Nest, 'Relax' edition

On Google, advertising, and invading your home appliances

In answering the federal regulators' questions last year, Google merely stated the obvious — 'mobile' doesn't fit the new categories of device of the future

Can't say I didn't see this coming.

Late last year, the Securities and Exchange Commission — one of the bodies that helps make sure businesses play fair — had some questions for Google regarding its year-end 2012 fiscal report, which was filed in January 2013. Some of those questions regarded Google's purchase of Motorola Mobility. Some had to do with taxes. Some with Motorola's Home business. Other questions had to do with the difference between the "cost per click" for advertising on desktop versus mobile.

It's Google's answers to that last section that got the headlines, of course. It's blogger gold. "ZOMG Google to put ads on thermostats and refrigerators and your newborn baby's forehead."

Only, that's not really what Google said.

I think we gave you the basic facts in our story, assuming folks would click through and read the SEC notes for themselves. But we know better. So let's take a look point by point.

Here's the question the SEC asked Google (emphasis mine):

  1. Your response to prior comment 1 suggests that platform price differentials remain between desktop and mobile. We also note that advertisers are diverting their advertising campaigns from desktop to mobile and tablets. Please quantify the impact of the various factors identified in your discussion of changes in revenue that caused the six percent decline in average-cost-per click paid by advertisers. If the decline is primarily attributable to mobile advertising, explain why quantification of mobile activity would not be meaningful. Further, tell us whether the increase in the number of paid clicks was the same across each platform. Tell us whether the number of paid clicks for desktops and tablets increased at the same rate as the mobile platform. Tell us what consideration you gave to providing the percentage change by platform.

The blurred line between tablets and phones

Basically, the SEC wants to know why there's such a difference in CPC (that's cost per click, remember) between desktop and mobile. Google's response started with why its year-end numbers were what they were. But the juicy part for everyone comes toward the middle, when Google starts talking about how it's actually getting tougher to say exactly what a "mobile" platform is. Google started with:

We would also like to highlight the significant difficulties we see with the practice of breaking out CPCs and paid clicks — or any performance metric — by device platform. It is increasingly challenging to define what exactly a "mobile" platform is from period to period — and what it will be going forward.

That is to say that simply having two categories — desktop and mobile — doesn't take into account future categories of devices, nor does it accurately reflect how we use our current devices today. Simple enough.

Google went on to explain that "most industry observers would have included tablets (in addition to handsets) in their definition of mobile." I'm inclined to agree — we pretty much do that here as well. And Google notes that it'd been treating phones and tablets as members of the same category for a while as well, including in third-quarter revenue numbers for 2011 and 2012.

But we don't use tablets like we do phones, right?

However, as tablets gained momentum in the market, it became clear to us that their usage had much more in common with desktops than with handsets.

As more people starting buying tablets, Google noticed that they were being used more like desktop (or laptop) computers than phones. And that makes sense. You probably don't keep a tablet in your pocket. You're not pulling it out every 2 minutes to take a peek. It's more of an appliance that you use for a little bit, and then leave it be.

'Mobile' isn't a future-proof category

Ads on thermostats, oh my!This probably isn't what Honeywell has in mind. Or google, for that matter.

Now for the juicy part. Again, emphasis mine:

We expect the definition of "mobile" to continue to evolve as more and more "smart" devices gain traction in the market. For example, a few years from now, we and other companies could be serving ads and other content on refrigerators, car dashboards, thermostats, glasses, and watches, to name just a few possibilities.

ZOMG MOAR ADS IN MOAR PLACES!!!

Folks, that's just Google stating the obvious. As more and more devices become "smart," with touchscreens and connectivity and the ability to reach more people, companies might want to monetize them in some way. That's all. Google's listing possible platforms for ad delivery.

