Earlier this month Apple (NASDAQ:AAPL) announced its new HomeKit developer platform, which allows home automation devices from different companies to connect to each other and be centrally controlled from an iPhone or iPad. Not to be outdone, the home automation company Google (NASDAQ:GOOG) (NASDAQ:GOOGL) purchased earlier this year, Nest Labs, just acquired the home security camera company Dropcam this week.
Nests' expansion into cameras and home security could help pit the company and Apple in direct competition for managing home automation -- but there can only be one winner.
What Apple wants
Apple's approach to connecting devices within the home -- part of the broader Internet of Things -- is to use its iPhone and iPad as the central hub that smart thermostats, cameras, smoke detectors, etc. take their cue from. Instead of using multiple apps to control those devices, Apple's HomeKit will allow all of them to be paired together and take voice commands from Siri.
So if someone is going to bed, they can tell Siri, "I'm going to bed" and the lights will turn off, doors can lock, and the thermostat will go to a pre-determined temperature. Apple is working with more than a dozen companies to make their devices to make this happen.
What's interesting is that both Nest and Dropcam devices are currently sold in Apple Stores, but with Nest aspiring to become a hub for home automation, the two companies will soon compete against each other.
What Nest wants
As a Wall Street Journal article mentioned earlier this month, "While initially hardware focused, Nest plans to become a central hub and software platform that controls many devices in the home as more are connected to the Internet."
The purchase of Dropcam (for a reported $555 million) shows the company may start moving in that direction. In a blog post on the company's website Matt Rogers, the founder and head of engineering at Nest, said, "Many of you already own Dropcam products and have asked if we could make them work with Nest." Purchasing Dropcam and pairing it with Nest's products is the first step in building out a home automation platform.
The next step came earlier this week when Nest announced a new developer program and a "Works with Nest" initiative that pairs the company's products to other devices and services from Mercedes-Benz, Whirlpool, Jawbone and others. The company said on its blog that, "What we're doing is making it possible for your Nest devices to securely interact with the things you already use every day."
This means that Nest can now turn LIFX lightbulbs on or off when it knows a user goes on vacation, certain Mercedes vehicles can tell Nest when a person is coming home and adjust the temperature accordingly, or pair with Jawbone's wrist band to notify Nest thermostat when a user wakes up and change the temperature bases on their preferences.
With Nest's latest moves, it's clear the company doesn't plan on being controlled by Apple's Siri. Google didn't spend $3.2 billion for Nest, and Nest didn't spend $555 million for Dropcam just so all those devices could come under Apple's control.
I think iMaker has made a slightly un-Apple approach to home automation, but a very smart one overall. It could have bought Nest -- and that probably would have been a good partnership -- but by creating the software platform that links hardware together Apple instead gets to control the devices and become the focus of attention in home automation. The company's software and voice commands become affiliated with the home, while letting other companies battle for hardware relevance among consumers. By doing so, Apple gets to focus on selling the iPads and iPhones that will become the devices running the homes, which could potentially create more value for the devices in users' minds.
Nest has great products, a promising platform, and obviously a strong backing from Google. But I think Apple has the advantage in the space. The company not only can pair devices from some of the world's largest companies, but it also makes the platform and the devices (iPhone and iPad) that will control them. I think that combination will be too hard for smart home device makers to pass up.
Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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