I don't agree with your point about Honeywell giving Nest any challenge. Honeywell has never made a good product. They take average technology and use it to add bells & whistles to their products (they give no real benefit to their customers other than flashy screens and beeps). This is very different from Nest, which is all about creating advances and new capabilities.
Nest made their mark because their product is truly great -- it actually learns your habits (temperature-related) and it uses the weather to basically predict what you want. And it actually does a decent job. Nest was founded by basically a bunch of former Apple employees, who understood design (not just aesthetics, but also software and user-interface).
Now, Google comes along, and is trying to squeeze Nest (not realizing they're ruining it). Because they're clueless (or maybe single-mindedly ad-focused)
1) Google issued several press releases trying to clarify the news. They did not say Nest will never put ads on its screens. Google's statement is guarded and carefully worded: "Nest ... does not have an ads-based model and has never had any such plans," This is Corporate Speak -- and it talks only about Nest's past. Google did not say Nest will never show Ads. Ads are Google's entire corporate strategy -- they will never disclose their strategy.
2) Google's entire business model is based on advertisements (and the data they need for it). It relies on clueless users giving their personal data to Google, freely. Google then sells that (our) data to advertisers -- to anyone that pays them (even thieves who form fake companies). Google could care less if their data discloses when you're home and when you're not, what road you drive to work, and what stores you shop at and when. (all of this is free, from the GPS data they get for free, from every android phone).