Our expectation is that users will be using our services and viewing our ads on an increasingly wide diversity of devices in the future, and thus our advertising systems are becoming increasingly device-agnostic. Enhanced Campaigns was specifically designed to help advertisers become more efficient in a multi-device future; rather than writing unique desktop campaigns, handset campaigns, and tablet campaigns, etc., Enhanced Campaigns allows our advertisers to write one ad campaign, which we serve dynamically to the right user at the right time on whatever device makes the most sense. Because users will increasingly view ads and make purchase decisions on and across multiple devices, our view of revenue is similarly device-agnostic.

Google didn't say 'Nest' — bloggers did

Google did not say it'll put ads on a Nest thermostat. I get why we used a picture of Nest in our original story. But c'mon, folks. Google didn't even purchase Nest until after it submitted these answers to the SEC.

Google also didn't say it's going to do any of this stuff tomorrow. Google's just saying what any other company in its place would say. There are these potential avenues for advertising. Maybe we'll use 'em. Maybe we won't. But here's what they are, and they're not all what we'd consider to be "mobile." 

And so this "Enhanced Campaigns" system lets advertisers create a single ad campaign across phones, tablets and, eventually, other platforms. That's all. No interstitials between changing temperature settings. No pop-ups asking you to take a poll before turning on the heat.

Just common sense when answering the questions of a regulating body. Again, you can read the full answers here. It's a lot easier than picking up a pitchfork.

Have something to say about this story? Share your comments below! Need help with something else? Submit your question!

Phil Nickinson

Phil is a recovering print journalist, editor of Android Central, subtitles and street signs

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On Google, advertising, and invading your home appliances

23 Comments

Everything has a price. We pay in cash, time, attention, or data.

Don't have money, build it yourself, can't build it, watch ads for it, can't watch ads, share your info for it. We decide what's most valuable for us and what we're willing to trade and not not trade, and if a deal is fair or not fair.

My Panasonic TV has an "ad" for the service. I turned it off. My Panasonic BD likewise. I couldn't turn it off so I returned it and got a Sony.

As long as I have choice, I'm fine with choices :)

That is a bit of an euphemism. Not sure if this is becoming a Google apologist site?

Google is using income from a de facto monopoly in online ads to destroy competitors in other segments (email, maps, operating systems etc ad inf). And they regularly acquire things that used to be ad free, no longer leaving that option for those who want to pay for products and services.

We are certainly no longer able to make some choices. And Google is one of the main players in making sure we don't. Yes, users who flock to the free stuff are a big part of that story, but the other part is certainly the inability of regulators to deal with the digital economy at all. Brick and mortar chains using the same tactics would have been in serious trouble in most localities.

And about that article... Sorry, but if there was any point truly proofing where Google didn't say what they said, it has not been made. They did not say Nest, they said thermostats. Got ya?!

I honestly don't see your point.

First, people HAVE to stop throwing around the word "monopoly" without knowing the correct way to use it. Google does not have a monopoly in anything they do. They may have a lion's share, but a monopoly? No. Never have. And most likely, never will. It just won't happen.

Now...the fact there there are companies such as Microsoft, Yahoo, AOL, etc...there are options. You have multiple options on who to choose to use for the services you mentioned. You don't like Google's practices? Go to Yahoo. Go to Microsoft. Go to Apple (if you own an iDevice). There are paid options for many of those services also. So if you don't like ads...pay for a service to use without them.

No competitor have been "destroyed" by Google. If I didn't want to use Google Maps right now...I could go download a myriad of alternatives. If I didn't want to use Android, I could use iOS, Windows Phone, or BlackBerry. If I didn't want to use Chrome...I have Opera, Firefox, Safari...

Nobody is making anyone use any of the services Google provide. Nobody is forcing companies to use Google for their ad deployment. They obviously choose what they use based on superiority or familiarity. No matter how free something is, if it's not good...it just won't get used. This does not change just because it's Google. There are many free alternatives that Google have provided that have failed. The ones that thrive simply have done it right.

Well, maybe you should look up "monopoly" yourself... Google does have a monopoly (a market controlling majority share) in desktop ads in most of the Western world, actually the EU and several European states are, as we speak, investigating their potential abuse of their monopoly.

