How the Nest Learning Thermostat Works

Nest Advantages and Challenges

Despite all its features, though, Nest has some hurdles to overcome. As of early 2014, Nest costs $249 per thermostat. That's more than twice, and in some cases five times, the cost of programmable thermostats from established brands Honeywell, Filtrete and Cadet. Non-programmable thermostats are even cheaper, with some models costing less than $20. Because of this, Nest's only customers are likely to be people with moderate to high incomes or who place a high value on either its design or its energy-saving features.

Beyond the cost gap, Nest also faces a sea of consumers who know very little about how their HVAC systems work. Though marketing materials for the Nest describe functions of these systems in easy-to-understand language, it may still prove difficult to sell the product directly to the consumer. It's possible that Nest's target audience will eventually shift to HVAC professionals and building contractors instead of home and business owners.

In early 2012, Honeywell, the biggest brand in thermostats in the U.S., threw down yet another gauntlet for Nest Labs. On Feb. 6, 2012, Honeywell filed a patent infringement lawsuit against Nest Labs citing seven Honeywell patents. Two days later, Nest Labs accepted the challenge. In its statement, Nest Labs said, "Nest will vigorously defend itself against Honeywell's patent-attack strategy to stifle thoughtful competition, and we have the resources, support and conviction to do so." That case is on hold as of early 2014, but another company, Allure Energy, brought a patent infringement suit on May 14, 2013. Time will tell how these legal battles will play out.

In January 2014, Google announced that it would be acquiring Nest for $3.2 billion. Provided the purchase is approved by regulators, the move will get Google into the connected home device market and possibly provide Nest Labs with more resources with which to fight patent suits. The impending acquisition has raised some privacy concerns from people worried that it will give Google access to the data gathered by Nest Learning Thermostat's sensors, as well as data from Nest's other product, the Nest Protect smoke and carbon monoxide detector. Nest contends that the company will follow its privacy policy and the information will continue to be used only to maintain and improve Nest products and services.