Why Google wants Fitbit, not for tracking, but for the data thumbnail

Why Google wants Fitbit, not for tracking, but for the data


Fitbit, Fitbit Google, Fitbit smartwatch, Fitbit Google deal, Fitbit fitness trackers, Why Google wants Fitbit
Google has confirmed it bought Fitbit, a company which has struggled to compete with Apple in the wearables space.

Google has tried its hand in the wearables segment, but has not been able to make an impact despite being one of the first companies to invest in it. Now, it seems to be looking at a shortcut: acquire a company with expertise in wearables and health data.

In a blog post, Google has confirmed it bought Fitbit, a company which has struggled to compete with Apple in the wearables space despite having a robust lineup of fitness devices at various price points, a dedicated user base and a growing health and wellness services vertical. The deal, which is valued at $2.1 billion, is expected to close in 2020 and will be subject to regulatory approvals, given how Google handles Fitbit users’ data.

“With Google’s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster, and make health even more accessible to everyone,” Fitbit co-founder and CEO James Park said. In a press statement, Fitbit reaffirms commitment to data privacy, saying it will remain transparent about the data it collects and why. The company also said its health and wellness data will not be used for Google ads.

It’s unlikely Google will kill the Fitbit brand anytime soon, though it could be rebranded as Google Fitbit. The fitness tracker major has confirmed it will continue to remain “platform-agnostic “across both Android and iOS.

The takeover of Fitbit shows an aggressive move by Google in the hardware space. The software giant has a dedicated hardware division headed by Rick Osterloh, who has successfully integrated the smartphone division and a Nest-branded line of smart home devices under one umbrella. With Fitbit now being a key hardware asset, Google will certainly take advantage of the fitness-tracking major’s hardware expertise by launching “Made by Google “wearables for Wear OS.

However, it could certainly tap into Fitbit’s Health management business, which offers a number of health and wellness services that work in tandem with the hardware it offers and are provided to both consumers and enterprise. Also, more importantly, Fitbit has access to health data of millions of loyal users.

Leo Gebbie, Senior Analyst, Wearables & VR, CCS Insight agrees. “Fitbit is a strong brand in the wearables space, with a large engaged user base and valuable user data,” he toldindianexpress.commail. “This [data] has huge appeal to a data-driven business like Google,” Gebbie said. “Although Google has been lukewarm in its commitment to wearables recently, this indicates it is serious about the segment and could provide a boost to its ambitions.”

Fitbit’s expertise in monetising premium health services and partnerships with traditional healthcare companies like insurers, could come in handy for Google. The company will also get an insight into data from the largest active community for health and wellness with over 28 million users. Health continues to be the fastest-growing verticals in the tech space.

Fitbit, Fitbit Google, Fitbit smartwatch, Fitbit Google deal, Fitbit fitness trackers, Why Google wants Fitbit
Beset by the competition from Apple and Xiaomi, Fitbit did try to restructure its business model.

Fitbit, founded in early 2007 by James Park and Eric Friedman, hasn’t had a hit device in its portfolio. Sales of its smartwatches have fallen drastically, while Apple’s Watch sales have doubled over the past few years, leaving Fitbit’s hardware business in deep trouble in the US and other developed markets. The 12-year-old company has faced stiff competition from Chinese companies like Xiaomi, whose Mi Band has been the most popular fitness tracker in India which can be bought for Rs 2,299.

Beset by the competition from Apple and Xiaomi, Fitbit did try to restructure its business model. Once labelled as the fitness tracker company, Fitbit made efforts to transition from a hardware-driven approach to potentially into a services company by capitalizing on its growing active user base. The company recently launched Fitbit Premium, a paid subscription service that takes advantage of Fitbit data to offer personalised health and fitness programs and coaching to help you achieve your health and fitness goals. Fitbit plans to sell the Netflix-style subscription service for Rs 819 per month or Rs 6,999 per year.

