How Google and Nest could get the smart home all wrong

Welcome to the Google smart home: You walk up your steps and use your Android device (or iOS app) to open your smart lock and signal to the network that you've arrived, whereupon your Nest thermostat turns the heat up to a comfy 71 degrees and Nest smart lights adjust the brightness to optimize energy use. Meanwhile, your Samsung refrigerator that now relies on Android -- earlier models having proven that the native Samsung smart appliance software just couldn't cut it -- sends you a notification to let you know you have just enough parmesan for tonight's recipe, but will have to buy some more next time you shop. Scratch that. It already noted that on your Google Doc grocery list.

It's a starry-eyed vision that glosses over all the gritty details that underlie what a Google-wound network of smart appliances might look like down the line, birthed by Monday's news that Google has acquired Nest Labs, maker of smart appliances, for $3.2 billion. Imagine! It's the marriage of a rock-star hardware maker to the most ambitious tech company on the planet. And for Google fans the news surely has some added zest, given thatnearly everyone thought a Nest acquisition was soundly in Apple's playbook.

But building the cohesive "conscious home" envisioned by Nest CEO Tony Fadell and the onslaught of Internet of things evangelists is one of the most complicated hurdles facing modern tech companies. So much so thatlackluster smart home showings from giants like LG and Samsung at CES 2014 last week did nothing but illuminate how murky the movement will be from trade show floor to store shelf.

And "getting it right" seems to be so far off that even Nest co-founder Matt Rogers, who will stick with Fadell under Google, admits that we're years away from the average consumer being able to start his or her coffee machine by turning off the alarm clock, at least not without turning to tech support four or five times.

"I think it's a decade. I think this is a very, very long road," Rogers said at CNET's "Connected Home" panel at CES 2014 last week. "You look at the Internet during the 90s: small communities, not mainstream. Late 90s: much broader. But it really wasn't until this last decade that it was mainstream," he added. The Internet of things, he posited, involves very much the same kind of slow progression and mass market convincing before it truly takes off.

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While CES may have been a drag for the smart home, what with tweeting fridges and texting washing machines, many in the industry are hailing the Google acquisition as an undeniably positive development for the space. It means not only more funding and faster development for Nest, the darling of the industry, but also a signal to both consumers, investors, and new startups that 2014 is the year this might really explode.

But the challenges are looming large -- and hard to solve. What's the best way to get devices talking to each other without seeming too overly proprietary but still understandable and user-friendly? What happens to the data about when I leave my house or go to bed or what's in my fridge? Is that data safe? Is that data for sale? If not now, when and for what trade-off?

Google has now taken a step forward into the Internet of things that it can't undo, and will have to move carefully to convince people that it's a force for good in the smart-appliances sector. Still, it could just as easily drop the ball, and Nest's bright future along with it. Here's how Google could take this otherwise universally applauded acquisition and use it to screw up the future of the connected home.

Mistake 1: Keep Nest devices at a premium

While it's currently unclear just what Google will reap from dishing out a little more than 5 percent of its cash reserves for Nest, the unequivocal response to what immediate benefit Google will offer the smart appliance-maker is this: scale. Currently, Nest is catering solely to North America, specifically the US and Canada, with hopes to launch in the UK soon.

Under Google's umbrella, Nest can easily gear up distribution and market launches at a far faster rate and accelerate the evolution of the company. "The thermostat that Nest has attacked for a while is really just scratching the surface. It's a huge market, and they've only been available in two countries," said Rob Coneybeer, managing director at Shasta Ventures, one of Nest's investors alongside Google Ventures. "I would say that they have the resources now to hire more rapidly, they have the resources now to invest if they want to in more products," he added.

While that all sounds grand for Nest and its investors, the products it makes are still sold at a premium when compared with what the average person spends on such appliances -- $129 for the Protect smoke detector and $249 for its thermostat, with old-fashioned models of each costing roughly $30 each.

"I think it's a decade [until the Internet of things is a reality]. I think this is a very, very long road," --Matt Rogers, co-founder, Nest Labs

That's a price point that Google could help bring down if the goal is not to make hardware at a profit, but to increase the prevalence of smart appliances and promote energy efficiency worldwide. It's not too far off from the often-humanitarian bent Google brings to its moonshot initiatives, like air-balloon Wi-Fi with Project Loon.

"Carbon emission decrease is very Google-esque," said Alex Hawkinson, founder and CEO of SmartThings, a company that makes a suite of smart home appliances all tied together through a universal software platform for smartphones. "I think there's no doubt that this will directly, for Nest, infuse the ability to scale into more countries and more aggressively bring costs of devices down if they want to."

That's not to say there is any indication that either Nest or Google is intent on selling smart appliances potentially at a loss just to accelerate adoption. But Nest's whole goal in tackling the unsexy appliances, thermostats and smoke detectors, was because those could have the most impact, cutting energy bills and saving lives.

