Google's $450M ADT Investment Gives It Chance to Sit Center Stage in Smart Home: Parks

Google’s $450 million investment in ADT, announced Monday, demonstrates “clear bullishness” for both pro-installed and pro-monitored sides of the home security market, emailed Parks Associates analyst Brad Russell Tuesday. Google and ADT’s long-term partnership will combine Nest’s hardware and services, powered by Google’s machine learning technology, with ADT’s installation, service and professional monitoring network across the U.S., said the companies.

With the investment, Google is looking to leverage the channel strength -- sales, installers, support and add-on services -- of the home security industry “to strengthen its long term aspiration to sit center stage for comprehensive smart home services,” said Russell. ADT wins the “brand strength of Google” and its product development capabilities and software strength in artificial intelligence and machine learning.

“The future of value creation in the home security market will be driven by technological improvements that reduce false alerts, learn the habits of the home, provide predictive recommendations, and take preemptive actions on behalf of the household,” said Russell. Such high-level software development has traditionally been provided by interactive services platform providers including Alarm.com and Resideo, he said.

With Google funding, ADT will be better able to stave off competition from competitors like Vivint and Comcast Xfinity that have AI development efforts in progress, Russell said. The partnership will “exponentially increase the capabilities of ADT solutions compared to smaller, regional players, or those whose bread and butter has been low cost monitoring services with no advanced technology,” he said.

Questions remain on the impact to ADT’s vendors, said Russell, noting ADT’s Command and Control solution uses Alarm.com as the platform services provider and Resideo as hardware provider. With Google’s backing, those firms’ future place in ADT’s strategy “is now called into question, depending on the depth and speed of which the Google Nest integration will happen,” he said. Alarm.com and Residio are “the gold standard in home security today, so they are not easily replaced, but all are aware of Google’s capabilities if it has an appetite and incentives to invest.”

Parks expects similar investments to follow from large publicly owned players due to recurring revenue and expansion opportunities. “Security provides a backbone for a unified smart home experience,” said Russell. Last year, about 32% of U.S. broadband households owned a working security system, up 5 points vs. 2018, said Parks.