Market Insight

Google’s Nest Acquires Dropcam.

July 03, 2014

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Google’s Nest announced on June 20 that it had signed an agreement to acquire Dropcam, a home surveillance provider, in a strategic decision to add home surveillance to its smart home portfolio. 

Our Take

Dropcam’s consumer, cloud-based camera offering gives end users the ability to remotely monitor live and recorded video streams via any Internet-connected device. This type of solution is becoming increasingly popular, especially in the U.S., and benefits from the growing use of tablets and smartphones with a high-speed Internet connection. Dropcam’s products are likely to be combined with Nest’s connected thermostats and alarms to form an integrated smart home solution.

This acquisition will also give Google a stake in the market for Video Surveillance as a Service (VSaaS), which IHS forecasts will reach nearly $1.3 billion by 2017 and is currently receiving renewed interest from the video surveillance industry. However, the true value in the acquisition is not likely to come from Google’s ability to penetrate the VSaaS market but in its strengthened ability to provide a more complete smart home solution. IHS forecasts that the overall market for smart home automation services will grow rapidly to reach over $3.2 billion by 2017, despite a rising number of hardware suppliers projected to offer free service platforms as a means of enticing the customer to purchase a growing number of compatible devices. 

The smart home market exhibits a diverse ecosystem, spanning device suppliers to platform providers and service providers, and ranging from utility companies to telecommunications companies, security providers and retailers. Already, many firms are looking to the provision of smart home services to provide increased revenues, reduce customer churn or increase brand loyalty.

As the market continues to heat up and consumer awareness and adoption grows, the ability for the industry to provide innovative as well as easy-to-use devices and services will help to support healthy margins in the face of growing competition. 

Google Inc.
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