Google Acquires Dropcam For $555 Million

By: John Honovich, Published on Jun 20, 2014

Google, via its Nest Labs subsidiary, has acquired home security specialist Dropcam for $555 million USD.

Revenue

IPVM estimates Dropcam's 2014 revenue to be on pace for $30 to $60 million USD. Industry sources cite a few hundred thousand cameras sold annually. At ~$100 average selling price (factoring in channel discounts), that would be in the low tens of millions. Include recurring revenue, that Dropcam claims 40% pay for, and that adds another low tens of millions.

Valuation Comparison

Relative to other home oriented camera companies or surveillance manufacturers, the valuation is extraordinary. For example, Lorex, a common brand available at big box retailers, had revenue of ~$75 million when they sold to FLIR in 2012 for just $59 million. Additionally, leading VMS developer Milestone was acquired by Canon for (reportedly) less than 3x their revenue of ~$72 million USD.

However, 10x revenue multiples are fairly common for Silicon Valley acquisitions. Indeed, Nest, the subsidiary of Google who acquired Dropcam was itself acquired for ~10x revenue (estimated ~$300 million, acquisition price $3.2 billion).

Why Sell?

Dropcam has touted its hypergrowth frequently. If the company is still growing at integer multiples, it would be a little surprising that they sold now considering in the Valley today, billion dollar valuations and acquisitions are increasingly expected.

Dropcam's Market Share

Get Notified of Video Surveillance Breaking News
Get Notified of Video Surveillance Breaking News

Dropcam's market share of IP cameras by units is likely ~2%, given the roughly 10 million IP cameras shipping annually. Dropcam only targets and is competitive in a very narrow segment of the overall IP camera. Of course, by revenue, Dropcam's market share is far less than 1% as the average IP camera sold costs 3 to 4x higher than Dropcam's.

By contrast, in the home market, Dropcam's share is far higher, though that is skewed because the home market is heavily analog, and a comprehensive picture would require factoring in those cameras as well.

Nonetheless, where Dropcam had a dominating lead was in the mindshare of the tech community, where it was clearly the camera of choice for Silicon Valley and its publications.

Dropcam's Product Positioning

Dropcam's strongest competitive advantage on the product side was ease of setup / use. Though this is slowly changing, most IP camera's remote viewing require manual setup including technical steps complicated / beyond the comprehension of the average consumer.

Otherwise, Dropcam's technology and product portfolio was relatively simplistic, with only one form factor (cube), limited maximum streaming resolution (720p) and no outdoor option. By contrast, even mid tier IP camera companies routinely offer domes, bullets, panoramics, PTZs and resolution options including 1080p, 3MP, 5MP and more.

Google Scared of Bad Publicity?

In all the publicity around the acquisition, the Google brand has been conspicuously absent. When rumors of this deal first emerged, many criticized the privacy implications of Google essentially getting a video feed into homes.

We suspect this played a role both in the positioning and the timing of the announcement (Friday end of business) to minimize the immediate backlash.

Future of Dropcam?

Google is clearly targeting the home market, starting with Nest and their thermostat, flaky fire detector and now Dropcam's cameras. However, the effort is still in its infancy with Google having little track record or history of selling hardware successfully at large scale.

The most optimistic scenario is that Google / Nest / Dropcam builds their own a complete suite of home services, including intrusion / alarm monitoring, using their scale to drive a large percentage of the market from incumbents.

On the other hand, the home experiment could fail or Google could lose focus / interest in it, given its core advertising businesses.

IP Camera Industry Impacts

How this impacts other IP camera providers depends on how Nest shifts Dropcam's marketing strategy. Dropcam has been spending on marketing at incredible rates and with expert precision compared to the lackadaisical efforts of traditional surveillance providers. Undoubtedly, this advantage has been critical to Dropcam's fast growth.

IP cameras benefit from little network effects so it is unlikely that anyone, including Google, can become a dominant player in the space. However, it still depends how well the slower moving incumbents and less well funded startups respond to the opportunity of Dropcam being assimilated into Google.

Dropcam Test Results

For our unique in-depth testing of Dropcam, see:

Comments (12) : PRO Members only. Login. or Join.

