It’s the dream for many technology start-ups to be eventually acquired by a huge player like Google in a multi-million-dollar deal, and in Fitbit’s case this looks set to come true with a staggering $2.1 billion tabled by the US internet giant.
In its announcement Google also signalled the eventual arrival of the Made By Google wearables line and increased investment to be pumped into its Wear OS operating system.
But what else will Google get for its money, and why has it committed to making such a big (and costly) effort to attach itself to consumers’ wrists?
For the first question, Google will acquire a larger slice of the wearables market, building on a $40 million buy of smartwatch technology from fashion brand Fossil.
So why has Google made its move for Fitbit now? CCS Insight senior analyst Leo Gebbie said wearables may be a logical extension of its current hardware portfolio, but also “strategically freezes out other players who were rumoured to make the buy”.
There is plenty of opportunity left in the wearables sector, noted Jitesh Ubrani, IDC research manager.
He added: “There are plenty of people who don’t own a wearable and a lot of first time buyers. Wearables are the complete opposite of smartphones, which as we know has reached saturation.”
For comparison, in Q2 this year IDC reported 34.2 million wearables were shipped across the world, an increase from 26.6 million year-on-year. In the same period smartphone shipments were 333 million, a decline from 341 million last year.
Canalys senior analyst Jason Low said the acquisition would allow Google to mount a challenge against Apple in smartwatches.
However, he added Google would have the: “challenge to create an appealing smartwatch with a great design, effective health and fitness tracking, and robust smart and connectivity features in a small package.”
WearOS needs a revamp
Analysts were in agreement that Google needs to improve its “stale” wearables operating system WearOS. Ubrani points out Google had not focused on its “floundering” wearables sector, particularly in recent years with a lack of updates.
He added a “reinvigoration of the WearOS platform is needed if they are to have success.”
Urbani cited this as vital given the sector had heated up with brands such as Xiaomi and Huawei pumping the market with aggressively priced products.
Gebbie found it incredulous how Google failed to mention any WearOS updates at its latest annual developer conference Google I/O, which at the time seemed to show Google continued to “lack commitment” to the OS.
But he admits the acquisition would be a sign of change to fortify what has been longed viewed as a “weak link” in the Google portfolio.
“We feel this acquisition seems to mark a change in approach because you don’t spend $2 billion dollars on a company and not do anything with it,” Gebbie added. But he warned Google has a mixed tracked record when it comes to hardware acquisitions. Google bought the Motorola brand for $12.5 billion in 2012 and sold it at a loss to Lenovo for $2.9 billion just two years later.
However, he added Fitbit held a lot of value in data, with 27 million active daily users.
Gebbie said: “The data was the more valuable piece for Google. I can see the value of the hardware side but the data for Google will be really valuable and it gives Google a stronger play in the health space”.
Urbani agrees the pending acquisition is a “big data play and a play into healthcare,” and that the data was the bigger prize in Google’s eyes.
Fit for the future
Potentially we could see a Made by Google smartwatch in May or June around the time Google I/O is held. But most likely Google will bide its time and launch it with the Pixel 5 and latest version of the Google Home Hub next autumn.
There seems to be a wave to ride on with wearables; IDC projects shipments to top 152 million units at the end of this year, rising to 194 million at the end of 2020. Meanwhile Gartner predicts wearables spending will jump from $40.5 billion to $51.5 billion in the same time period, with more users upgrading from wristbands to smartwatches.
But Google needs to come up with exclusive features that can link up with other devices in its ecosystem that go beyond enabling skipping songs on Spotify, measuring heart-rate and showing notifications. Or it might be another Motorola-sized mistake.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.