As the world's fastest growing tech innovation
wearables are expected to be on a billion wrists by 2022.
Fitbit has been at the forefront of the industry for over 10 years from what was
originally a glorified pedometer to a smartwatch that they claim could help
transform people's lives. But how did the Nintendo Wii lead to the
gamification of exercise? Why has Fitbit's value fallen more than
75% in the last five years? And what made
Google part with more than two billion dollars to acquire Fitbit?
Here's how it happened.
Fitbit's co-founder, James Park,
arrived in America at the age of just four from South Korea.
His parents were small business owners managing a wig shop in Cleveland, Ohio
and as you might suspect they had very high expectations for their son.
Park met these expectations at school enrolling at Harvard in 1995 to
study computer science He completed an internship at Morgan
Stanley during the summer following his junior year and using the skills he'd
learned decided to abandon his studies to start his own business:
an electronic wallet that could be used to make purchases online.
The new business, called Epesi, from the Swahili word for quick, hired Eric Friedman
as its first employee and raised several millions from venture
capital firms during the late 90s. Unfortunately the bursting of the
dot-com bubble in 2001 spelt the end for Epesi. Park and Friedman
followed this up with the launch of their next startup
HeyPix one of the earliest social photo sharing apps.
They sold the business to CNET in 2005 for several millions
and consequently moved to San Francisco to remain the directors of their product.
It was in December the following year that Park purchased the newly released
Nintendo Wii and felt inspired by the idea of turning
physical activity into a game in which users could participate and compete.
Enter Park and Friedman's latest idea:
Fitbit. A device that would make exercise a fun and social activity
encouraging its customers to take on their friends in various
fitness-related challenges. After pulling on some contacts in the tech and design
industries and with the help of Singapore-based manufacturer,
Racer Technology Fitbit developed a prototype and raised
two million dollars in a funding round in the Autumn of 2008.
Around that time, the first Fitbit product was unveiled at a TechCrunch conference
with Park and Friedman receiving 2000 pre-orders that day.
Due to the unforeseen demand and current limitations on the product, they soon
realized that their release date would not be before Christmas.
In response, Park started writing a blog providing honest updates on the
manufacturing process for everyone who had made a pre-order which proved a
popular move. Following the eventually successful
release of the first Fitbit the company continued to raise more
money from venture capital firms. Fitbit's revenue grew from 15 million
dollars in 2011 to 76 million dollars in 2012.
Wearable tech had become a fast-growing industry with big players like
Jawbone and Nike starting to enter the market. By 2014,
Fitbit had a majority market share of 67% and in 2015 their IPO market cap reached
10 billion dollars. However within one year their valuation
had been slashed to just two billion dollars in 2016 which Park
attributes to the launch of the Apple Watch
and Fitbit's failure to enter into the more lucrative smartwatch market.
Fitbit soon reacted by launching the higher end Versa and Ionic models,
eventually joining the software market too, offering a subscription service in
2019 called Fitbit Premium which for 9.99 a month
includes features like advanced insights and customized programs.
November 2019 saw Google's parent company, Alphabet Inc declare that an
agreement had been reached to acquire Fitbit for $2.1 billion.
So why did Google invest so heavily in the world's fifth biggest wearable tech company?
Firstly, as the only specialist fitness
brand in the top five most popular wearable firms,
Google will be able to make use of Fitbit's unparalleled commercial partnerships.
Thanks to its health-focused outlook,
corporate wellness programs have been established with giants like Adobe and Domino's,
even joining forces with sportswear firm
Adidas to launch a special edition Ionic smartwatch.
Possibly even more crucially, these partnerships extend specifically into
the healthcare industry. Fitbit has reached agreements with the
likes of Vitality Health in the UK and Blue Cross and Blue Shield in the US,
which insures over 100 million Americans.
A partnership has even been formed with the state of Georgia's Medicaid program
offering the custom-made Fitbit Inspire to diabetes patients.
Fitbit's singular focus on health gives them a unique image amongst their competitors.
Secondly, considered the next major
battleground in the tech sphere, it's the data collected by Fitbit that could
provide the blueprint for Google's future strategy.
Combining Fitbit's user data with information from Google's other health
acquisitions like Verily and Calico could pave the
way for the little known Google Fit to become a much bigger
player in the industry. Fitbit's data could also be incorporated into Google Assistant,
as the company seeks to become the dominant force
in ambient computing while also extending the reach and engagement of
Google's wider ecosystem.
And finally, Google simply intends to
make use of Fitbit's highly rated hardware
currently on the wrists of 28 million customers worldwide.
Google's loyal followers have been waiting patiently for the rumored
release of the Pixel Watch while ownership of the Apple and Samsung
counterparts continues to grow. Other Big Tech firms like Facebook and
Amazon have struggled to integrate into the wearables market
with Facebook reportedly having a bid for Fitbit turned down before Google's
purchase was agreed. Therefore the acquisition of Fitbit
could provide a unique stepping stone for Google to get ahead in the hardware stakes.
With the wearable tech industry set to
be worth 54 billion dollars by 2023, Google's purchase of Fitbit
could prove a shrewd one. Google's CEO Sundar Pichai has tried to
calm fears that they would misuse the data his company inherits,
especially while the EU still holds reservations over the acquisition's
potential to monopolize the industry. Let's wait and see if Fitbit's hardware
and Google's software can combine to transform healthcare.
And that's how it happened.
Thanks for watching!