In a recent interview withindianexpress.com,Fitbit’s India chief Alok Shankar admitted that the company wanted to gradually move into the health solutions space that will be the key to its future. “Till now a lot of discussions has been around the hardware piece… the smartwatches, fitness trackers, etc. But, more and more now, we are pivoting around the ecosystem space,” he said on the sidelines of the launch of Versa 2, Fitbit’s latest flagship smartwatch.

Shankar told that the company is increasingly turning towards services to sell its fitness tracker and smartwatches, a model which Apple is also trying to follow to turn around slowing iPhone sales. Although the hardware continues to be profitable, Shankar said, “the company was sitting on a large database which can help get more recurring revenue”.

“Otherwise, when you do hardware, you see the blip, and then you are managing the product life cycle,” he said, adding how the idea was to reduce the risk of being invested just in hardware and “get another revenue stream”.

Shankar said the Fitbit health services is a key focus area which will drive the company towards profitability. “We are putting a lot of stress around the subscription base and the value-added services,” he added. “Fitbit Premium is very critical for us,” he said, adding that it will be layered on top of free services and software. While the company is yet to see the impact of Fitbit Premium in India (the service went live a month back), Shankar said the uptake of premium health service apps in the US and other developed markets is on the rise.

Asked about the high subscription cost of Fitbit Premium in India, Shankar pointed out that people may be willing to pay for a premium service, which includes guidance and one-on-one coaching. He said the company will continue to learn from the feedback and is willing to refine the service from experience and price point of view. Fitbit is also thinking about bundling the paid service with the devices to reach out to more users. However, exactly when this will happen remains to be seen.

“It’s not to say the product margins are going down, but we really want to improve them and the software plays a key role,” he said.

Can Google Take on Apple?

To win the wearables market, Google needs three things: hardware, software and health data. Right now, Google does not have anything. Apple, on the other hand, has a huge lead over any player in the smartwatch space. The company sells a lot of Apple Watches, so much so that it is now the largest watch company in the world. Still, its biggest asset is the software and the massive ecosystem advantage.

Google, even though an early player in the smartwatch space through WearOS, never showed confidence in the software nor launched a watch of its own. The company has mostly partnered with watch brands like LG, Fossil and Michael Kors, but the smartwatches from its partners have failed to compete with Apple Watch. This may change once Fitbit starts releasing WearOS-based smartwatches.

Fitbit, Fitbit Google, Fitbit smartwatch, Fitbit Google deal, Fitbit fitness trackers, Why Google wants Fitbit
Fitbit’s expertise in monetising premium health services and partnerships with traditional healthcare companies like insurers, could come in handy for Google.

As Leo pointed out, Google’s acquisition of Fitbit will not increase its chances to better compete with Apple. “Apple looks set to continue dominating the top end of the market with its massively successful Apple Watch, while low-cost rivals such as Xiaomi are likely to continue their efforts to offer impressive budget devices. However, this move may signal a new wearables strategy from Google and we could see it increase its focus on this segment and potentially bring new products to market,” he said.

Fitbit’s strength lies in health research and in the health data. Through a SpO2 (peripheral capillary oxygen saturation) sensor in its wearables, Fitbit can determine interruptions in breathing during sleep, such as those caused by sleep apnea. The company’s work in the analysis of the sleep habits of users may help Google to add a sleep tracking feature in its smartwatch. Apple Watch does not come with sleep tracking.

“Google would mostly benefit from Fitbit’s valuable user data, and may use Fitbit’s intellectual property to increase its focus on manufacturing more health-centric devices with a longer battery life that can drive lots of health-related user data,” Leo added.

Fitbit’s relation with health insurers and its acquisition of healthcare-related companies will benefit Google. In August, Fitbit signed a contract with the Singapore government to provide fitness trackers as part of a health programme that could reach up to a million users. As per the programme, Fitbit will provide free health trackers to citizens who agree to pay $10 a month for a year on the Fitbit Premium service.

Jason Low, a senior analyst at Canalys, agrees a mere takeover of Fitbit won’t help Google compete with Apple in the smartwatch space. “Apple is far ahead in the smartwatch game, and it will take far more effort than just an acquisition to catch up,” he said.

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