Related Reports on Acquisition

ADT Eliminating Acquired Brands, Unifying Under 'Commercial' Brand on Jun 14, 2019
ADT is eliminating the brands of the many integrators it has acquired over the past few years, including Red Hawk, Aronson Security Group (ASG),...
OpenALPR Doubles Prices on Jun 06, 2019
There is no 'race to the bottom' in cloud / AI video surveillance. In May, Verkada increased their prices. Now, OpenALPR is doing the same with a...
"New" Arecont Fixes Failures "Without A Fight" on Jun 05, 2019
The "old" Arecont was infamous not only for its camera failures but for making their "partners" fight to get them fixed. IPVM drew the ire of...
Pelco Sold Off, Now Independent on May 28, 2019
Pelco has been sold off by Schneider Electric, completing Schneider's terrible tenure, but giving Pelco a chance at life. IPVM spoke with...
San Francisco Face Recognition Ban And Surveillance Regulation Details Examined on May 14, 2019
San Francisco passed the legislation 8-1 today. While the face recognition 'ban' has already received significant attention over the past few...
ACRE Acquires RS2, Explains Acquisition Strategy on Apr 19, 2019
ACRE continues to buy, now acquiring RS2, just 5 months after buying Open Options. One is a small access control manufacturer from Texas, the...
ISC West 2019 Report on Apr 12, 2019
The IPVM team has finished at the Sands looking at what companies are offering and how they are changing their positioning. See below for 50+...
Failed Integrator Rollup, Securadyne Sells to Guard Giant Allied on Apr 10, 2019
One of the most ambitious integrator rollups of the decade has reached its conclusion—selling to a mega guard company. Allied Universal has...
Panasonic Favorability Results 2019 on Mar 27, 2019
Panasonic favorability declined, as the company struggled to find its way amidst a changing market and its ill-timed decision to become a Dahua...
Lenel Favorability Results 2019 on Mar 26, 2019
The positive news for Lenel is that integrators do not dislike them as much as they used to.  The negative news for Lenel is that integrators...

Most Recent Industry Reports

Responsibility Split Selecting Locks - Statistics on Jul 22, 2019
A heated access debate surrounds who should pick and install the locks. While responsible for selecting the control systems, integrators often...
Vivotek Trend Micro Cyber Security Camera App Tested on Jul 22, 2019
Vivotek and Trend Micro are claiming five million blocked attacks on IP cameras, with their jointly developed app for Vivotek cameras. This new...
Avigilon ACC7 VMS Tested on Jul 22, 2019
Avigilon's Control Center 7 boldly claims it will "transform live video monitoring" with the new Focus of Attention "AI-enabled" interface. We...
History of Video Surveillance on Jul 19, 2019
The video surveillance market has changed significantly since 2000, going from VCRs to emerging into an AI cloud era.  The goal of this history...
Mobile Access Usage Statistics 2019 on Jul 18, 2019
The ability to use mobile phones as access credentials is one of the biggest trends in a market that historically has been slow in adopting new...
New GDPR Guidelines for Video Surveillance Examined on Jul 18, 2019
The highest-level EU data protection authority has issued a new series of provisional video surveillance guidelines. While GDPR has been in...
Wyze AI Analytics Tested - Beats Axis and Hikvision on Jul 17, 2019
$20 camera disruptor Wyze has released free person detection deep learning analytics to all of their users, claiming users will "Only get notified...
Anyvision Aims For 2022 Revenue of $1 Billion on Jul 17, 2019
Only 3 video surveillance manufacturers do a billion dollars or more in annual revenue - Hikvision, Dahua, and Axis. Now, Anyvision plans to join...
HD Analog vs IP Guide on Jul 16, 2019
For years, HD resolution and single cable signal/power were IP camera advantages, with analog cameras limited to much lower resolution and...
How To Troubleshoot Wiegand Reader Problems - Inverted Wiring on Jul 16, 2019
Wiegand is the dominant method of connecting access readers, but problems can arise for installers. In fact, one of the most difficult reader...

The world's leading video surveillance information source, IPVM provides the best reporting, testing and training for 10,000+ members globally. Dedicated to independent and objective information, we uniquely refuse any and all advertisements, sponsorship and consulting from manufacturers.

About | FAQ | Contact