Fitbit went public in June 2015, just two years ago. Its IPO was priced at $20 a share and in a few weeks the stock climbed up to almost $50. Fitbit’s market share in the wearables space was almost 50%.
What has gone so wrong for Fitbit in the last 24-30 months? Fitbit’s products today are much better than what they were back in 2015. But unfortunately for Fitbit the sector has changed and also the way investors think of it.
- In 2015, hype was all over the place regarding wearables. Apple was getting into it and everyone thought it was going to be the next big thing. Two years later, the Apple Watch is just a moderate success. Not as big many people expected.
- Take up of Apple Watch has been much larger, in relative terms, in countries where the iPhone has a large market share, that is USA, Canada and the UK, which also happen to be Fitbit’s main markets.
- Globally Asian tech companies, led by Xiaomi, have been outselling Fitbit with cheaper fitness trackers, arguably of lower quality.
- Apple Watch has instilled in consumers the desire that their wrist wearables have additional features (multi-purpose apps) in addition to fitness and health tracking: IDC forecasts that sales of fitness trackers will remain stagnant while smartwatches sales will more than double in four years.
As a result of all the above Fitbit found itself in a difficult position where it had to choose one of the three following paths:
- Stay with its traditional product range which focuses on a subsector (activity trackers) which is declining in its key markets and which will not grow much either in other markets (i.e. Asia) where cheaper competition is intense and expansion will require a significant financial effort.
- Move forward and enter the smartwatch market by adapting its new products to an existing and available operating system for smartwatches: Android Wear.
- Move forward and enter the smartwatch market by creating its own operating system, Fitbit OS, and hoping to attract enough interest from external developers to create additional multi-purpose apps.
While Alternative 1 was probably never taken into consideration, I believe Fitbit seriously considered the possibility of going the Android Wear path. However concerns about design, integration and battery life led Fitbit out of this alternative.
In the end Fitbit has recently launched its first smartwatch, the Fitbit Ionic, running on its own Fitbit OS but external apps are still scarce. Will Fitbit be able to attract external developers to its platform? Or will Fitbit will follow the steps of Blackberry and Nokia which both resisted to adopt Android and went, in a very short time, from huge companies to mere afterthoughts in the smartphone industry?
The initial reviews of the Fitbit Ionic show that experts are concerned that the Ionic may be a great fitness tracker but not such a smart watch.
But let’s not get ahead of ourselves, Fitbit has taken its decision and we will all soon find out whether it chose the right path or not.