Of course Gooble destroyed companies and markets. How much can you charge for a mobile OS right now? Licenses were between $10 and $25 before Android, they are $0 now. How much can you charge for an email service? What happened to all the RSS services when Google got in, and how many returned only after Google killed their service?

Google is making billions with ads, and they use this money against everybody. If that is what everybody wants, fine, but nobody should be this naive about it.

"How much can you charge for a mobile OS right now? "

Hmm. I think Apple is just as easy to blame. Apple doesn't charge for the OS PERIOD. They lock the OS to the hardware and they give FREEEEEE updates. The last update to OSX was FREEEEEE. Hmmm. Who do we blame. The top two OS's for mobile are FREEEEE. So how this that Googles fault. It seems to me that Apple gives it free because they have a high profit margin and Google is free it's their business model to get people to be their product which allows them to sell advertising.

"Google is making billions with ads, and they use this money against everybody."
Apple is making billions with high profit margin devices, and they use this money against everybody.

Seems to me that is the same sh** different company.

Rene I agree with what you are saying above, but....this should be disclosed up front so you can make an informed decision. I have a Nest and feel it would be wrong if all the sudden it started showing ads.

Just my opinion.

Sent from the iMore App

Nest is a "premium" product at a premium price. It's not subsidized in any way. No way Google is dumb enough to think you can take Apple-centric people who are the vast buyers of nest and then throw on Google advertising and as a 1, 2, wammie. People who are Apple-centric believe they've paid for the premium hardware and therefor ads are never going to be accepted on by that customer base. They might as well jack up the price another $10 to $20 from the offset.

What they aren't saying is: If ads come to thermostats, will they just be on the thermostat or would they also show up on the apps that control them?

Can you imagine embarrassing Ashley Madison ads on a thermostat?

It's getting kind of chilly in here, you might want to raise your thermostat....or, if you are ready to get into a whole new mood already why don't you check out Ashley Madison for some extra heat in your life.

I don't mind the approach Amazon took with their Kindles. Pay full price, you get no ads or pay slightly less for their devices and get ads pushed to it. If I pay a hefty premium for my appliances or thermostats I don't expect ANY ads on it unless the manufacture takes the Amazon approach in offering a slightly cheaper model with ads. If someone is willing to save a few bucks they may opt for the model with ads. I personally hate ads and will pay a premium just so that I don't see them. Just my opinion tho.

This is my point. You have the view most Apple fans have. I pay extra for my hardware so I don't have to pay with my data. This is a fair point and Google isn't going to poop on this market. Ads are a no go on premium hardware products. It just won't happen. They'll more likely to jack up the initial price of the item which lets face it, for many if its the nest is $249 or $269 your going to get it if its cool.

""ZOMG Google to put ads on thermostats and refrigerators and your newborn baby's forehead."
Only, that's not really what Google said.""

"For example, a few years from now, we and other companies could be serving ads and other content on refrigerators, car dashboards, thermostats, glasses, and watches, to name just a few possibilities."

I'm lost here...

Basicly the outrage is all about Nest the company Google bought. If they didn't buy them everyone wouldn't care about this statement. Google's OS is going everywhere from TV's to thermostats. If a company uses android on their thermostats Google was saying it's possible to put ads on their. That's all. Later they bought nest and now people are up in arms because Nest is a "premium" product meaning its expensive and made high quality directed at wealthier people. "Premium" products have lots of margin (profit) so their should never be ads on these products. The manufacturer get their money from you during purchase. The 99 % goes toward subsidized products and they are the product by selling ads targeted at these consumers. If your paid a lot of money you should not be also charged again by being the product. Basically like be taxed twice. That's what this is about. Google will NOT be putting ads on NEST products. I will bet anyone. They can make more money from the 1% making a premium product line of Home Automation from NEST and then make home automation under the NEXUS brand with a low cost and subsidize that maybe by ads.

