By Blake Kozak, principal analyst, security technology at IHS Markit
Nest Labs has expanded into the home security market with a range of products which includes the Nest Secure alarm system, Nest Hello video doorbell, Nest Cam IQ outdoor security camera, and corresponding software and services.
The video doorbell uses Google’s facial recognition technology.
Nest Labs is one of the first big movers in the home automation market, and the company is thought to be one of the leaders.
Nest currently offers a range of products including thermostats, smoke and carbon monoxide detectors, and video doorbells.
The company was founded in 2010 by former Apple engineers Tony Fadell and Matt Rogers, and was acquired by Alphabet – Google’s parent company – in 2014 for $3.2 billion at a time when it had fewer than 300 employees.
Now, Nest Labs has more than a thousand employees, and last year, it generated approximately $340 million in sales, according to a report on Recode.net.
The new Nest Secure starter pack includes the following products:
- Nest Guard is an all-in-one security base that provides the alarm, keypad and a motion sensor, and voice responses
- Nest Detect is a category first: a sensor that detects both motion and open or close movement in a single battery-powered product. It senses windows and doors being opened, and motion in a room
- Nest Tag is a fob that can attach to a keychain, allowing user to arm and disarm Nest Secure without a passcode. Nest Tags can be shared with family members and trusted people who regularly enter the home
- Nest Hello video doorbell – Combines the Nest Cam with a doorbell
- Nest Cam IQ outdoor security camera – Outdoor security camera with imaging and intelligence, plus tamper resistant, weatherproof components
IHS analysis of Nest Labs’ new launch
This is the first major product announcement from Nest since it released its outdoor camera in July 2016.
Although it has since released updates to its thermostat – Nest Thermostat E – and indoor camera with Nest Cam IQ, the portfolio had been limited and non-progressive compared with competitors.
With the release of Nest Secure and Nest Hello, Nest is beginning to take charge of its ecosystem and destiny.
Prior to Nest Secure, Nest relied on integrating cameras and other Nest products into ecosystems – such as ADT Pulse, SimpliSafe, Scout Alarm, and Xfinity Home – to meet consumer demand for security products that are more than just cameras.
Although the initial marketing around Nest Secure is security, these sensors are the building blocks for a complete home automation system, and other use cases such as elder care.
Despite the many unique features that accompany these product announcements, it was a necessary step for Nest to launch these products in order to remain competitive in a constantly changing market.
The Nest Hello video doorbell brings a few unique features to an increasingly crowded market by offering facial recognition, a warm welcome feature that provides indicator lighting and quick actions for pre-determined audio responses.
Moreover, with a monthly subscription to Nest Aware, the doorbell can use facial recognition to identify friend from foe at the front door as well as the use of Sightline, for viewing past footage.
The doorbell also has a wedge that can be used to alter the viewing angle as well as echo suppression and ambient noise cancellation.
Despite its brand recognition for thermostats and cameras, Nest will have an uphill battle to supplant Ring, which currently has a global market share of about 45 percent.
For Nest Secure, this offering brings a few unique features that were missing from other platform such as SmartThings and Wink. One such feature is the countdown option.
Other platforms rely heavily on geo-fencing or manual arming and disarming of the security system via the mobile app.
The sensors themselves are also following a recent trend to embed multiple features into a single device. For Nest this means motion detection combined with a door/window sensor.
Another interesting feature is the Nest Guard.
IHS Markit has previously mentioned one of big barriers for smart home is the involvement of the rest of the family because today, most smart home systems reside on a single mobile phone which means only one person can easily access features.
With Nest Tags and the Nest Guard, it becomes easier for other family members to use the DIY security system.
The Nest Tag can also be used by a nanny or other house guest to arm and disarm the system, during pre-set times.
Without analytics, the smart home cannot be very smart. Nest has added IQ to its outdoor camera which now allows for facial recognition for the outdoors.
This is a big step forward for DIY surveillance because the facial recognition could eventually be used to unlock doors or turn off the security system simply by approaching the home – in conjunction with Nest + Yale lock and the Nest Hello.
Although Nest facial recognition has had its challenges, the technology is constantly evolving and will eventually be used in security more often.
The other feature added to the Nest indoor camera is Google Assistant. With Google Assistant, the user can ask questions or request surveillance video to be cast to a TV.
Although it makes sense that Nest integrate closely with Google Assistant considering the close relationship, using voice control with a camera is limiting and there are already many other options available in the market that allow surveillance video to be shown on a TV.
Lastly, professional security monitoring combined with a DIY installation continues to be a major trend.
Nest announced a partnership with Moni that will permit 24/7 professional monitoring.
This is significant because more professional monitoring providers are offering month-to-month contracts and DIY partnerships, such as with ADT Canopy (but has yet to gain any notable traction).
IHS Markit expects that the flexibility of month-to-month contracts from professional providers and DIY purchases/installation combined with no contract monitoring will begin to challenge the traditional model of paying for two year, three year or even five year contracts.
The primary reason is cost and return on investment.
As smart home evolves, the devices will get smarter, cheaper and easier to install.
And for consumers who do not travel and are not away from a mobile device for extended periods of time, the DIY partnership with no contact monitoring could win out.
IHS Markit will be comparing these costs in detail in its upcoming report that compares professional service providers.
Overall, these product announcements from Nest offer unique features but it also follows the current industry trend of specialists moving into the wider market.
What this means is that companies which entered the market with a primary specialty – in Nest’s case, thermostats – are starting to build complete portfolios. This has also been seen with companies such as Somfy and Yale.
By offering a complete portfolio, Nest will be able to continue to expand into a complete home automation ecosystem, with less reliance on its Works With Nest partnerships.
Although Works With Nest will continue to be important, especially when working with specialist such as Hue or Withings, companies are looking to control their own destiny. Finally, in terms of pricing, Nest Secure comes at premium.
To compare, a consumer could purchase SmartThings Home Monitoring Kit for $150. This kit includes a motion sensor, two door/window sensors and a smart plug for lamps and appliances.
The Nest Secure alarm system has a starting price of $499 and includes the Nest Guard (keypad), two Nest detects (combination of motion and door/window sensor) and two fobs.
Although the price for the start kit comes at a premium, other Nest products are priced at the higher-end of the spectrum, and require a monthly subscription for advanced features.
With the launch of the Nest E thermostat, Nest has acknowledged the need for lower-priced products, so with the high starting cost of the security system, Nest may struggle to win over customers using less expensive, more open alternatives.
Many of the themes discussed in this research note are explored in greater depth in IHS Markit’s security technology and smart home reports.
About the author: Blake Kozak is a principal analyst for the security technology group at IHS. He is responsible for all research across the smart home which includes business models, platforms, devices, consumer video and competitive analysis.
