Could a Google Acquisition of Fitbit Lead to Smartwatch Success?

The wearables market is racing towards records this year: IDC predicts more than 152 million wrist-worn wearables will be sold by the end of 2019 and healthy growth is expected to continue. The top five companies, with almost 66% of the worldwide market between them, are Xiaomi, Apple, Huawei, Fitbit, and Samsung, in that order. If Google has aspirations in wearables, Fitbit is a way in, which could explain the news that Google’s parent company Alphabet Inc. may have made an offer to acquire Fitbit.

This revelation is based on a report from Reuters, which cites an anonymous source, and it is far from a done deal. We don’t know what the offer looks like, if there was one, or whether Fitbit will accept it, but the company has been struggling of late. If we look back at IDC’s report, it’s smartwatches that are sprinting ahead of the pack, while simpler fitness bands, which make up the majority of Fitbit’s revenue, seem to have run out of steam. Under pressure from a host of cheap fitness trackers, especially from Xiaomi, and struggling to transition to smartwatches where Apple is dominant, Fitbit has been stuck between a rock and a hard place. It has dropped prices — and profits have gone down with them. Though we liked the Fitbit Versa Lite, the stripped-down smartwatch was not a hit and was blamed for a decline in revenue that sent Fitbit’s shares tumbling in the summer.

Fitbit Versa Lite Review — Kelly Hodgkins/Digital Trends

It’s not difficult to see why Fitbit may be open to an acquisition, but why would Google move in this direction?

If we look at Google’s hardware line-up, from the Pixel 4 to the Pixelbook Go to the Nest Mini, there’s still a gap for a wearable and the Pixel Buds 2 aren’t going to fill it. Google doesn’t currently make smartwatches or fitness trackers, but it does offer Wear OS software, which is specially designed for smartwatches. The problem is that it’s not very good and not one of the top five wearables players is using it.

Rumors about a Pixel Watch have been circulating for years, but it was a no-show at Google’s latest event. There’s little doubt that Google has worked on different smartwatch designs, in fact, six former employees revealed to Business Insider that a Pixel Watch was set to be unveiled alongside the original Pixel phone in 2016, but was axed amid fears it would tarnish the brand. Reportedly the LG-manufactured smartwatches ended up being released as the LG Watch Sport and the LG Watch Style, which debuted Google’s Android Wear 2.0 update. The poor reviews suggest Google was right to drop them.

A mysterious $40 million deal with The Fossil Group in January, which saw Google acquire some intellectual property and the research and development team behind it, is a strong hint that Google is still planning a smartwatch. Google’s push towards a hands-free future and this idea of “ambient technology” where a disembodied Google Assistant is our conduit to the nearest hardware could chime neatly with a microphone and speaker on your wrist. A Pixel Watch would also fit nicely into its wider ecosystem and pair up with Google’s Pixel phones and its growing smart home portfolio.

But those are all reasons why Google might want to make a smartwatch. Why would it buy Fitbit with that goal in mind? After all, Fitbit has been struggling to break through on the smartwatch side, more than 50% of its sales still come from fitness trackers. Fitbit OS grew out of Pebble’s software and it feels basic and a little lacking in features and app support, so it’s hard to imagine that’s a reason. Design-wise, while they’re solidly built, Fitbit smartwatches like the Versa 2 feel derivative and uninspired.

What Fitbit does have, that Google lacks right now, is a large community of users wearing its devices and sending all that fitness and health-related data to its servers. Google is all about collecting data, applying machine learning, and using it to develop insights and smarter software. Though Google Fit is widely available on Android, Wear OS, and even iOS devices, it has far fewer active monthly users than Fitbit. A report from last year covering the most popular health and fitness apps in the U.S. suggested Google Fit has 2.6 million monthly unique users compared to Fitbit’s 27.4 million.

On top of all that data, Google would also gain Fitbit’s algorithms. Every company engaged in fitness tracking has its own set of secret algorithms for counting steps, measuring calories burned, and tracking sleep.

Another potential motivation may lie in Fitbit’s move into the healthcare market, a side of the business that has been growing steadily. Fitbit has sold a lot of devices through corporate wellness programs and it has started to successfully target health insurers. Fitbit also partnered with Google in this space, adopting its Google Cloud for Healthcare platform which provides a secure way to share sensitive medical data. There’s a growing realization that tracking devices could save the healthcare industry, particularly insurers, an enormous amount of money and Fitbit is well-placed to step in.

If the acquisition goes ahead, it’s not clear how Fitbit would be integrated. One of the very valid reasons Fitbit didn’t adopt Wear OS was to maintain good battery life in its devices. Google can’t just put Wear OS on Fitbit devices and expect it to be a success. But it would be weird for Google to own a wearables brand that doesn’t run its own platform.

It’s hard to imagine Google having a hit smartwatch without gorgeous design and major improvements to Wear OS and buying Fitbit won’t tick either of those boxes. It’s always possible some longer-term master plan will emerge and Google will leverage the Fitbit brand to turn out an amazing new wearable that’s fit to compete with the Apple Watch, but it looks like a long shot right now.

Why would Google want to buy Fitbit?

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