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Google’s Nest line of smart home products will be combined with ADT’s security services in a partnership announced Monday by the two companies.
As part of the deal, Google will invest US$450 million into ADT to acquire a 6.6 percent interest in the security and smart home solutions provider.
The companies also agreed to each spend $150 million for co-marketing, product development, technology and employee training.
In a statement, the pair explained that the partnership will integrate Google’s hardware and services and ADT’s DIY and professionally installed smart home security solutions to innovate the residential and small business security industry.
The future ADT and Google home security solution is expected to advance smart home offerings and attract new consumers seeking premium technology, end-to-end smart home service and trusted security, they added.
Home security is one of the most popular reasons households purchase smart home devices, observed Jessica Ekholm, a research vice president with Gartner.
She cited a 2018 survey by the firm that found 66 percent of U.S. responders said they were likely to use smart home devices for preventing access to the home while they were away, while 64 percent noted they were likely to use the devices for security when away from home for long stretches of time.
“Partnering with ADT will help Google reach potential new customers that are currently opting for managed security services, thus reaching beyond Google’s Nest usual clientele,” Ekholm told TechNewsWorld.
Frank E. Gillett, a vice president and principal analyst at Forrester Research, though, sees the partnership as a risky move.
“This is a very big bet by Google on physical security being a big motivation for people adopting Google products,” he told TechNewsWorld. “I find that puzzling because I don’t think consumers want another $50 a month bill, unless Google can flip ADT’s value proposition and change it from an annoying monthly fee and occasional valuable service to a constantly valuable service for which you gladly pay for.”
Tapping Into Valuable Channel
However, Gillett acknowledged the deal could give Google an advantage over its rivals in the market. “It recruits a motivated partner to emphasize Google over Amazon or Apple as a smart home control system,” he said.
The deal also gives Google access to an important channel for its smart home products.
“Today, Nest products are, by and large, sold at retail,” explained Ross Rubin,the principal analyst with Reticle Research.
“An important channel for home security and home automation is the professionally monitored service business where ADT is one of the most recognized brands,” he continued.
“In making Nest products available through ADT,” he told TechNewsWorld, “Google can expose them to customers who are specifically interested in this kind of functionality and are actively seeking that out by contacting a monitoring service provider.”
“Google will get better access to that customer base and for ADT,” he said, “they get access to products that are more sophisticated, have a broader ecosystem than products they have distributed in the past.”
Adam Wright, smart home senior research analyst at IDC, observed that the Google-ADT deal illustrates the changing dynamics of the smart home market.
“For some time, the market has been categorized as one with clearly defined segments — do-it-yourself versus fully managed services,” he told TechNewsWorld.
“In the past 12 months or so, DIY vendors are finding added success in areas that have traditionally been exclusive to managed service providers,” he continued.
“Vendors like Nest, Ring, Samsung, and others have launched installation and professional monitoring services for their DIY home automation and security solutions, which essentially blurs the lines of differentiation between DIY vendors and managed service providers and may increase the appeal of adopting a DIY approach to smart home solutions,” Wright explained.
He argued that managed services providers need to respond to encroachments on their market by DIY outfits by pivoting their strategies to allow for a more agile, a la carte approach to their solutions and customer acquisition strategies.
That kind of strategy was behind ADT’s launch in January of Blue by ADT. The DIY smart home security offering allows customers to customize a smart home security system on their own terms, with no long-term contracts required.
“By offering DIY products alongside the full suite of managed services solutions, managed service providers will be better equipped to reach a broader range of consumers that might be at first reluctant to invest in a whole-home package,” Wright said.
“So,” he added, “for Google, this deal can provide a significant boost to its lineup of DIY smart home monitoring and security solutions by positioning it to compete more strongly against both other DIY competitors and also other fully managed service providers like Vivint, Brinks and others.”
Google’s infusion of $450 million into ADT is more important to the home security company than to the search giant, maintained Mark N. Vena, a senior analyst with Moor Insights & Strategy.
“This cash infusion will allow ADT to operate as an ongoing entity without disrupting their current business,” he told TechNewsWorld.
“It will also help ADT design more bleeding edge products that integrate Google Assistant functionality at a more robust and intuitive level,” said Vena.
“For Google,” he added, “it helps them get into the residential and businesses services business. Google could probably do that without investing in ADT, but many customers might be wary of partnering with Google for security services due to Google’s somewhat compromised privacy and data protection reputation.”
“ADT is a trusted brand in this space and this would aid Google as they try to expand their brand and product line in the security services area,” Vena explained.
ADT, in turn, can benefit from Google’s reputation.
“ADT, like most professional services security companies and cable companies, has ugly and badly designed equipment,” observed Forrester’s Gillett.
“If ADT uses the slicker hardware and better applications of Google, it will drive sales for Google and customer engagement for ADT,” he said.
“ADT wants to expand beyond the 20 percent of the market that pays for professionally monitored security because it and others in the industry have been under assault from cable TV and Internet service providers,” he added. “So for this partnership to be successful, ADT will need to grow its share of the market.”
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