ADT is a company offering electronic security systems, fire protection, and other alarm monitoring services to its customers in the US. You can trace this business’s roots to the 1870s, a testament to its reliability. However, in recent years, ADT struggled. The increase in the popularity of smart homes hurt ADT’s business.
But you know what they say: “if you can’t beat them, join them.” It seems ADT listened to that advice. It has partnered with Google, allowing it to remain relevant.
How Smart Home Devices Affected ADT
There’s an entertainment trend now that you may have noticed. Streaming services like NetFlix made people abandon cable. Smart Home devices have the same effect on traditional security systems.
ADT required installation fees. Meanwhile, homeowners can set up their smart devices themselves. A professionally outfitted ADT system could cost thousands of dollars. Smart home devices can be as pricey, but they are easier to set up. On top of those costs, ADT’s monitoring involves three-year contracts. Its price ranges from $28 to $60 a month.
So, ADT’s competitors easily knocked the company’s clunky hardware. They also suggest that ADT still exists because of its reputation. If not for that, it would have been long gone.
Dave Selinger, co-founder of home security upstart Deep Sentinel., says something about it. He says you can buy some yard signs on eBay, and you can get 99% of the value ADT provides. Additionally, you’ll spend $20 less.
Jim DeVries, ADT’s CEO, is aware of these criticisms. And he knows his company provides more than what blue lawn placards from eBay could give. But he knows arguing against that would be pointless. So, he focused on thinking of a better solution.
The strategy Jim DeVries came up with is to become a tech company to compete with tech companies. The first step toward that transformation is its partnership with Google.
Google Bought A Stake in ADT
As mentioned above, the popularity of DIY-friendly security devices put ADT’s business in a dangerous spot. People can buy Arlo, SimpliSafe, Google Nest cameras, video doorbells, or Amazon’s Ring. Homeowners can get the same peace of mind without spending as much.
Then came a surprise in August two years ago. Google revealed it would buy a 6.6% stake in ADT for $450 million.
As part of the deal, ADT’s salespeople and installers must promote Google’s hardware. The two companies must also develop products together and integrate their services.
Based on ADT alarm installer Roli Chiu’s work on a Palmetto Bay home, ADT had gone all in on the partnership. He wore the “Super-G” – what people call the new shirt with Google’s logo. Furthermore, he said the ADT truck would also have Google’s logo on it.
Chiu was so excited for the deal to close. He said the addition of Google’s smart home devices to ADT’s portfolio would be a game changer. This statement came from someone who installed systems at around 15,000 homes in two decades. Indeed, it was. He praised Google’s facial recognition technology, as well as its advanced WiFi. Chiu also threw in some side comments about Ring – he did not like its weak battery life.
As Chiu worked, ADT sales adviser Jordan Hernandez talked with the homeowner. He told them about ADT’s Google Home package, which includes the Google door lock, the Google doorbell, the Google Hub, and the Mini speaker. It’s priced at $600. Hernandez explained that it is a discounted price; you’d spend more if you bought those smart home products separately.
With this change in ADT, the business has been saved.
A Match Made in Heaven
You can describe ADT as an army of residential technicians. The company’s biggest strength is in logistics. However, there’s not much investment in research and development. Merk Reimer, ADT’s engineering director, says the product team is barely a product team. They did not make products. Instead, they reported to the IT team and mostly built sales portals or tools to support ADT’s installers.
ADT has a tech lab, though. However, it is used only for testing the reliability of outsourced technologies. They don’t use it to make products they can call their own.
Here’s the problem. Several studies pointed out that 96% of automated alerts from companies like ADT were false alarms. Then, smart home products equipped with AI technology got a surge in popularity. These new toys for homeowners are much more reliable and impressive than the ones ADT bought from suppliers.
Meanwhile, Google has invested in research and product development. In recent years, it has shown strong interest in dominating household automation. Google has bought Nest for $3.2 billion and security startup Dropcam for $555 million. People thought Google would control the digital layer of the smart home, and the sales of smart home devices would increase eightfold.
But things weren’t looking good for Nest and Google; infighting over strategy and funding beset them. They offer smart home products but have forgotten one factor. While the consumers can set up the devices themselves, some would rather have others do it.
So, Google contacted ADT. Google has the smart home devices that ADT needs. Meanwhile, ADT has a workforce that can install the devices in the consumer’s homes. They need each other. DeVries says it is a match made in heaven.
How is the Partnership?
After Google and ADT announced their partnership, the latter’s unmoving share price quickly doubled.
The partnership really did both parties well, even though the deal terms are vague. Google did not create any hardware exclusively for ADT. There’s also no subscriber revenue sharing. The idea is Google could benefit from ADT’s thousands of computer scientists installing its products in homes. Then, embedding Google products in its premium package would allow ADT to boost setup fees and monthly prices.
It worked. ADT reported it’s already selling an average of 6,500 Google doorbells weekly. Consequently, its own install revenue increased by $90 per home.