Smart Home Weekly: The (Nearly) All Revolv/Nest Acquisition Edition

Welcome to the Smart Home Weekly for the week ending 10/26/14.

It was a slow week in smart home until Nest pulled a Google and acquired smart home hub maker Revolv.

Kinda big news, right?  I'll spend most of this week's newsletter looking at this deal and what it means.  

Quickly though, some housekeeping: the winner of the Oort Bluetooth smart home will be announced on Tuesday. I'll write up a blog post. However, if you haven't entered (deadline Monday, better hurry), don't worry - we'll have another cool giveaway starting next week.

Also, if you haven't registered yet for Thursday's webinar, please do so. You can hear me talk to Mike Harris from Zonoff and Kevin Meagher of Lowe's about building scalable smart home products and services.

On to the big news...

Nest Acquires Smart Home Hub Maker Revolv

Google's smart home group, led by Nest, has acquired the smart home hub maker Revolv. They will stop selling the device immediately, and all indications are this was an acquihire of a company whose main product had sold fairly little.

The lack of sales isn't surprising, in part because Revolv's hub was $300, many times more expensive than competing solutions such as Wink, Lowe's Iris and others. But also in part because the hub as a device category is a long term stop gap, something which Nest knows as evidenced by what Nest cofounder Matt Rogers told Liz Gannes, “We are not fans of yet another hub that people should have to worry about. It’s a great team, an unbelievable team. There’s a certain amount of expertise in home wireless communications that doesn’t exist outside of these 10 people in the world.”

I've questioned the long term viability of the  hub, feeling that you could put that functionality into other devices. Nest seems to agree with me even as they buy Revolv, if Rogers' quote is any indication.

For Nest (which is really Google, only that they want us to say Nest because I'm sure they've determined the words "Google" and "smart home" don't test well together), they are employing a Trojan Horse strategy using the thermostat as the central control point, while others like Wink are starting to look at switches/wall mounted displays as possible control points combined with a smart phone app. Apple's strategy isn't completely clear, but I think HomeKit will make iOS devices smart home control points and the Apple TV will be positioned as the fixed control point long term.

Some other thoughts:

Radio Expertise: No Longer Hanging By A Thread

In terms of what Revolv gets Nest/Google, it looks like the main reason for the buy was to bring a significant amount of radio expertise in house.  What's interesting is this acquisition is a tacit admission by Nest/Google that while they hope to push a new wireless standard in Thread into the market, they've realized Thread is one among many radio standards in the future smart home and Nest as a company needs to be able to make them all work together.

With all this new in-house radio expertise, It makes one wonder how the Nest thermostat will evolve in the future if the company has stated publicly they don't really want a hub.  Could we see the Nest Thermostat pack in more radios over time?

I certainly think it's possible.  Currently the thermostat has Wi-Fi and 802.15.4 (the radio utilizing their version of Thread and the radio foundation for Zigbee and 6LoWPAN (which Thread also uses)), but I could see Bluetooth as a good possibility for the next version of the Thermostat. 

Would Nest ever push Z-Wave into their thermostats or use the 802.15.4 radio for Zigbee? I have my doubts. While the radio expertise they are acquiring could certainly help them in myriad ways as they look to hone their smart home control point devices, I still don't think, philosophically, Nest would go the Z-Wave or Zigbee route. All that smack talk about Z-Wave and Zigbee (even if indirect smack talk) coming out of the Thread group seems like it would mean eating some crow if Nest started to pack in Z-Wave radios into their thermostat.

The Smart Home Hub Cool Kids Now Work For The Man 

Another interesting angle on this deal is it essentially takes the last of the recent high profile smart home hub startups off the market. Sure, there's long time players like Vera, INSTEON and others that have been around for a while (as well as more recent entrants like Wink and PEQ), but of the recent crop that came to market in the last few years, Smart Things and Revolv have been the ones constantly positioned by the mainstream tech press in trend pieces as starting points in the the smart home.

But now with the two highest profile hub players off the market and working for the man in Samsung (Smart Things) and Revolv with Nest/Google, what will this mean for those left?

Unfortunately, I think that the two most high profile players in the hub space had fairly underwhelming exits shows that the market hasn't put a super high valuation on this particular category. The main reason is because sales volumes have been underwhelming for all the reasons I've talked about in the past: hubs are not easily explained, consumers hate new box categories, etc.

