- November 4, 2019
- Posted by: Ramkumar
- Category: Mergers And Acquisitions
Google’s acquisition of Fitbit
Google’s acquisition of Fitbit – A fitness tracking pioneer for $2.1 billion is done to take on Apple’s fast growing wearables tech business.
This acquisition can put Google under the ambit of antitrust authorities.Fitbit which went public four years back was valued at $4 billion and Google has bought Fitbit at exactly half its initial valuation.
Fitbit has been a true pioneer in the fitness industry and has created terrific products, experiences and a vibrant ecosystem. Google looks to bring its best software, hardware and AI to further strengthen Fitbit wearables market share.
Fitbit shares have declined in the past few years as the company shifted its focus from low cost fitness trackers towards smartwatches.
Meanwhile Google has launched Android wear – An operating system for smartwatches and also offers a health tracking service Google Fit.Google Wear OS has failed to gain any real traction in the market.
Anti trust concerns on Google’s acquisition of fitbit
- Fitbit customers should be willing to handover their health and fitness data to Google.Google had promised that they would not use the Fitbit customers data for Google ads.
- Fitbit customers would be concerned by the prospect that Google can access their intimate information about their weight, sleep and menstrual cycles as well as their heart rate and their daily step count.These data are coupled with the precise location information.This is used by Fitbit to map its users workouts as well as links to social networks like Facebook and Twitter.
- Google is already under scrutiny from regulators in US and Europe for anti competitive behavior, data concentration and privacy abuses.Due to the high risk of the deal not able to secure regulatory approvals, Google has agreed to pay a termination fee of $250 million to Fitbit if it fails to obtain antitrust approval for this deal.
Wearables Market and Competitive Analysis
- Fitbit has 28 million active users which is a considerable number in wearables segment.In terms of the market share, Apple is the leader and is closely followed by Samsung, Xiaomi and Huawei who surprisingly have all surpassed Fitbit in terms of shipments.
- Fitbit products are cost effective and their core tenets – accelerometer and turning heart rate data to interactive charts and actionable intent have become commoditized.
- One area where Fitbit still has an edge over other companies is in the mindshare as it was among the earliest wrist worn wearables companies.Apart from Apple, Fitbit still does the best job in taking the raw data and converting it to actionable intent which users find something useful.Fitbit is still way ahead in sleep measurement and representation.
How Google will integrate Fitbit?
- Google would integrate Fitbit into its hardware division. Google will initially start to make investments in Wear OS which will lead to more wearable devices by Google in the market.
- Google will not discard Fitbit brand atleast for sometime.It will follow a similar strategy that it followed for Nest.Fitbit will slowly get absorbed into Google hardware business.
- Google already has plenty of metrics similar to Fitbit through its Google Fit platform though not at the same scale.Further Google is part of Alphabet which owns Verily – An health sciences company.Hence Fitbit acquisition will give Google considerable scale in the wearable data market.
- At the same time, Wear OS needs to change and hence Google can leverage Fitbit’s specific health related advantages to augment its existing platform.Fitbit on the other hand is gradually losing its customer base and revenues.When Fitbit came up with its $80/year subscription service to shift its business model away from low margin commoditized hardware to recurring subscription revenues, it hardly made any jitters in the market and neither was able to affect Apple position as a market leader in the wearable segment.
- Both Google and Fitbit realize that it is really hard to compete in the wearables space unless one build the entire stack.This acquisition can provide Google with a full stack in order to compete with Apple.
Key takeways on Google’s acquisition of Fitbit
- Both Google and Fitbit realize that it is hard to compete in the wearables space unless one builds the entire stack.This is where Apple steals the show with it’s full tech stack.
- This acquisition will not affect Apple position as a leader in the wearables segment.At the best, this acquisition is more of a bail out package for Fitbit to potentially save it from ignominious failure.