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Why Google's Nest Labs spent $550M on home security

The $555 million acquisition of Dropcam by Google's (GOOG) Nest Labs is being spun as a deal that has nothing to do with the search giant. Concerns are high that consumers will find it disconcerting to have the information from a video monitoring company land in Google's lap.

But no matter what the officials say, this is all about Google's long-term interests and goes well beyond what information the company might acquire from glances inside homes. Google, Apple (AAPL), Microsoft (MSFT), and others are in a race for a beachhead in consumer homes, one of the last great selling and monetizing frontiers.

Google explicitly said when it bought Nest in January for $3.2 billion that the maker of home monitoring products would run autonomously. Given the amount of resistance Google has faced from consumers and regulators in the U.S. and E.U., it is understandable why. If obtaining information on consumers is touchy when you can monitor their web browsing and email, imagine the reaction if you had a direct window into how people lived their lives at home.

But to acquire personal information, a goal for virtually every high tech business, a company needs consumers to use its products and services. That means owning a platform and infrastructure. Microsoft did that on the business front in the 1990s but ultimately fell behind in mobile. Apple soared ahead with the iPod, which set the stage for carrying content with you, and then the iPhone and iPad. Google Android became the mobile platform of choice by volume, if not by profit margin.

Now there is a concerted effort on the parts of all three companies and others to stake a claim in the home. Forget PCs as the platform of choice, because they never thoroughly integrated with home life. A beachhead on this competitive front means devices and services that people will use in the ordinary course of being at home.

Microsoft has focused heavily on its Xbox line of gaming consoles, which also happen to stream movies, television, and music, because it embraced entertainment. Google has shown interest in helping people better monitor the status of their homes while there and, with the acquisition of Dropcam, when they are away. Although Apple has not yet provided details about the new home automation features of its iOS mobile operating system, clues from patent filings suggest a combination of monitoring, control, and entertainment.

A new race is on. And eventually companies will want to make money from what they learn, just as they do today. Why else would Google tell the SEC that it envisions ads on refrigerators, car dashboards, thermostats, glasses, and watches, to name just a few possibilities?

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