Proving the Business Case for the Internet of Things

Google buys Fitbit for $2.1bn

Steve Rogerson
November 5, 2019



Google is buying Fitbit for approximately $2.1bn.
 
“More than 12 years ago, we set an audacious company vision to make everyone in the world healthier,” said James Park, co-founder and CEO of Fitbit. “Today, I’m incredibly proud of what we’ve achieved towards reaching that goal. 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. Google is an ideal partner to advance our mission. With Google’s resources and global platform, 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.”
 
The transaction is expected to close in 2020, subject to customary closing conditions, including approval by Fitbit’s stockholders and regulatory approvals.
 
“We believe technology is at its best when it can fade into the background, assisting you throughout your day whenever you need it,” said Rick Osterloh, senior vice president at Google. “Wearable devices, like smartwatches and fitness trackers, do just that. You can easily see where your next meeting is with just a glance of an eye or monitor your daily activity right from your wrist.”
 
Fitbit pioneered the wearables category and has sold more than 100 million devices. It supports an engaged global community of millions of active users, using data to deliver personalised guidance and coaching to its users.
 
"Fitbit has been a true pioneer in the industry and has created terrific products, experiences and a vibrant community of users," said Osterloh. "We're looking forward to working with the incredible talent at Fitbit, and bringing together the best hardware, software and AI, to build wearables to help even more people around the world."
 
Fitbit says it will continue to remain platform-agnostic across both Android and iOS.
 
“Google aspires to create tools that help people enhance their knowledge, success, health and happiness,” said Osterloh. “This goal is closely aligned with Fitbit’s long-time focus on wellness and helping people live healthier, more active lives. But to get this right, privacy and security are paramount. When you use our products, you’re trusting Google with your information. We understand this is a big responsibility and we work hard to protect your information, put you in control and give you transparency about your data. Similar to our other products, with wearables, we will be transparent about the data we collect and why. We will never sell personal information to anyone. Fitbit health and wellness data will not be used for Google ads. And we will give Fitbit users the choice to review, move or delete their data.”
 
Consultancy Futuresource described the acquisition as “a fundamental shift in the wearables competitive landscape” saying it would send reverberations through the industry.
 
“Of all the major technology companies worldwide, only Apple has placed a serious emphasis on wearables and has, as a result, almost exclusively been the driving force behind smartwatch growth and innovation,” said Nicola Finn from Futuresource Consulting. “Amazon’s recent hardware releases all notably orbit the wrist without directly competing with it, while Microsoft has consistently been unable to crack the personal electronics market. Up until now, Google’s focus was on expanding its WearOS platform but, with Fossil the only notable vendor utilising this operating system, Google’s penetration of the wearables market has always been muted.”
 
Indeed, she said, with Fitbit having outsold Fossil by a ratio of 5:1 in the first half of this year across all wearable’s categories, Google was acquiring a wearables brand that was synonymous in this marketplace.
 
“Fitbit’s strong brand presence and expansive portfolio that straddles high-end fitness trackers and entry-level smartwatches, as well as its growing health subscription services, will give Google a large enough footprint from which it can re-launch itself into the wearable’s competition,” she said. “Moreover, with Google’s mixed success in its go-to-market strategies for other hardware, the company has also acquired Fitbit’s expertise in developing strong consumer demand.”
 
From Fitbit’s perspective, she said the acquisition made good sense.
 
“While the company is on track to exceed 14m unit shipments this year, a return to growth from the 12.7m units in 2018, this is still a significant decrease from the 22.2m units the company shipped in 2016,” said Finn. “Fitbit has struggled to keep pace in a changing wearable landscape while surrounded by larger, more diversified tech companies. The emergence of more sophisticated wearables has meant that Fitbit’s USP has been cannibalised and improved upon by a range of emerging device categories such as smartwatches, sports watches and hearables.”
 
She said, in a sense, the wearables market, once driven by Fitbit, had left the company behind.
 
“Moreover, one of the major technology battlegrounds of the next decade will centre on the emerging ecosystem of connected wearable devices, in an effort to establish dominance in a post-smartphone world,” she said. “While the ecosystem in personal electronics centres on the ubiquitous smartphone, vendors are increasingly investing in wearable device for the wrist, ears and head, moving some of the key smartphone functionalities away from the pocket.”
 
Apple is the dominant smartwatch and hearables vendor this year, but this transaction means Google can compete directly with Apple in these categories. Neither company is a stranger to innovation, and both will be actively seeking to design the next piece of the personal electronics ecosystem to gain an advantage over their rivals.
 
“The acquisition of Fitbit by Google means far more than a mere change in the wearables landscape,” said Finn. “It is one component of a much larger competitive challenge in the technology world and sets the scene for the ecosystem decade.”