Apple's Role in the Connected Home

There as been a lot of discussion around Google's purchase of Nest and what that means for the future of the "Connected Home". Many have questioned why Apple didn't purchase them. I think a better question is why would they purchase them? 3.2 billion is certainly a lot of money for a talent grab, so obviously Google has some interest in making widgets for the home (more Nest-type products). I was at big box home improvement store earlier and saw a big display of "Connected Home" type products. The display included door unlocking technology, WiFi enabled outlets, WiFi cameras, and a "smart" thermostat. What was in the center of the display? An iPhone. What is on one of the trailing images on Nest's homepage? It's an iPhone. What's on D-Link's advertisement for their WiFi enabled cameras? It's an iPhone. Are you seeing the trend here? Apple is already at the center of the "Connected Home". Just about every modern "Connected Home" device is setup and managed with an iPhone.

Apple's strategy is to make high margin products that they can sell a lot of. How many WiFi enabled power outlets could Apple sell and how much money can be made off a $50 one? Apple sells 1 product at that price point (outside of cables, adaptors, and gift cards) and that is the iPod shuffle. On top of the low margins, these consumer grade home automation products are sort of terrible. Outside of my Nest, I've not been happy with any of them that I've tried. These type products have to be near perfect and competitive on price to gain mass market adoption.

Could Apple make a near perfect WiFi enabled power outlet? Sure, but how do they sell it for a healthy margin at Apple-level volume? I don't think this is ultimately a business they want to be in. It's not currently a product category that seems like it's ripe for disruption and expansion. If it changes in a few years, then Apple can enter the market at anytime.

As I mentioned earlier, they are already at the center of most "Connected Home" products. Their products act as the remote for just about every "Connected Home" device on the market. As long as the iPhones and iPads keep selling by the boat-load, companies will continue to integrate the iPhone and iPad into their products. This reminds me a lot of the speaker market. Most of them support Apple products (and even pay Apple for that opportunity in a lot of situations), but Apple doesn't have to build and sell speakers. They do what they do best and let others do the same thing.

Apple likely doesn't want to create an "Apple Connected Home", but rather a "Connected Home" that is controlled with Apple products.