08/01/2020
On the 1st of November 2019, Google announced that it would be buying the renowned wearables company, Fitbit for 2.1 Billion Dollars. The deal will see Alphabet-owned Google purchase the company at $7.35 per share in cash, thus valuing Fitbit at $2.1 billion. Wearable tech is currently the new trend around - with innovations in the healthcare sector
like Omron’s new wearable Blood Pressure Monitor and Philips’ wearable biosensor patch (which is a self-adhesive patch that collects metabolic and kinetic information on the wearer) paving the way for a truly wireless world.
While this deal still has to be approved by the companies boards and by regulators threatening to break up large tech companies (kudos, Elizabeth Warren) - the deal represents a large change in Google’s outlook of the future of the tech industry. Upon the closure of the deal, Fitbit will exist under Google - leading up to a world where we could very well see Fitbit by Google. This type of deal is very equivalent to what Alphabet (Google’s parent company) did with the smart home company, Nest a few years ago.
“Fitbit has been a true pioneer in the industry and has created terrific products, experiences and a vibrant community of users,'' said Rick Osterloh, senior vice president of devices and services at Google. ”We’re looking forward to working with the talent of Fitbit, and bringing together the best hardware, software, and AI, to build wearables to help even more people around the world.” This acquisition is a symbol of a larger shift in the tech sector towards moving towards healthcare. With the news of Amazon’s Health Navigator acquisition coming just one year after acquiring PillPack – in the same week that Google acquired Fitbit – the fact the big 4 tech companies (Amazon, Apple, Google, and Microsoft) are venturing beyond software towards healthcare and personalization is quite evident.
Moving back to the Google-Fitbit deal though, the dynamics of this deal makes a lot of sense for Google. The tech giant has spent multiple years trying to break into the wearables market which is currently being dominated by Apple’s Apple Watch. Google has had issues with their hardware. Although they have had their Wear OS integrated with a few wearable tech manufacturers like Fossil , Michael Kors, Huawei and LG, they haven't been able to create a large enough dent in the market.
Wear OS does have some advantages over Apple’s technology. Originally known as Android Wear, it launched in March 2014 and had more than a one-year head-start over Apple Watch. It’s also cross-platform, working nicely with both iPhones and Androids, while the Apple Watch works exclusively with the iPhone. None of that seems to matter much, though. Apple currently has 36 percent of the smartwatch market share. Samsung (with its Samsung wearables and its Samsung Health platform) is in the number two slot with 11
percent. Fitbit, in comparison, has just 5.5 percent. This is where Fitbit comes in, Fitbit's hardware and Linux-based Operating System is liked by many users, giving Google a much stronger platform to build upon. And Fitbit’s strong focus on Fitness Tracking could also prove to be a strong contender for the Apple watch. Google, with all its struggles with hardware - has a stellar background software platform in the existing integrated Google Fit portal.
Similarly, the deal offers a great opportunity to Fit as it can use Fitbit can use Google’s wide developer support and software skills along with integrated technological support towards making their products a bit smarter and more diversified in their functionality. This coupled with the integration into the Android network provides Fitbit with a great opportunity to establish itself beyond its niche.
Even though there are a lot of valid reasons for this acquisition, it has faced a considerable amount of backlash amongst regulators and the general populace over serious concerns over data privacy. While Google and Fitbit have both been eager to state that Fitbit will maintain their autonomy over their users’ health data and it will not be used to make targetted Google advertisements, the concerns over data privacy - especially in the current political climate in the US and the EU (from whom it requires approval) have led to some uncertainty in the deal.
With both Google and Fitbit being extremely relevant in the lives of the public, even today - the potential for both brands to connect to consumers and physicians is very large and open to new competitors. The 1+1=3 business potential for both Fitbit and Google is very large and showcases both companies’ will to move forward into becoming a strong player in both the hardware and firmware aspect of wearable tech. Here’s hoping it takes the best of both companies and finally makes it into a cohesive smartwatch that could provide a little competition for the Apple Watch. Google already has Android, Google and YouTube in the top 20 most relevant brands in the USA and their likelihood to add a fourth into that family seems to be quite high.
Contributed by - Pranay Tarigopula Sanket Bhatt
