acquisition will allow Google to fully enter into the IoT industry, and to give them a voice and a seat in these working groups and consortia where they are not present today, this is not enough to explain such an acquisition by a bet on the future.

Considering the price of $3.2bn – and leaving aside the future integration, marketing and operation costs – to be break even NEST would have to sell a $250 thermostat to half of the 132 million US homes, which with their current ratios would translate into about $16bn of revenue and $3.3bn of margin. This is unlikely. It won’t happen in the short term or in the mid term.

Also, we should not forget that unlike an iPod or an iPhone, a NEST thermostat sells on an equipment market and not a replacement market: nobody is going to upgrade its domestic thermostat every 24 or 36 months. Moreover, one cannot consume or purchase additional content or services from a NEST thermostat. At least not yet, but you will see later in the article that NEST has some app store envy for it’s signature device.

Google enters the house? No.

Another very common yet very unconvincing theory: By acquiring NEST, Google finds a way to enter the home and will be able to know and learn everything about the lifestyle and consumption habits of its inhabitants.

Inevitably comes right after that the sensitive question of the personal data and all the fantasies that go around – which can be easily understood in the middle of the NSA psychodrama. This theory says that Google’s advertising business would then be able to place targeted ads based on this collection of domestic data.

Not only this is not possible because of the NEST Privacy Policies, but it is unclear how these data could tell more about our tastes and habits that this Android phone that lives in our pocket and follows us everywhere.

Of course, we could imagine some interesting scenarios by merging data from our agenda, from the weather forecasts and our home thermostat, all delivered via Google Now on your Android phone. OK, this could be interesting, but not THAT interesting.

There’s nothing really groundbreaking in here, and ultimately there is nothing in there as lucrative as Google’s current advertising business. The ad business is his real cash cow: some say it represents 120% of Google’s revenue and more than 60% margin, all other activities today being experiments and cost centers.

Home automation has been a topic for decades, even before the Internet. So why would 2014 be the year of home automation? Or may be 2015? May be it’s just the same way that some repeat every new year that it’s going to be “the year of mobile”.

Google strengthens its patents portfolio? No.

Another explanation we can read in the press: NEST has certainly applied for a large collection of patents and Google would like add them to its portfolio, in order to avoid potential legal and commercial issues in the future. May be.

But think about: Would Google pay $3.2bn just to acquire IP? One could argue that they’re a similar case with Motorola’s acquisition. Until now (1), the real benefits from this massive $12bn acquisition are that Motorola’s patent portfolio have created a shield allowing Google to develop Android without fearing trials or being slowed down by Patent Trolls.

Then why?

We end up running in circles and scratching our heads: But why did Google buy NEST? That’s the plan, if any?

Even Jean- Louis Gassé, a well-informed and famous former Apple employee, comes to the conclusion that maybe there isn’t a clearly defined plan, and maybe all this happened just because Google could do it.

Barry Rithholtz, from the Washington Post, says it may just be a defensive move, some kind of insurance policy – that they is finally not so expensive if you consider Google’s quarterly revenue and they cash flow. There’s certainly a bit of that, but ultimately the explanation lies elsewhere.

Jean-Louis Gassé also reminds us of some people commenting the acquisition saying that Apple should have acquired NEST rather than Google. I do not agree.

Beyond the design of the object, the excessive care and quality of the manufacturing and “Out of the Box experience” which is very Apple-ish, the rest of the big picture has much more in common with a pure engineering project a la Google.

If Apple had acquired NEST, they would have probably just offered the device shelf in their Apple Stores, while Google by contrast knows exactly what to do with NEST. And this changes everything.

Introducing the NEST Energy Services…

After doing some deep searches, I ended up finding interesting information, and in particular I heard about the NEST Energy Services, an offering that augments the NEST thermostats value proposition in a very logical way.

From there, we start to envision the big picture, and we understand that the ultimate purpose of the NEST thermostat is not to provide more comfort and help a home owner to save on his energy bills. No, once again, the real value of this smart connected thermostat is elsewhere.

It turns out that NEST has established trade agreements with several energy suppliers, and that the latter offer cash incentives to customers who agree to play the game.

What is the goal? The objective is to better control and regulate energy consumption.

The goal is to control and regulate the energy consumption not in a house, but on the scale of a city, a state or a country. It’s all about avoiding energy shortage and expensive prices during consumption peaks. During these peaks, the price of a kW can vary from 1 to 100, and it costs to both the homeowner, and the energy provider, because it’s a regulated market and the maximum price an energy utility can charge a consumer is capped (the difference in price is then supported by the energy supplier).

