Google’s investment in ADT would perhaps be one of the most significant investments that a software company has made in the physical security industry.
Google’s investment in ADT would perhaps be one of the most significant investments that a software company has made in the physical security industry. The deal will give Google what it has not managed to come up with, despite decent technology and deep pockets. It also underlines an essential factor – the physical security industry, despite its increasingly blurring lines with IT, will always need a “physical” presence on the field. ADT has that, with its systems integrators and installers.
Google’s interest in physical security has been limited to smart homes in the past, but now it might just be looking for a seat at the table. The “long list of opportunities” that ADT CEO Jim DeVries referred to in the investor meet would most probably include sectors outside the residential and small business in the longer term. And why wouldn’t they? The software capabilities of Google can be a real game-changer in large-scale projects like smart cities.
Nest to get a boost
The most obvious outcome of the deal is a stronger push for Google’s Nest lineup of cameras. Under the agreement, ADT will switch from selling a range of camera brands to Nest alone. This includes cameras, speakers, thermostats, etc. This should probably concern Amazon, as the online retailer is the closest competition to Google with its lineup of Ring cameras and Alexa-enabled smart devices.
Market demand for smart home
Despite sounding quite futuristic, the concept of a smart home has not had a high demand in the market. Sure, the projections are all stunning, with agencies predicting over 10 to 20 and even more CAGR in the coming years. But remember that’s for an industry that’s not really picked up yet, and the baseline is still low.
There are several reasons for this. First, the smart home itself is a loosely defined idea, with several components involved. You can have some smart devices in your home, but how many of them will make your home itself smart?
Second, only a few smart home solutions currently available in the market have any particular usefulness. Cameras are definitely useful, but residential surveillance systems are available without the tag of a smart home. Smart thermostats may help to improve energy efficiency, but not everyone is convinced it’s a necessity.
Smart speakers are fancy at first but end up being what they are – speakers. Smart lights? Nice to show your guests. Smart switches? Aren’t they the same as smart lights? In short, smart home companies need to understand customer pain points better and come up with necessary solutions, not just “nice-to-have.”
Investment in new devices
This is where the Google-ADT deal could make a difference. Both companies have pledged US$ 150 million to develop new products. This could lead to more innovative devices that would appeal to customers more.
The arrival of COVID-19 has seen some market interest in smart homes as more and more people began working from homes. This could be a good launchpad for the market as a whole as
they have got the customer’s attention now.
The view from ADT
The consensus is that ADT will benefit from this deal. Shareholders seemed happy, as the company’s stock price jumped over two-thirds after the news, and DeVries himself said that the agreement is “transformational” as it gives ADT a boost to compete in the smart home sphere.
Finally, a question that has come up with this deal is if Google will acquire ADT in the future. DeVries has said he cannot speak for Google’s plans. This may or may not be a plan, but as of now, Google gets access to over 6 million US customers through ADT and a firm foothold in the smart home market.