The announcement of Google’s acquisition of Fitbit for $2.1bn is a fundamental shift in the wearables competitive landscape and will send reverberations through the industry. Of all the major technology companies worldwide, only Apple has placed a serious emphasis on wearables and has, as a result, almost exclusively been the driving force behind smartwatch growth and innovation. Amazon’s recent hardware releases all notably orbit the wrist without directly competing with it, while Microsoft has consistently been unable to crack the personal electronics market. Up until now, Google’s focus was on expanding its WearOS platform but, with Fossil the only notable vendor utilising this operating system, Google’s penetration of the wearables market has always been muted.
Indeed, with Fitbit having outsold Fossil by a ratio of 5:1 in the first half of this year across all wearable’s categories, Google are acquiring a wearables brand that is synonymous in this marketplace. Fitbit’s strong brand presence and expansive portfolio that straddles high-end fitness trackers and entry-level smartwatches, as well as its growing health subscription services, will give Google a large enough footprint from which it can re-launch itself into the wearable’s competition. Moreover, with Google’s mixed success in its go-to-market strategies for other hardware, the company has also acquired Fitbit’s expertise in developing strong consumer demand.
It is likely that other WearOS devices will be relatively unaffected by this acquisition; as with Android smartphones, Google’s own hardware foray into the market did not inhibit the ability of other vendors to use the Android platform. Moreover, given the extent of this investment, WearOS users are probably tentatively excited by this news as it means that Google will likely refine and enhance its wearables platform which has typically lagged behind Apple’s.
From Fitbit’s perspective, this acquisition also makes good sense. While the company is on track to exceed 14m unit shipments this year, a return to growth from the 12.7m units in 2018, this is still a significant decrease from the 22.2m units the company shipped in 2016. Fitbit has struggled to keep pace in a changing wearable landscape while surrounded by larger, more diversified tech companies. The emergence of more sophisticated wearables solutions has meant that Fitbit’s USP has been cannibalised and improved upon by a range of emerging device categories such as smartwatches, sports watches, and hearables. Hearables is a rapidly growing category that offers fitness tracking as a commodity feature, while smart watches and sports watches both frequently go beyond activity tracking. As with any company that becomes synonymous with an industry, it is hard to reinvent the brand to keep up with the rate of innovation, and Fitbit has proven to be no exception. In a sense, the wearables market, once driven by Fitbit, has left the company behind.
Moreover, one of the major technology battlegrounds of the next decade will centre on the emerging ecosystem of connected wearable devices, in an effort to establish dominance in a post-smartphone world. While the ecosystem in personal electronics centres on the ubiquitous smartphone, vendors are increasingly investing in wearable device for the wrist, ears and head, moving some of the key smartphone functionalities away from the pocket. Apple are the dominant smartwatch and hearables vendor this year, and now Google is able to compete directly with Apple in these categories. Neither company is a stranger to innovation, and both will be actively seeking to design the next piece of the personal electronics ecosystem in order to gain an advantage over their rivals.
The acquisition of Fitbit by Google means far more than a mere change in the wearables landscape. It is one component of a much larger competitive challenge in the technology world and sets the scene for the ecosystem decade.
Source: Futuresource Consulting