Fitbit to soon come under Google?

Fitbit to soon come under Google?

Last month it was reported that US-based Fitbit was in talks with investment bank Qatalyst, exploring the options of a possible sale. According to a recent Reuters report citing anonymous sources, Google owner and Silicon Valley tech giant Alphabet Inc has made an offer to acquire the manufacturer of popular fitness wearables. 

Fitbit's stock was put on hold as it jumped 18% after the news broke, but later resumed trading and ended the day up 30.5%, adding more than $330 million in revenue and bringing its total market cap to around $1.5 billion. There is, however, no certainty of any deal with both Google and Fitbit providing no official comment, as rivals like Amazon are also speculated to be prime candidates for the big buy. If, however, the transaction does take place, the newly formed subsidiary would come under Google, making it the second-largest player in the smart wearable market behind Apple and putting it yet again in direct competition with the Cupertino-based company. 

The decline of Fitbit
Launched in 2007, Fitbit was one of the pioneers of smart fitness bands. With their sleek, lightweight designs and superior fitness sensors and software, the company attracted fitness enthusiasts, health-conscious corporate workers, and athletes alike. But 12 years down the line, tech behemoths like Apple and Samsung have entered the fray with their high quality, premium smartwatches that have industry-leading sensors and fitness capabilities. Fitbit, on the other hand, is struggling with their smartwatches, even after acquiring the smartwatch company Pebble in 2016. 

Shareholders of the company are frustrated with the Versa Lite smartwatch that failed to meet expectations and resulted in Fitbit cutting their 2019 revenue forecast in July, sending the stock to all-time lows and for the first time, dipping the market cap below 1 billion dollars. After that fiasco, the company released its Versa 2 smartwatch to generally positive reviews, and the third-quarter earnings (which include the Versa 2 sales figures) are set to be reported on the 6th of November, 2019. 

On the lower end of the price spectrum, Chinese companies like Huawei and Xiaomi are flooding the market with extremely affordable yet capable fitness bands, eating into Fitbit's sales. As a result, Fitbit is stuck in an unenviable position of being priced higher than the Chinese offerings, with fewer features than the likes of Apple and Samsung. 
Industry analysts have noted, however, that the sheer volume and accuracy of health data accumulated from over 27.3 million users may be the key to Fitbit's true value. Google, being one of the largest data-focused companies in the world, would be able to utilize this effectively. 

In 2018, Fitbit acquired Twine Health, a company aimed at utilizing both artificial intelligence and personalized coaching experience to help people suffering from ailments like diabetes or hypertension. They also entered a deal with pharmaceutical leaders Pfizer and Bristol-Myers Squibb to contribute towards faster detection and diagnosis of atrial fibrillation, potentially helping people avoid fatal strokes and diagnose Coronary Heart Disease. 

Google at an advantage

An illuminated Google logo is seen inside an office building in Zurich (Picture Credit: REUTERS/Arnd Wiegmann)   

Even with the goldmine of health data, Google's inclination towards acquiring Fitbit may seem odd for a primarily software-based company, but it's not the first time they've made a decision like this. Back at the start of 2014, the company acquired smart home appliance maker Nest for 3.2 billion US dollars. The move was mocked at the time, but now in 2019, smart home appliances are everywhere, and Google has become a market leader with their Google Home division. The Google Nest line of products have been positioned as their focus on smart home hardware, and are widely popular. 

This shift towards hardware is Google's aim at 'ámbient computing'. The term was explained by Rick Osterloh (Google's Head of hardware) during this year's Pixel product launch - “Our vision for ambient computing is to create a single, consistent experience at home, at work or on the go, whenever you need it”. Google basically intends on creating an Apple-like ecosystem, but one that is non-obtrusive, seamlessly blending into the user's daily life. Smart wearables are a perfect addition to that, and in January, Google even acquired undisclosed smartwatch technology from Fossil for 40 million US Dollars, acquiring in the process a dedicated team with experience in premium smartwatch designing.  The decision had a parellel in the company's acquisition of a smartphone engineering team from HTC in 2017 to work on their Pixel lineup, and a Fitbit purchase along with the Fossil technology might prove to be Google's official entry into manufacturing smart wearables. 

That isn't to say Google has not entered the realm of smart wearables yet. Their Wear OS for smartwatches has been used by a wide range of companies like LG and Fossil. Over the years, plenty of rumors have surfaced about Google developing a Pixel-branded smartwatch, with a market-ready model almost released in 2016. However, the plans were abandoned, and LG later released the models as the LG Watch series in 2017. 

Smartwatch Wear OS features (Picture Credit: Google)

With the rise of the Apple Watch and Samsung abandoning Wear OS in favour of their proprietary Tizen operating system, the competition has greatly reduced Google's influence in the market. In the fitness wearable market, however, Fitbit is a prominent brand, while Apple remains the dominant player. With a common rival like Apple, both companies can greatly benefit from an acquisition, especially considering the revenue gain from purely the market speculation of the purchase. Having Fitbit under their umbrella would enable Google to expand its presence in health and fitness with the data they possess, and a potential wearable under their own brand would make them a greater part of their customer's lives, furthering the company's idea of ambient computing. 

November 1: New update

As it turned out, the rumours were true after all. Google will take-over Fitbit for $2.1 billion, provided it clears acquisition regulations in 2020.

"We have built a trusted brand that supports more than 28 million active users around the globe who rely on our products to live a healthier, more active life," Fitbit co-founder and chief executive James Park said in a statement by the two firms announcing the deal.

"Google is an ideal partner to advance our mission. Fitbit will be able to accelerate innovation in the wearables category, scale faster, and make health even more accessible to everyone. I could not be more excited for what lies ahead," Park added.

Read more | Google to buy wearables maker Fitbit for $2.1 billion

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