Yes, I get that. But we are more that justified to think that Google will use ads in products similar to the Nest. People are right to think that: "ZOMG Google to put ads on thermostats and refrigerators and your newborn baby's forehead." because Google said exactly that. They will, if they can. People can't say (at least based on Google's words) "ZOMG Google to put ads on the Nest thermostat"... Also I think that is very naive to think that Google can't change its mind about the Nest down the road.

No. They didn't say "They will, if they can." They said that is something they "could do." That is a big difference. Google currently only owns 1 hardware company which is NEST. If they aren't going to put it in NEST products then the question is are they going to have a NEXUS line of home automation for the 99% of people who UNDERSTAND that these products are sold near to cost meaning they are subsidized by ads. Goolge also makes an OS which these companies could use and maybe that free OS might be ad supported. Should you decided these are cool devices and you want them them and you can't afford the premium cost of NEST products then you buy the NEXUS branded products or another companies using the special version of Android for home automation. They will have to accept that you have to give your data and submit to ads to buy these discounted products. This is no different then how TV started out. Fee over the air tv was free content over the air paid by commercials . Then cable tv came out and if you paid them they would give you extra channels and since you paid you didn't have commercials. Over time we now are dumb enough to pay and get commercials effectively being double charged. Either way you cut it , commercials / ads are the way things can be given to the 99% that otherwise would not be available to them because of cost of the product. If you can pay the full price then you won't have to "worry" about ads. For the rest of us like me I'll take any good / great product that is discounted that is supported by ads or sharing my data. It's my 2nd job. I could care less if I see an ad or there is an ad there I don't notice. I even use to put an app on my pc back in the day of dial up that would show ads and it clocked the time I had it running while I was using my computer and sent me a check for a few dollars a month.

"For the rest of us like me I'll take any good / great product that is discounted that is supported by ads or sharing my data" Oh I see. I'm not in the same boat. I bought a Kindle with the "offers" and removed the ads 1 week later. For the same reason I don't have cable tv in my home right now, and my kids hate commercials. But I think that you are right. If you don't care about your personal data but you want to have cool gadgets... ads is the way to go.

One quick point. Kindle..The reason you can pay Amazon $10 to take off the ads is because their model revolves around you buying content to make money their money back. Truthfully Amazon doesn't even need to sell the tablet with ads since they should make it back by you buying content.

Google's services cost more than $10. If you use everything they offer like I do (drive, calendar, Google now, maps, docs, sheets, and other stuff I might have missed are probably worth about $ 100 a year. Google can't offer a one time payment of $10 like Amazon can. Google's current way of ads works and works well. It allows them to invest and diversify to other types of business so if the advertising market crashes they have other sources of income. It allows moon shots like the Google self driving car and the balloons and drones that they want to use for maps data and internet in remote areas. They can invest in Google Fiber which i'd love to have. Comcast in my area is charging more because I canceled the basic tv service. Infact I pay $10 extra not having the tv service probably because they want you listed as a cable tv subscriber so their advertising costs don't go down as the people leave cable tv and go all cable internet.

I'm not really on board with the whole home automation thing anyways. I just don't see the appeal of it. I don't need or want my fridge or thermostat to be connected to the internet. And I absolutely don't want to see any kind of advertising invading any " smart" appliances I might own in the future. It's one thing for a free web site to be ad supported, but if I'm paying good money for an internet connected appliance I had better not see even one ad there. Period. I paid my money, I don't need advertisers pitching their useless garbage at me on top of it.

Sent from the iMore App

Seems to me a lot of the google worry and hate seems to be a bunch of FUD. People are more concerned about what they cook up in there head about what theyMIGHT do rather then just seeing what they ACTUALY do.

People in certain camps are pre wired to believe certain things. Just look at politics. Not everyone only is on the side that pays them the most money. Some on each side believes their views and when some data comes out true or not believe it or not, they believe it or not by the side there on. In this case you have a distrust of Google you then believe they bought NEST and now will put ads on it.