"You know with home energy use, the thermostat is the biggest single device you could attack and really change that," Hawkinson said. "One of Google's big plays here could be to help this scale and make it more available and reduce household energy use worldwide."

In that vein, Google could be more interested in making sure Nest can reach more households before it begins rolling out more products. How it goes about doing that -- either by helping lower costs or some alternative strategy -- will prove pivotal to shaping Google's smart home.

Mistake 2: Lock Nest down. Or worse: Push Android-only

The worst thing that could happen, and a cynical sentiment that was quickly echoed on Twitter and in Internet comment threads, is that Google, in gobbling Nest, will attempt to keep it locked down and interwoven with only Google products. "Nest has been great at opening up device innovation and making connected objects. The one issue with them is that they haven't had an open API," said Hawkinson. "If they [Nest and Google] open up easy-to-use APIs to Nest devices, that will foster a lot of innovation in a good way," Hawkinson said.

Hawkinson finds it unlikely that Google would suddenly reverse course on its relationship with open-source technologies. "Google has always had a really good stance with Android and outwards in terms of providing open APIs. I think it's going to help Nest scale and it's that much more likely to be open as a result of this, he added.

One reason why Google would even consider such a move would be to directly compete on the platform side with companies like Hawkinson's, building out a Android-powered smart appliance-specific operating system of sorts. It's not farfetched to imagine Google weaving that into a smart-home ecosystem, especially considering that it's no longer just a search company serving ads, but a Web behemoth that layers itself like a fabric over many of our daily apps, services, and devices.

Coneybeer doesn't think Google is interested in the software or platform side of the Internet of things, at least not yet. "The focus is on the hardware. Once you get the hardware footprint, you can offer those other things," he said.

When asked directly about Android by The Verge, Fadell simply stated, "There are no plans. Like I said, iOS and Android, we're going to be committed to both platforms."

By turning heads with such a jaw-dropping acquisition figure and snatching up the most high-profile hardware on the market, Google has heated up the smart-home space like no other company could, save Apple. It's now Google's responsibility to make sure that it leaves room for others to innovate and build out Nest's platform, especially if it wants to lead the charge while ensuring our initial positive reactions to the Nest deal stay positive.

"$3.2 billion in cash is going to cause a lot of other companies to re-up the interest," Hawkinson said. "We were seeing on our side that 2014 is really the year where this starts to gain mass market adoption." If that's to be true, keeping the smart home as open as possible will be in Google's best interest.

Mistake 3: Fumble on privacy

It's one thing to quietly open the floodgates between Google+ and Gmail -- risking the momentary fury of the tech community -- but another issue entirely when dealing with devices capable of collecting data about us while we sleep or go about our private lives. Privacy, one of the increasingly sensitive cornerstones of our technological lives both in the US and abroad, is now intrinsic to how Google manages its services as it sticks its hands into more and more industries.

By venturing into the home with Nest, Google will be forced to walk a fine line to ensure it's not painted as the all-powerful and unavoidable tech titan taking over every aspect of our lives, from autonomizing our cars to mandating we use our real identities online. Fadell has been adamant that Nest will not be changing its terms of service, but refused to say definitively that the company would never open itself up to Google in the future.

Rogers, speaking at CNET's "Connected Home" panel last week, addressed the issue and staunchly drew a line in the sand. "The most obvious answer is the right answer. If the consumer says, 'Hey I don't want you to collect my data' and 'Delete my stuff,' you have to do it," he said. "It's the right thing to do."

It's no mystery that corporations would love to advertise to us based on what they know we may need in our refrigerator or bathroom. "It's up to guys like us to make sure that that doesn't happen," Rogers added.

Fadell is equally staunch. "We had long discussions [with Google] about what they do with users' data today," he said in an interview with CNET Monday. "And we had them read our privacy policy, which clearly limits [use of Nest owners' data] only to improving Nest users' [experiences] they looked at us and said that's what they wanted to do."

But that doesn't mean that opening up Nest to Google's data mining one day will be a bad thing. If there's an appropriate opt-out policy in conjunction with clear and valued incentives, unleashing data from our smart home to help better the services and improve efficiency could fundamentally change our relationship with companies like Google. And that doesn't just mean discounts on detergent if you let your smart washing machine siphon your usage data.

"Saving 20 percent on your energy bill, helping the planet in the process, and avoiding breakdowns of a system when there's a heat wave coming, those are real things," Hawkinson said. "I think that's a big deal and worthy cause."

Update at 2:20 p.m. on Tuesday, Jan. 14: A previous version of this article stated that Nest was planning to expand into the UK soon. Nest has already begun selling it's Protect smoke and carbon monoxide detector in the UK, but has yet to roll out its Learning Thermostat.