The NEST thermostat is the node sensor in every home that will enable energy suppliers to master of the Smart Grid without having to make deep investments and infrastructure changes.

Now we see it. The stakes are high, and every single home is concerned. This goes far beyond the fantasy about this overhyped Internet of Things market to be. This is real economy and real benefits.

Google and the energy market then?

By connecting the dots, the pattern starts to appear…

It is little known but there is a Google subsidiary called Google Energy LCC which has received all the necessary agreements from the FERC in order to be a player in the energy market, and to sell and buy power at market price. This fact is revealed in this interview (skip to 1’40″) .

Do you see the pattern now? All right, now you can read this article from April 2013 about NEST Energy Services and everything will be much clearer.

Beyond NEST

Lately, Google has also acquired more than half a dozen of robotics companies, including Boston Dynamics that is funded by ARPA military research funds and does really incredible things, and also another company called Deepmind, specialized in AI and very discreet about their research and what they really do. Oddly, all this has generated much less conversation than the acquisition of NEST. I suppose that this is a sign that the Internet of Things topic is on a peak of hype right now, may be it’s a CES effect.

Taking a step back and looking at this big picture, it still makes sense. It is consistent with what Google has accustomed us to: the use of technology in sometimes unexpected ways to solve common everyday life questions and problems, and to simplify recurring human tasks: From the driverless cars, to Google Maps, to domestic robots, to Google Flu trends or smart contact lenses, the keywords are simplification, automation and optimization.

To be continued…

Notes and references

(1) A couple of days after this article was first published in French on Jan 29th, Google confirmed that they had sold a part of Motorola Mobility assets to the Chinese company Lenovo. However, Google will keep a portfolio of more than 17,000 patents from Motorola. What is the amount of the sale? Something about $2.9bn. Well, it seems that Google has just gotten back what they paid for NEST…

 

This article was originally published in French on Diginomos. This is an English version for your convenience. Please let me know if you find typos or grammar errors in this text. Thx!

Sep 20, 2013
Christophe Lauer

More than 10 years of blogging… and counting

I was kind of surprised the other day when I realized that my former employer – Microsoft, you named it – was kind enough to let live one of my first blogs, probably my first public blog on a MS platform. Posts are more than 10 years old.

Since then, I never stopped blogging and at some point I even had several blogs in parallel, some were purely personal, some were professional, but I did never stop blogging.

I even had my 15 minutes of fame when I was interviewed for La Tribune during Sept. 2004 and when I later discovered that the article would start by mentioning my name. This day I bought two copies to offer to my parents, I have to confess ;)

At some point, I was very into twitter, especially between 2007 and 2009 – my former managers at MSFT know what I mean when I say I was too much into twitter – but now that twitter has become so mainstream, I have learned to keep it to what it is, and I’m kind of resuming with blogging.

So, the bottom line is: if you’re a regular reader of my blog, and you kind of like it, be assured that I haven’t planned to stop blogging anytime soon ;)

Aug 24, 2013
Christophe Lauer

I Forgot My Phone (video)

I Forgot My Phone: A touching two minutes video about how we loose touch with our relatives and we’re not living the present because of our addiction to our smartphones.

Dec 4, 2012
Christophe Lauer

Agreed: Social Media Listening is not the same as Research

Earlier today, I was doing my daily routine of reading blogs in my Google Reader selection and I came found the following post titled “Social Media Listening is Not the Same as Research”, which appears to be a modified reprint of another article titled “Four Reasons Why Social Media Listening is not the same as Research”, written by Julie Schwartz who is Senior VP of Research and Thought Leadership at ITSMA.

The author’s point of view

In the later post, the author elaborates four points on why Social Media Listening cannot replace classic marketing research, based on customer panels and interviews.

Here are the four points, unedited and as present in the article:

1 – Doesn’t ask the questions you want to ask
2 – Doesn’t come up with a hypothesis and get the data to support (or refute!) your hypothesis
3 – Doesn’t comprise a representative sample
4 – Doesn’t tell you what might happen in the future; rather, it’s a window into the past

Later in the same article, the author agrees that Social Media Listening can still provide some benefits, and she mentions:

- Provide qualitative insights
- Reveal unmet needs
- Test ideas in real time
- Collect data

My point of view

While I tend to agree with most of the points listed as potential benefits, I don’t agree with the four points why social listening could not replace research. And here’s why.