Those companies that have been on the market and have something of an installed base (meaning those companies that showed up before Smart Things and Revolv) are, in reality, used largely what I would term hobbyists or enthusiasts, but not mass market consumers. And, in truth, early-mass market consumers are what bring high valuations. 

But for these others, hubs are usually only part of the story. Revolv's modest exit - assuming the valuation was fairly small (I would assume sub-$100 million, maybe much lower than that) - was in part because the company was a smart home hub pure play.  Players like Vera and INSTEON also have hubs, but they also have fairly robust product ecosystems built around their software and hardware.

That doesn't change the fact these companies still primarily early adopter plays and their systems are not centered around more modern radio technologies like Wi-Fi and Bluetooth, but since their stories involve bigger installed bases and larger overall visions, there's a chance there could a decently valued exit if a) a larger, acquisitive company saw them as jumpstarts for smart home strategies and b) they decided to sell. 

The Takeaway

Bottom line, this is an interesting acquisition on a number of fronts.  Revolv's team could become central to Nest/Google's attempts to trojan-horse its products - which appear innocently as simple point products - to become central command centers for the smart home. It does make one wonder how committed Nest/Google is to pushing Thread as a standard if they're investing in "box of radio" expertise, but it's also not unlike Google to hedge bets. I think this deal also shows that valuations for smart home startups who haven't had breakaway point-product success (like Nest or Dropcam pre-acquisition) remain fairly suppressed.

So, like I tell you kids, if you want to get rich, its all about creating a runaway hit point product (easier said than done, obviously).

In Other News...

This week wasn't just about another Nest/Google smart home acquisition (close, but not quite). A quick rundown of other news:

Roost Reveals

Remember a few weeks ago I wrote about how smart home startup Roost's new funding and compelling (but still vague) talk about retrofit and low-cost smart home? Well they've raised the curtain on their product and its a Wi-Fi connected smart battery.

The Roost Smart Battery

Not exactly what I was expecting, but reading over the details (I talk to them this week) it makes sense as a retrofit for existing smoke alarm systems. Essentially the Roost goes into existing smoke alarms and can send a signal to you before the battery is low and when their is a smoke or fire incident to an associated Roost app. 

The Takeaway

Now the Roost folks were talking a big game around retrofit smart home, so I imagine that smart battery is something they see going into more than just smoke alarms, but for now I think its a logical retrofit opportunity. I think the story's an easy one to tell (unlike smart home hubs, for example), so I could see Roost battery packs showing up in bulk at some retailers with a well done end cap and doing some decent sales volume.

Icontrol "Open(s)Home" to Philips Hue and Logitech 

Icontrol announced this week they've brought in two pretty big names into the OpenHome partner program.  OpenHome is Icontrol's app and partner program, and so going forward we can expect Philips Hue devices and certain Logitech devices to work with Icontrol systems.  Logitech's integration will start with Smart Home Ventures' PEQ system, which is based on the company's Touchstone architecture, the self-installable version of Icontrol's technology. 

The Takeaway 

Makes sense that Icontrol is expanding their universe of compatible partner products, particularly as they move more into self-install products with Touchstone.  The company also sees Piper as its "third platform" in addition to its carrier-centric and self-install Touchstone system, and I expect we'll see fairly close alignment over time with Touchstone and Piper platforms.

Leeo Smart Nightlight Launches

This one was a bit of a cool surprise. The Leeo smart nightlight is positioned as a smart nightlight that can listen for and interpret your existing fire alarms and carbon monoxide alerts and send you notifications via an app, as well as notify friends and family about events.


The Leeo Smart Nightlight

The device works on Wi-Fi and is available for purchase today for $99 via the company's website.

The Takeaway

Interesting approach, and makes sense that a device wouldn't need full integration with an alarm/alert system, but instead can simply let you know when the device is making noises.  As this piece says it's somewhat competitive to the Roost smart battery, but they are clearly different approaches at different price points, and both mark starting points for products that can grow into different, more evolved products over time. 

That's it for this week. If you haven't already, subscribe to the Weekly to get in your inbox, use RSS for your favorite reader or magazine app, or just listen to the audio version (usually a day or so after) via iTunesStitcher, or RSS it to your favorite podcast player.

Update: Podcast edition below:



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