Is Google’s acquisition of Fitbit all about ecosystems?

m&a consulting

Google Fitbit acquisition

Last week Google acquired Fitbit for $2.1 billion in cash. Google’s acquisition of Fitbit will give Google a foothold in the wearables market. Google has been struggling to gain market share in wearables market. Google built its Wear OS – A smartwatch operating system based on Android. Google licensed its wear OS to smartwatch manufacturers like Samsung and Xiaomi. Fitbit accounted for roughly 10% of the smartwatch shipment equipments in the second quarter of this year according to Strategy Analytics.

In the wearables market, Apple is the market leader. All the other smartwatch manufacturers trail Apple by a wide margin. Apple’s smartwatch accounted for 46% of smartwatch shipments in Q2. This record volume of shipments has pushed Apple’s revenues in the wearables segments to 54% higher in Q2. Apple’s revenues from wearables is $6.5 billion.

Apple’s market leadership in wearables segment give consumers a reason to choose iOS over Android. This is more relevant when the customer needs to upgrade their hardware. Google needs to combat this trend. If not, Google can lose its android users to iOS.

Battle of ecosystems

Apple is far superior to its competitors in one parameter. Apple has built a complete ecosystem of hardware and services. These work together to provide a superior user experience. Google on the other has done a commendable job in bundling out collection of devices. These devices include Google Home smart speakers, Nest thermostats and smart cameras, pixel phones and chromecast devices. All these devices work well together.

Technology performs best when it can fade into the background. At the same time technology needs to assist customers 24/7 whenever they need it. Wearables devices are a key piece missing from Google’s hardware lineup. This missing piece can provide assistance to customers when needed. These devices will operate in the background and collect useful data.

Google’s ecosystems of services is much more than Apple. Google’s hardware and software devices work best with other Google devices. Apple’s ecosystems are mostly walled garden. Apple’s strategy is to encourages its users to buy more Apple devices. Apple watch is more functional with iphone than other wearables including Fitbit devices.

Wearables devices like watches and earbuds are growing in popularity. Google has an opportunity to keep Android users switching to iOS. Google will also try to attract some iOS users to Google devices. Google would want to use Fitbit’s experience to build attractive smartwatch devices with Google software. In the past Google collaborated with HTC to build Pixel phones. If this strategy is successful, more users can choose Android over iOS.

Data privacy

When it comes to data privacy, Apple has a better reputation than Google. Apple still keeps siri’s data processing local. They do not send the customer queries to the database stored in the cloud. Big tech companies like Google and Facebook are facing scrutiny over their data privacy policies. Apple is running it’s own ad campaigns reiterating its strong stance on privacy.

Google has been transparent about its data collection methods for Fitbit. Google has confirmed that it will not sell customer’s personal information to anyone. Fitbit’s health and wellness data will not be used for Google ads. Google also provides choices for Fitbit users to review, move or delete their data.

An average customer does not base their decisions based on what a brand says. They make their decisions based on how they feel about the company. These feelings may not always match with the facts. At the same time they are important in setting the tone for how consumers will interpret the things companies do.

Apple pitches its smartwatch as the customer’s personal device. Customers may not able to trust Google with their data. When personal data like health information, heart rate are concerned, customers will not trust Google.

Despite the privacy concerns, Fitbit acquisition can help Google. It can strengthen Google’s presence in the wearable market. Google need to incorporate devices into its ecosystem of hardware and software. These devices need to function in the background. If Google manages to achieve this, then it can grow its wearables unit. Google can emerge as a strong competitor to Apple watch.

Final Takeaway

Apple’s symbiotic smartwatch – iPhone relationship would threaten Google’s Android business. Fitbit acquisition could well be the answer to this.

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