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Nest Expects To Make More From Its Partnerships Than Selling Thermostats

A thermostat is a one-time purchase for consumers, but Nest can continue to make money off partnerships with utility companies.

Nest Expects To Make More From Its Partnerships Than Selling Thermostats
[Image: Nest]

Google acquired smart thermostat maker Nest for $3.2 billion earlier this year, but it turns out the company’s most valuable asset isn’t its hardware, but rather its data.

Nest partners with about a dozen utility companies to manage the energy use of some customers, according to Forbes. One competitor, Honeywell, also has 60 partnerships in place with utility companies. Nest founder Tony Fadell says eventually, revenue from such services will outpace hardware sales. “We’ll get more and more services revenue because the hardware sits on the wall for a decade,” he told the magazine.

The scope of these partnerships varies from company to company. In some instances, customers are paid $30 to $50 a year by the utility companies in exchange for the ability to turn down the air conditioning on hot days while other deals have Nest splitting the cost savings with its partners. Nest says its algorithms can lower energy usage during peak times by 50% to 60%.

Nest isn’t the only connected hardware company with its eye on data. Fitbit also has programs in place to sell activity data to employers, and Jawbone is weighing the option as well.

About the author

Based in San Francisco, Alice Truong is Fast Company's West Coast correspondent. She previously reported in Chicago, Washington D.C., New York and most recently Hong Kong, where she (left her heart and) worked as a reporter for the Wall Street Journal.