Dive Brief:
- Technology giant Alphabet is considering folding its home-automation arm Nest Labs back into Google after splitting the groups two years ago, The Wall Street Journal reported citing unnamed sources. Nest, while attracting a lot of buzz at first for products like connected thermostats, has been sluggish to innovate and lost its co-founder and CEO Tony Fadell last year while remaining an independent brand.
- The initial splitting of Google and Nest never made that much sense to begin with, some insiders said, as the two often worked on similar projects and encountered several areas of overlap. Re-combining them now would allow for more synchronization from a manufacturing and retail distribution standpoint and would be strategic as both groups face increased hardware competition from Amazon, which recently released a home security device akin to Nest products.
- In related news, Google this week rolled out an update to Google Home where the connected device can now process and complete two commands at once, according to The Verge and as first reported by CNET. One example of the feature in action was that a user could ask Google Home to turn on the TV and about the weather, with the device performing both tasks simultaneously. Amazon added a similar capability to Alexa earlier last month with what it calls "routines."
Dive Insight:
The potential re-merging of Nest and Google points to the considerable ramp-up in connected hardware technology that's occurring at the moment — one that will become a key battleground for the major technology companies next year and remains an area to watch for marketers as voice-driven search becomes a more feasible way of reaching consumers directly in the home. A recent Juniper Research report forecast that marketers' ad spending on voice-powered digital assistants will reach $19 billion by 2022.
Amazon has become the de facto leader in the smart home category with its Alexa-powered devices like the Echo and strategic moves such as allowing third-party hardware companies to use its voice-powered AI for their own devices. Google also appears to have hindered itself by separating its namesake hardware unit from Nest Labs when the two businesses might have been able to establish a stronger foothold by working in tandem.
Despite these factors, Google is primed to remain competitive with Amazon based on the strength of its software and technologies like machine learning, which have seriously bolstered the company's newfangled focus on hardware. Announcing a robust second-generation of devices in October, including the Pixel 2 smartphone and expanded Google Home offerings, executives emphasized artificial intelligence as the unifying force between the suite of products. Google in September also paid $1.1 billion to bring on 2,000 engineers and technical staff, along with some intellectual properties, from the manufacturing giant HTC.
Apple might become the third main player in the smart home sector, but it recently delayed the release of its first smart speaker, the HomePod, missing the key holiday window. Apple's approach has always been about carefully controlling the product pipeline, including hardware and software, but both Google and Amazon allow third-parties to deploy their technologies and have a greater interest in data, which can be leveraged for advertising purposes.
Google's bread and butter is its digital ad business, but Amazon is quickly staking out more of that territory, with revenue expected to surpass $2.5 billion by 2021, according to Forrester forecasts.