The setbacks that led to Fitbit's $2.1B acquisition by Google
The wearable health tech market is more than a decade old and tech giants are not new to the scene. But Google’s acquisition of Fitbit for $2.1 billion — its 5th largest acquisition till date — is an answer to its mantra: If you can’t build it, buy it.
However, Fitbit is not the first wearable health-tech acquisition of Google. In January this year, it acquired Fossil Group’s (relatively unknown) smartwatch intellectual property for $40 million. This technology was based on Misfit, the wearable tech firm that Fossil acquired in 2015. But nothing much has come of those acquisitions as of yet.
In fact, last month Business Insider reported that Google itself ventured into developing smartwatches since 2013, but did not launch anything owing to internal reorganizations, quality issues, and design struggles.
So why these acquisitions now?
The wearable health tech market was relatively rudimentary until recently. Today, the market is growing at 48 percent year-on-year. And with Apple Watch already owning 38 percent of the market share — the largest in the space — if Google does not enter now with a strong headstart, it might be too late.
Having said that, Google is not buying out Fitbit at its peak. Fitbit reached its peak valuation in 2015, at which time it was worth 10 times of the $2.1B it has sold for today. This peak also coincided with the introduction of Apple Watch, which gave people more value from their device that just a watch or a health tracker. And it has only advanced its technology since then, while the market has become tougher for Fitbit to differentiate itself.
All of this signals Apple’s strength in the market, but it is not the only player that Google should be concerned about.
Samsung is in the lead with its health-tracking technology along with Huawei and Amazfit.
Furthermore, even though Fitbit is not as big as it used to be, it is amongst the top players in the sector. And let’s not forget that it almost created and developed the segment long before Apple launched its smartwatch.
Fitbit has over 27 million active users and its brand is synonymous with the wearable fitness tech today — that mindshare is something that Google is banking upon with this acquisition.
The buyout is expected to close in 2020 following regulatory approval, which might not be as smooth as Google would have wished considering US government’s probe into its power, and how Fitbit’s acquisition will only increase Google’s data power. Answering this concern, Fitbit wrote in a statement that they “will continue to put users in control of their data and will remain transparent about the data it collects and why. The company never sells personal information, and Fitbit health and wellness data will not be used for Google ads.”
Whether or not that is true, “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,” said James Park, co-founder and CEO of Fitbit in a statement on their blog.