Google did not pay $3.2 billion for Nest Labs this year just because it designed a smart thermostat ...

1. Google’s Nest Labs Joins Race to Define Platform for
the Internet of Things
Google did not pay $3.2 billion for Nest Labs this year just because it designed a smart thermostat
that has redefined that humble household device.
No, Google also bought into the vision of Nest's founders, Tony Fadell and Matt Rogers, a pair of
prominent Apple alumni, that the Nest thermostat is one step toward what they call the conscious
home. That means a home brimming with artificial intelligence, whose devices learn about and adapt
to its human occupants, for greater energy savings, convenience and security.
Last Friday, Nest moved to broaden its reach in the home, buying a fast-growing maker of Internet-
connected video cameras, DropCam, for $555 million. And on Tuesday, Nest is expected to announce
a software strategy backed by manufacturing partners and a venture fund from Google Ventures and
Kleiner Perkins Caufield & Byers.
Nest's is the third high-profile announcement this month about software to link devices in the home
in a network known as the consumer Internet of Things. At its Worldwide Developers Conference
this month, Apple introduced HomeKit, its technology for linking and controlling smart home
devices. HomeKit uses the iOS operating system, the software engine of iPhones and iPads.
Quirky, a start-up that manufactures and sells products based on crowdsourced ideas, on Monday
announced the creation of a separate software company, Wink. Its initiative has attracted the
backing of a major retailer, Home Depot, and manufacturers like General Electric, Honeywell and
Philips.
All three projects are efforts to create software platforms for the Internet of Things. The concept of a
platform relies on a virtuous cycle: The more people use your technology, the more likely other
people are to use it. Economists call this a network effect.
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mentionedThe most common example in technology is the computer operating system, which has
gone from the IBM OS/360 to Windows to iOS to Android.
But a software platform doesn't have to be an operating system. It can be any software that attracts
a following of developers who write applications that link to it or work with it. The company behind a
successful platform creates a technological and business ecosystem and reaps the benefits through
increased sales of software or hardware.
The Nest plan reflects its corporate ethos: "You build great products, and through that a platform
emerges," Mr. Rogers, vice president for engineering, said in an interview. "No one wants to buy a
platform. People buy products. You need critical mass."
Nest's eight early partners include Whirlpool, Jawbone and Mercedes-Benz. Brett Dibkey, a vice
president who oversees Whirlpool's smart-home efforts, said his company and Nest had a similar
philosophy. The emphasis, he said, was on "consumer-relevant, purposeful innovation."

2. Whirlpool and Nest, Mr. Dibkey said, have worked together for more than year to develop a few
applications. One allows a Whirlpool clothes dryer and a Nest thermostat to work together to
conserve energy and save money. The thermostat detects a local utility's peak load times, when
electricity is most expensive. It sends a signal to the dryer to run on a cooler, slower drying cycle at
those times.
In a Jawbone application, the company's activity-monitoring wristband detects when a person gets
up on a winter morning. It then sends a message to the Nest thermostat, telling it to heat up the
house, said Jim Godfrey, Jawbone's director of communications.
Nest opened up one site for developers and one for consumers that explains how other products
work with Nest.
Nest's Internet of Things strategy will be backed by the Thoughtful Things Fund, a venture capital
fund created by Google Ventures and Kleiner Perkins. The fund is intended to help developers who
make Nest applications get their projects up and running. The Thoughtful Things Fund is similar to
other venture funds established to support smartphone and tablet software developers.
"For a small company," Mr. Rogers observed, "it's really tough."
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