Google shakes up smart home market by shutting Works with Nest

Sonos has announced that it will be pushing Google Assistant integration to many of its devices in the near future, expanding on the Amazon Alexa interface that it has had for some time. It’s a sensible move for Sonos, and one that opens up channels into Google homes, but it comes in the same week that Google’s decision to shutter the Works with Nest program – its smart home product brand – has caused much consternation.

Google announced, as part of the recent Nest reshuffling at Google I/O, that it would be shutting down Works with Nest, and launching Works with Google Assistant. Privacy was mentioned frequently, and it seems to be that Google wants to tighten up the ways that devices access personal data within these deployments – perhaps so that the next time the European Union decides to target Google, it can’t be accused of using homes as data mining operations.

Ostensibly, Google is correct, that this is a very messy ecosystem that needs some level of recalibration, but the way it has gone about it seems ill thought-out. There were gentler ways to announce it, and also to get the message across for the motivations behind the decision – although, Google has been very quiet on that front, which has opened the door for speculation.

On paper, there doesn’t seem to be any reason why a device that was once in the Works with Nest list can’t go through the steps of getting onto the Works with Google Assistant one, but there has been a good amount of weeping, wailing, and gnashing of teeth, over the pending demise of all the custom routines that users will have set up using their Nest devices – although it has been made clear that IFTTT support is not going to be included in the new regime.

Now, given that Google and Amazon recently reached an agreement that buried a long-standing spat, with Alexa now supporting YouTube on Echo hardware, and Prime Video now available on Android TV and Chromecast platforms, we think that Google is unlikely to decide to rip the Alexa compatibilities out of the Nest ecosystem, as some vindictive political measure.

If a device has the hardware capabilities to work in one, it should work in the other, and developers have until August 31 to work out how to make the transition. So then, there doesn’t seem to be a technological reason that a device can’t make the transition. If the developers are willing and able to translate their code from one camp to the other, their failure to do so would then put Google in the firing line – and this is a major PR risk for Google.

Google’s VP of Nest, Rishi Chandra, has talked up how Google will only hand out authorizations for Works with Google Assistant after careful scrutiny. Control4 has already applied, and for many companies, we imagine Google will happily grant that approval – but will Google do the same for the Amazon Echo ecosystem?

If a developer goes public, alleging that Google is refusing to approve its inclusion in the program, then that’s a stick with which to beat Google for the press. The larger the developer’s brand, the more that blow will sting. Amazon is likely going to be able to wield the biggest stick, but whether it wants to take the swing is unclear. Lashing out at a rival could spark retaliation, and for the meantime, the pair have plenty of space to grow new business in the growing smart home market – and seem to have put some of their differences behind them.

Kicking off hostilities would be out of character, based on the recent settling of differences. Google hasn’t publicly said that Alexa-based devices are not welcome, but we will have to pay close attention to the devices that get included in the new compatibility program. Google can only rely on blaming the developers or Hanlon’s Razor for so long, until it becomes clear that it is trying to damage Amazon’s smart home ambitions.

We will also have to watch how Google handles irate Nest customers that are waking up to the fact that their carefully crafted smart home macros will no longer work, and that if the developers behind these devices don’t make the transition (or are blocked from doing so), that these devices are now useless. Because, on paper, the decision seems arbitrary, Google is going to be in the firing line, but cynically, we all know that this is a way for Google to increase its control over the Nest ecosystem – wiping the slate clean and then only letting the approved devices back in.

So then, your personal opinion is going to shape whether killing Works with Nest is simply a necessary part of the reshuffle, and that all those orphaned devices will be able to make the transition to the new way of doing things, or if this is a power-grab by Google that is done with the full knowledge that it is harming existing Nest customers that have invested a lot of time and money in fleshing out their smart homes.

Lawsuits seem likely, but we don’t envision them going particularly far. There’s not much in the way of monopolistic or anti-competitive harm to be proved yet, as this is still a fledgling market, and Nest suffered little harm when it did much the same thing – killing off the Revolv hub and only offering compensation after it discovered that this was apparently an unpopular move.

However, from a research perspective, seeing a smart home brand or even Amazon file a complaint against Google would be interesting. It could shed light on some of the demographic and usage data for these smart homes, as those would be a necessary part of demonstrating that Google had caused harm in this decision.

What the decision to kill Works with Nest might do is reinforce the sunk-cost fallacy facing many smart homes. Once a consumer has, unwittingly perhaps, bought their first non-transferable device, there is now a financial incentive to remain inside that ecosystem – to avoid ‘wasting’ the money on a device that won’t work if they decided to jump from Alexa to Assistant.