Company / division: Fitbit
Fitbit has finally announced its second smartwatch, the Fitbit Ionic, following the launch of the Fitbit Blaze in May last year. At the time, Fitbit described the Blaze as a “smart fitness watch” but it seems to want everyone to forget that designation now as it launches the Ionic and wants to frame it as its first entry in this space. To be sure, when it launches, this device will have an app store, something the Blaze didn’t have, but it’s far from certain that there will be anything meaningful in it. One reason Fitbit is pre-announcing the device two months ahead of launch is to get developers going, while the other is surely to get out ahead of Apple’s third set of Watch hardware, which will be announced in a couple of weeks. Based on what we know so far, the Ionic looks very similar on paper to the Apple Watch in several respects: it has GPS, contactless payments, it’s swim proof, stores and plays music, provides personalized fitness coaching, and so on.
But on paper is about the only place it does look like the Apple Watch – the Ionic is very much in the design tradition of Fitbit’s other devices: angular and industrial looking, with garish colors an optional extra. It hasn’t published the dimensions of the device, but at least a couple of shots in its promotional video make it look enormous, especially for wearing in bed. That’s important, because multi-day battery life and eventual ability to track sleep apnea are among the very few differentiators here against the Apple Watch, and if it’s uncomfortable to wear at night, none of that really matters.
We’ll have to wait and see all the details in October, but based on what we’re seeing today, my guess is that the Fitbit Ionic will sell maybe a couple of million units, or roughly ten percent of Fitbit’s annual device sales, over the first year, maybe slightly more if the third party app ecosystem is stronger than I’m expecting. At those numbers, it’ll barely make a dent in the overall smartwatch market, which is dominated by Apple, with Samsung in second place and other Android devices in third, though it might provide a boost to Fitbit’s ASP, which is currently around a hundred dollars. I would guess it’ll mostly appeal to existing Fitbit users who admire its aesthetic, and will likely do better among Android users who have relatively few other compelling options than among iPhone owners. Fitbit today also announced wireless sports headphones called Flyer, which will retail for $130 and be available online right away: these are a sign that Fitbit recognizes its lack of an ecosystem is going to be an increasingly big challenge going forward given its lack of integration with either Android or iOS, and it therefore needs to build its own.
Fitbit CEO Talks up Forthcoming Smartwatch (Jul 18, 2017)
Weekly Narrative Video – Wearables are Struggling (Jul 8, 2017)
This past week’s narrative video is on the Wearables are Struggling narrative, in light of the news that Jawbone is entering liquidation. I’ve seen lots read into that news, some of it sensible and some of it probably overblown as far as the significance for the broader wearables industry. In the video, I talk through how I see the news, and also what I think about the state of the wearables market. Subscribers can watch the video on the narrative page here as always, and if you’re not yet a subscriber you can sign up for a 30-day free trial here and get access too.
Strategy Analytics Says Apple Top Wearables Vendor in Q1 (May 8, 2017)
Fitbit Reports Worst Revenue in Nearly 3 Years, Second Straight Quarter of Heavy Losses (May 3, 2017)
This isn’t good news for Fitbit, at a time when it was supposed to be recovering from a tough year and getting back to profitability and eventually growth. As I’ve said before, I suspect its push into the smartwatch market will be more of a distraction than a help to the company’s overall performance – it puts it head to head against Apple in a category Apple currently dominates and takes it out of the sweet spot it’s historically done well in. If it’s also unable to produce a decent product in accordance with its own internal timeframes, then that bodes even worse for the further push into this category following the Blaze launch last year. Another big question not addressed by this article is to what extent Fitbit will be able to integrate some of what it acquired from Pebble and Vector over recent months in this new product – so far, it looks like it’s more of an iteration on the Blaze than something completely new.
via Yahoo Finance
Given all the focus Fitbit has been putting into smartwatches lately, it’s good to see the company get back to focusing on its core value proposition: really good dedicated fitness trackers. The acquisitions it’s made and products it’s launched have made me worried that, rather than sticking to its core market, it’s trying to expand into territory dominated by Apple and to a lesser extent Samsung, which seems unwise. The Alta will now get a version that costs $20 more for an embedded heart rate monitor, and which also promises to track sleep better. This is good incremental innovation from Fitbit, which seems to have managed to squeeze the new functions into the same size, and it should also give average selling prices a bit of a boost. ASPs have risen over the last several years, but remain under $100 most quarters, and have been boosted most in those quarters when new high end devices launched. Given Fitbit’s bad Q4, it needs lots more of this kind of thing to spur repeat purchases and broaden its addressable market, though the overall ceiling on this market continues to be one of its biggest long term challenges.
