Airbnb & Nest Partnership – A Huge Win for Google, Airbnb and Hosts, but is it Good for Guests?

By Scott Kirk

We recently discussed Airbnb’s partnership with Nest (acquired by Google in January 2014 for $3.2B). The nuts and bolts of the partnership include Airbnb providing selected hosts with the Nest Learning Thermostat free of charge ($250 retail value) and access to Nest’s MyEnergy platform that allows hosts to track energy consumption, learn how to save energy and increase home efficiency. The partnership has huge benefits for three of the four constituents:

Google / Nest: Likely the biggest winner in this partnership. Nest receives revenue from Airbnb on the initial thermostats. The press release alludes to the thermostat only being provided to select hosts, but given 500K homes [1] are available on Airbnb, a larger roll-out of the program could mean very substantial revenue growth for Nest. Secondly, Nest gains an entry point into the home. Google / Nest owns the customer relationship through their MyEnergy platform and can leverage that relationship to upsell its full suite of products. Nest is not required to put up any initial capital. Nest takes little to no risk.

Airbnb: Airbnb is under extreme pressure from city and state governments, most significantly the NY State Attorney General. The Attorney General accuses Airbnb for violating short term rental laws in over 72% of NY rentals [2]. In response, Airbnb has put up a big fight focusing on the energy / environmental benefits of Airbnb vs. traditional hotels. On the heels of a company sponsored Cleantech Group study in New York, Airbnb is using the Nest partnership to embellish its already green-washed story. The partnership may have some benefits for Airbnb hosts, but at the end of the day this is another tool for Airbnb to frame its eco-friendly pitch.

Hosts: Why not participate if selected by Airbnb? You get one of the hottest “smart home technologies” for free. Heating and cooling can be easily and automatically controlled when guests are not at the house, greatly reducing your utility bill. Very little downside if selected to participate in the program.

The value to three aforementioned constituents seems fairly obvious in my opinion. The issue that I have with this partnership is the potential spill-over effect on guests, their security and their overall privacy. I helped lead an investment in a firm called Alarm.com two years ago. The company provides an integrated intelligent home security system. Going to market through security dealers (think ADT, Pinnacle), they have a couple million subscribers. With Alarm.com, customers can turn the lights on and off remotely through their mobile phones, adjust the temperature and have live video look-ins while away from the home. As part of the investment thesis, we looked at the correlation between customers that owned one smart product (thermostat, carbon monoxide monitor, video cameras, sensors, etc.) and the likelihood of them purchasing multiple others. It was off the charts.

Guess what? Google and Nest are operating with the same goals of cross-selling additional smart home products once gaining entry into the home, most notably cameras to enable live video monitoring. If a hunch isn’t strong enough, Google purchased Dropcam, a provider of Wi-Fi enabled webcams and trackers, for $555M in June [3]. So my concern with the partnership is the effect on Airbnb guests’ privacy and security. Having your host know your energy usage during your stay might be intrusive, but let’s assume that’s fine for now. Having your host purchase additional products from Google / Nest such as Dropcam video cameras (which based on my diligence analysis is inevitable) and being able to know every time you enter / leave the house and change rooms is a huge intrusion of privacy. Having your host have live video look-ins, creepy. The privacy concern for Airbnb guests is not only tied to this Nest partnership, rather a broader concern as more smart products get installed in homes. It is very hard to see who will regulate this and if most guests would even be aware of the intrusion of privacy – likely not. The Airbnb / Nest partnership will accelerate this personal privacy issue.

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About macomberjohnd

HBS Finance faculty interested in sustainability in the built environment including devices, structures, townships, and cities.

2 Responses to “Airbnb & Nest Partnership – A Huge Win for Google, Airbnb and Hosts, but is it Good for Guests?”

  1. By John Macomber

    Good for everyone but the customers…that’s an interesting model. Or, maybe the benefits are so great and the subset of customers who cares about privacy is so small that the issue is a non-factor.

    Smart homes and smart cities both have a lot of ground to cover around “what’s the real user problem here” and not just “what can some vendor try to sell!” In BSSE terms, is the job of the thermostat comparable to the job of the milkshake? Don’t think so.

  2. Scott, thanks for a thought-provoking blog. I agree with you that there are privacy concerns when companies such as Google, Airbnb and even Uber have access to consumer data. However, if we look around us, the collection and use of data and the resulting privacy issues are not novel.

    For example, tracking capabilities have been available to wireless telephone companies for close to the last two decades since cellular technology became common. Apple and other cell phone manufacturers already have access to people’s daily movements, communication habits and browsing interests. Amazon and other retailers (on-line or otherwise) collects data on consumer’s buying habits. And on a most basic level, click through data on simple web pages are analyzed for marketing and other purposes (and since each IP address is unique, it is arguable that the data is not anonymous).

    My point is this – whether we were aware of it or not, or whether we acknowledge it or not – our privacy went out the door the day the world became digital. So the concern for me is not about whether the data is collected, but about how it is used.

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