What The Google-Fitbit Deal Means

In 2007, when the iPhone was launched, James Park and Eric Friedman saw an opportunity to create a new type of device. It would leverage low-cost sensors to allow a person to have a wearable, which could track vital health stats. The result was Fitbit, which was initially developed with about $400,000 in seed capital from friends and family. There was also a nice boost from a Kickstarter campaign.

Within a few years, Fitbit would become the industry standard of this rapidly growing market. The company would then go public in 2015, with the share price rising close to 50%. At the time, the company was posting quarterly revenues of more than $500 million. 

But unfortunately, this would prove to be the peak of Fitbit’s success. The market would soon get saturated with a host of other devices, many of which had lower price points. It also did not help that Fitbit suffered from production and quality problems, which stunted growth.

And for the most part, Fitbit has continued to struggle. So in light of this, it makes sense that the company has agreed to sell itself to Google for $2.1 billion.

While the search giant has invested heavily in wearbles–and has built its own Wear OS–the efforts have been mostly a bust.  It’s actually been Apple that has capitalized on this market opportunity, such as with the Watch and AirPods (during the latest quarter, the wearables business posted a 54% jump in revenues).

OK then, what are some of the takeaways here with the Google-Fitbit deal? I reached out to some tech entrepreneurs to get their viewpoints.

Dan Malven, who is the Managing Partner of 4490 Ventures:

“The market for wearables is dominated by Apple and Samsung, who have decades of experience in making and selling hardware devices at a mass scale. Alphabet has never successfully sold hardware devices at any level approaching the scale of those two companies. But a key differentiator that Alphabet has over Apple and Samsung is access to a wide array of health and wellness data and algorithms in their subsidiaries Verily and Calico, and through their broad-based GV investment portfolio. If they can conceptualize new features that use their proprietary data and algorithms, then the Fitbit devices could become the delivery vehicle—the so-called ‘last mile’—to impacting health and wellness at mass scale.  Alphabet is fundamentally a company built on proprietary data and algorithms, and that’s where the real value resides.”

Michael Luther, who is the Co-Founder and CEO of MX3 Diagnostics:

"This move should put the eHealth market on alert—Google just acquired 25-30 million active users who care about monitoring their health. This is exactly the demographic that eHealth is designed to reach. And I would say that 'preventative health” within eHealth just got more competitive.

“But on another note, this deal highlights something else that is important: Just because you create an entirely new product segment—which Fitbit did with wearables—doesn’t mean you will own it forever. We’ve seen this play out many times in the past. But give Fitbit tons of credit in that they created this market and they continue to hold ground despite Apple and other global competitors going after them. A related lesson is that ‘single product’ companies need to be planning down the road map for key points of expansion leverage. Fitbit was just starting to make that happen with its developments in preventative health partnerships."

Omri Shor, who is the CEO of Medisafe:

“Quality AI is predicated on an abundance of validated data, the tools to analyze that data in a meaningful way, and the ability to drive action. Google and FitBit together certainly have the potential to develop groundbreaking AI. Although, if this potential is realized, there are limits to the impact of their AI. It’s advantageous for them to continue to partner with digital therapeutic companions to truly personalize and significantly improve patient outcomes.”

Tom (@ttaulli) is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction.