This post was originally published on January 9, 2020
While this may be the first instance that Google’s acquired an entire smartwatch company outright, the tech leviathan has undoubtedly had its eyes on a bigger piece of the Internet of Things pie for a while.
In January 2019, it bought smartwatch technology from Fossil in a 40 million USD deal with a goal to develop and promote its Wear OS platform and push out more wearable devices.
With the Fitbit deal, it might have come full circle on this promise. Google’s blog post announcing the transaction has a similar ring to the Fossil transaction.
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Rick Osterloh, Senior Vice President of Devices at Google, explained that the investment was for “an opportunity to invest even more in Wear OS as well as introduce Made by Google wearable devices into the market.”
At the same time, he reassured users: “We will never sell personal information to anyone. Fitbit health and wellness data will not be used for Google ads. And we will give Fitbit users the choice to review, move, or delete their data.”
But consumers remain skeptical. Many took to Twitter to announce they’re actively looking for Fitbit alternatives or that they’re wary of the privacy implications.
Now that @Google bought them, I’d like to switch to something else.
— Brian Pagán 🧠+💚 (@brianpagan) December 15, 2019
The fact that Google has an atrocious privacy record doesn’t exactly help dampen concerns. Let’s take a closer look at why the deal happened in the first place.
It’s Apple, Stupid
The iPhone and Macbook tend to dominate headlines when it comes to Apple hardware launches, but most folks tend to overlook that the Apple Watch is one of the fastest-growing divisions at the company.
In 2018, sales of the Apple Watch accounted for half of all smartwatch sales globally, with about 22.5 million units shipped. Fitbit was second by a considerable margin at 5.5 million, Samsung came in third at 5.3 million, while Garmin took fourth place at 3.2 million.
In the Apple Watch’s debut year, when critics almost universally panned it, it still managed to rake in 1.5 billion USD more than Rolex did.
Let that sink in for a second. Apple made a billion dollars more than perhaps one of the most recognized watch brands in the world.
Since then, the Apple Watch has only gone from strength to strength. The new version has several healthcare features integrated into it, such as heart rate notifications, an ECG monitor, and fall detection capabilities.
Google has targeted healthcare unapologetically and knew it had to act fast; otherwise it would permanently cede the space to Apple and other rivals. And with the wearable market slated to rise to 63 billion USD by 2025, that’s a hefty chunk of cash that would not have reached its coffers otherwise.
I’m no financial analyst, but a 2.1 billion USD deal for Fitbit, the second-largest player in the wearable OS space, which raked in 1.8 billion USD of revenue in 2018 seems to be decent business.
It was a no-brainer for Google. Sundar Pichai got a discounted price for a company that has a considerable amount of brand equity and a loyal user base of around 28 million. Without the acquisition, there seemed to be no way that Google could have made a serious dent in the smartwatch market.
How will Fitbit work with Google?
Google can deny it all they want, but the basis behind the deal is to make its algorithms smarter and toss an array of even more invasive hardware products onto the unsuspecting public.
The company might not sell Fitbit data to third-parties as it claims. But Fitbit made a net loss last year, and Google certainly isn’t a charity. It’s possible, yet unlikely, that Fitbit might be treated as a standalone division with Google pumping in more money for R&D and striving to build smarter products.
It wouldn’t be the first time Google has spent big on a company and lost. It paid 12.5 billion USD for Motorola only to dispose it off for around 3 billion USD a few years later as it never really figured out how to integrate it into its core product suite.
The likelier scenario for Fitbit is deeper integration with Google’s burgeoning line of Pixel phones, Nest Hub, Google Home, and whatever else the company comes up with. So you have your smartwatch that relays data back to your phone, which syncs to your smart thermostat and speaker and other voice-controlled gizmos.
In the meanwhile, all these devices are capable of tracking your sleep, your heartbeat, the music you play, the people you talk to most frequently, the shows you watch, the kinds of things you buy online, and what you like to eat.
Google can claim that they don’t share the data externally, but nothing is preventing the company from transferring data from one division to another, like using Fitbit data to make its thermostat smarter. Or Nest Hub commands to build proprietary apps for Pixel phones.
And for a company that raked in north of 100 billion USD in ad revenue in 2018, it’s almost impossible to conceive that the growing family of hardware products won’t be used for smarter targeting in some capacity.
Google’s track record with privacy isn’t great
Google has a terrible record when it comes to safeguarding privacy so why would it be any different with the Fitbit deal? Google Home Mini has spied on users, and its Project Nightingale is murky and mysterious.
I can’t see this acquisition in any other light but a bad deal for consumers overall. Unfortunately it seems as if this dystopian future is what we’re going to have to contend with.