via Ars Technica
Wearables grew 16.9% in Q4 2016, Fitbit still first but Xiaomi is gaining – VentureBeat (Mar 2, 2017)
The numbers here look about right, but what a far cry from the forecasts of the wearables market we saw a few years back. I recently wrote a piece on the state of the wearables market, in which I argued there are really three important sub-markets within wearables: the Apple Watch in its own category, dedicated fitness trackers (in which Fitbit dominates in western markets and Xiaomi in China), and Samsung’s various devices, many of which are bundled with smartphone purchases and therefore thrive on a rather different business models from the others. These IDC numbers largely back that up with market share numbers, but also reinforce the point I made in that article about how the market has fallen short of its theoretical potential and largely stopped growing. It can still grow, but the offerings need to get much better and broader in their appeal, and to some extent we also need the technology – especially in components – to catch up with the vision here.
Fitbit Reports Final Q4 2016 Earnings (Feb 22, 2017)
I covered Fitbit’s preliminary earnings release a little while back, and we already knew these results weren’t going to be pretty. This was the first quarter of year on year declines, and also featured the company’s first meaningful losses since 2013, when it recalled its Force device. Its costs, especially its sales and marketing costs, rose considerably as a percentage of revenue, and its cost of revenue in particular was well up on last year’s despite the much lower revenue. As I said a few weeks ago, though Fitbit is downplaying these results as a temporary setback and promising a recovery, I see little evidence to support that assertion. Interestingly, some of the metrics Fitbit only provides once a year around user numbers suggest that it’s sold relatively few second devices to the same users – its registered user number is over 80% of its total number of cumulative devices sold, suggesting under 20% were sold as second devices to the same users; in addition, its active user number is now under half its total registered user number, suggesting an over 50% abandonment rate. Those two combined, together with the relatively small addressable market for dedicated fitness devices, are why Fitbit is having such trouble.
via Fitbit (PDF)
Fitbit Announces Preliminary Fourth Quarter 2016 Results (Jan 30, 2017)
These are preliminary results from Fitbit, designed to flag to investors that revenues in Q4 were well down on previous forecasts, and to announce layoffs and other cuts to the business designed to realign costs with lower revenues. The company will lay off 6% of its workforce as part of an attempt to cut $200m (or almost a fifth) out of its operating cost run rate for the year. Bizarrely, it’s still characterizing its current troubles as temporary, even though it’s given very little evidence to back up this claim. Importantly, revenue in the first half of 2017 is likely to be down compared to H1 2016, because it had big new product launches a year ago. So even if we’re to believe the claims of a rebound, Fitbit concedes there won’t be any evidence of it until later this year. Fitbit continues to be by far the most successful standalone wearables company out there, but if even it is struggling in this way at this point, that’s indicative of broader challenges for the wearables industry.
Fitbit was already in the news recently when it ended its attempts to block sales of Jawbone devices on the basis that the latter appeared to be circling the drain, so it seems even more of a knife between the ribs in the context of an allleged attempt at an acquisition. Though this one failed, it’s further evidence that Fitbit is engaging in a massive rollup of wearable technology companies. But this story is also noteworthy for what it says about Jawbone’s plans to secure a future for itself, which apparently are centered on FDA-approved healthcare devices and therefore potentially an insurance-subsidized model. Fitbit has already pursued the corporate market, and Apple Watches have been sponsored under certain employee healthcare plans too – this is a fascinating new thread in the development of wearables, and one that has the potential to mirror the benefits the iPhone and other smartphones received from the carrier subsidy model.
Fitbit acquires the Vector smart watch startup, as the wearable giant continues its roll-up | TechCrunch (Jan 10, 2017)
Consolidation continues in the smartwatch market. This piece is a little too effusive over the original technology – Vector wasn’t that special. But, like the Pebble deal, this is about Fitbit buying in IP and to some extent skills that should help it sharpen its next generation of wearables and smartwatches specifically. As the wearables market continues to be tough, we’ll see much more of this, and many of the smaller, struggling, vendors will be snapped up by the few remaining big names, with Fitbit likely one of the big acquirers.
Lessons From Fitbit’s Troubled Revenue Multiple – Mattermark (Dec 28, 2016)
The concluding line of Alex’s piece is “hardware is hard”, and that’s certainly becoming something of a narrative in its own right. But this is also a story about increasing market skepticism about wearables companies, and their potential to grow and generate profits. Fitbit has been the exception as an independent wearables-focused vendor, but I and others have questions about its ability to sustain its growth and profitability going forward.
Fitbit’s app hit the top of the App Store on Christmas Day, and stayed there on Boxing Day too. But this isn’t the first time that’s happened – the same thing happened last year too, and the ranking of the Fitbit app always spikes at Christmas. Given that sales have been up year on year consistently, though less dramatically than in the past, this is very much what you’d expect.