1 – Doesn’t ask the questions you want to ask

This is wrong to think so.
Every day, hundreds of thousands of comments, conversations, and statuses are published on social networks, in online forums, in comments on websites, in product reviews. It’s up to you as a researcher to come up with the appropriate queries in the social listening tools in order to filter out noise and to only get the verbatim that are relevant for a given question, and to narrow down the result set to something that is at the same time not too big – so that each comment or status can be analyzed by a human, and not by some automatic sentiment analysis piece of software – and also not too small so that it still remains statistically correct.

2 – Doesn’t come up with a hypothesis and get the data to support (or refute!) your hypothesis

Wrong again, it’s exactly how we proceed: the process starts with some work sessions with the client where we scope the project, define the research areas and the questions to be answered. It’s also the moment where we get internal inputs, business and domain knowledge and specific terms and jargon, if needed. Then comes a phase of initial listening where the first hypothesis are either confirmed or refuted. If the later happens, we loop back and rescope the project, and go for another run.

3 – Doesn’t comprise a representative sample

Maybe. But maybe not. If you consider that the population of the internet users are a special part of the society, you may be right. But if you’re trying to figure out some effective online tactics, it’s likely that you’re not considering non-internet users in your research, and as a result, online conversations on social networks are a pretty representative sample, on the contrary :)

4 – Doesn’t tell you what might happen in the future; rather, it’s a window into the past

Honestly, I don’t buy into all this trends around “predictive analytics”. It’s too much of rocket science, and you never know what happens. What happens in the future depends on what WE do today, so yes I agree, you need to make your strategic decisions on something more scientific that your instinct and best guesses.

Benefits of Social Media Deep Listening

Now let me highlight some specific benefits of doing Social Media Listening for a business:

- Flexibility: you can ask as many questions as you like, come back after some initial findings, rescope and ask explore new directions. Ad lib. Databases and listening tools never get tired of answering.

- Short cycles: results can be obtained in days or weeks, not in months. These near real-time capabilities mean that you can detect early signals and take timely actions.

- You can expect the unexpected: because your queries will bring you a series of unfiltered verbatim, you can expect to find answers to questions which you would have never thought asking in the first place, even if you’re a very experimented researcher who has conducted hundred of panels and interviews.

- Authenticity: when consumers publish a status on a social network, they speak they voice, and they really say what they mean. They’re not influenced by the way the question is asked or they do not have to choose their answer from a made up list.

- Real language: also, as a consequence of the previous, consumers user their actual real language, which may differ from yours. If you study this carefully, this can give you interesting hints on some keywords that you could then use to create specific content, and also for SEO.

- No borders, no limits: You’re not bound to a given geography, and you can do the same listening for different regions or areas and observe the differences. You could then fine-tune your marketing to create location-based campaigns.

- Beyond just marketing: of course, the first departments who would benefit of social listening in a company would be marketing and sales, but not only: there are also findings that could be very valuable all along the conversion funnel: from sales, to customer support, product design & engineering, or innovation.

- Listen to the unreachable: also, this process of social listening are very convenient for those businesses who do not have a direct access to their end customers, either because they do not own their sales channel, or because there are B2B2C or because they are some kind of regulated industry. Being able to listen to unreachable customers is something of big value.

Final word

So, I’m sure you’re now convinced that Social Listening has definitely some unique business value. Some famous market research companies have also already got it, like for instance Ipsos who announced a similar offering one year ago, and I’m sure they would agree with me.

Social Media Listening is not the same as Research

On a final note, I would say that yes, I do agree with the title, but not for the same reasons :)

Curious to ear more? Convinced? Want to give it a try?

The good news is that “Social Media Listening” is something that we at Valtech do for our customers, and we have some pretty strong references and case studies in this domain. Contact us if you can to know more, and we’ll be happy to get in touch with you and to setup a meeting.

[Edit] : Corrected job title for blog most author mentioned.

Mar 6, 2012
Christophe Lauer

DO’s and DON’Ts of Social Analytics – Conference material

This morning in Paris was our event “Social Media Analytics”, with our partners from comScore and Adobe.

Here is my presentation about the Do’s and Don’ts of Social Analytics. This is the director’s cut version, along with the comments. You can download the PDF version.

Enjoy!

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A propos : Consultant solutions sur le Marketing Cloud chez Adobe, région Southwest Europe.
Ex-Microsoftee de 2001 à 2011.
Je vis entre Paris et New-York entre Paris et deux avions, et ceci est mon blog personnel.
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