Fitbit‘s acquisition of smart watch assets last year generated a lot of interest as to the direction of Fitbit. In its fourth quarter earnings statement yesterday, Fitbit revealed it paid $23 million for Pebble’s assets and $15 million for those of Vector Watch. Although smartwatches are a big source of interest for Fitbit, which is keen to extend its market dominance beyond activity trackers, Fitbit CEO and cofounder James Park made clear on the conference call with analysts that the future growth of the company is tied to partnerships with corporate wellness programs and digital health.
The two deals that reflect this push by Fitbit are its Fitbit Group Health program launched in June last year and a collaboration with Medtronic in December. Although Fitbit has worked with employers and insurers for years, group health bundles software and services across corporate wellness, weight management, insurance and health research.
Park pointed to Medtronic’s app iPro 2 myLog which aggregates blood glucose level data with automatic activity tracking data from Fitbit devices.
“It’s a great example of how a credible and trusted company in healthcare is relying on what we do as a key part of their strategy. The quality of our partners speaks for itself.”
Given the company’s Fitbit Group Health activity, one analyst asked the company to offer guidance on its employer wellness business. Park noted that it was still early days. But he also pointed out that the company’s work to court insurers has been something Fitbit has been engaged in since almost the inception of the company.
“We cannot give [specific] guidance but growing the [Fitbit Group Heath business] and digital health are critical to the growth of the company.”
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Fitbit also intends to upgrade its software to make the user experience for its devices more engaging as a way of increasing its customer reach. One example of that was the revamped Fitstar app the company launched at CES that personalizes workouts and enlists an online personal trainer coach to support workout goals.
Its financial results illustrated some of the challenges the company is facing as it struggles to balance new ways to grow, reinvesting in the business and operational costs. The company’s sales for the full year of 2016 totaled $2.17 billion but with a net loss of $102.8 million.
Smartwatches offer a chance for Fitbit to double its addressable market Park noted. At the same time, the company cautioned analysts not to expect smartwatches to overtake activity trackers as a source of income anytime soon.
“We would expect smartwatch margins to be less than our tracker margins,” Park said, but added: “We want to ensure that it is competitively priced so it can be successful.”
But Park also noted on the call that the company is interested in developing “form factors beyond the wrist”. It will be interesting to see what applications will take shape from this.
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