Google announced it completed its acquisition of Fitbit for $2.1-billion on 14 January, despite the deal not having final approval from the US Department of Justice (DOJ). The takeover had been in discussion with the DOJ for 14 months, which raises the question: why is Google in a rush to acquire Fitbit?
Looking beyond the legal issues and questions present at the close of the acquisition, Google has a strong motivation, outside of user data. Google has stated multiple times that the reason for the acquisition is devices: customer base and the technologies powering the software of Fitbit devices.
This statement makes sense when looking at Google’s current smart wearable platform offering of WearOS, or Android Wear, as it was previously known.
While Google was among the first to the wearables market in 2014, ahead of Apple which launched the Apple Watch in 2015, it did not place enough importance on the device category. On a software level, where Google played, the operating system (OS) was plagued by issues and bugs which were not fixed in time. Instead, more issues appeared, and new OS versions remedied the issues 3 to 4 years later.
The software problem was not helped by Qualcomm, which had relatively low-end chipset designs for this purpose, compared to the likes of Apple. Watch manufacturers were limited to 512MB of RAM until late 2018. Contrast this with Apple which, in its latest generation Apple Watch, has a system-in-package based on the A13 processor — the chip that was among the most powerful and in the 11 series in 2019.
The less-than-ideal software, less-than-ideal hardware, and slow pace of improvement, led to less than favourable reviews, leading to poor sales, ultimately leading to apathy from manufacturers to continue in the WearOS business. This led to the likes of Samsung, which used WearOS in the beginning, to move away to its own solutions.
This is evidenced by market share, provided by Statista, showing that Apple, Xiaomi, Huawei, Samsung and Fitbit collectively make-up 69.3% of the market, in order of largest market share holder. These are all manufacturers that use their own software, leaving WearOS with little presence in the wearable market. Google acquiring Fitbit allows it to own a small but more meaningful 2.6% share of the market — giving it a better chance at competing in the smartwatch market.
From a device perspective, Fitbit holds the potential not only to integrate and introduce wearOS to a larger user base, but will also aims to improve wearOS with the learnings of Fitbit’s OS team. That, in turn, will make wearOS appealing to the base of 2.5-billion active Android devices as of 2019.
Read more on the next page about the concerns of the regulatory bodies.
The DOJ and Australia’s regulatory body have raised concerns about Google acquiring Fitbit’s health data, which is considered one of the most sensitive data types a user can create. Their concerns stemmed from Google’s business model, which sees it generating revenue from selling the data of users to advertisers and providing them with better targeting of users through their own advertising services, used across the web.
However, Google has agreed not to use location and health data for advertising. It worked with the European Union (EU) Commission to establish commitments around users’ health data privacy. With this agreement in place, the EU Commission cleared the acquisition to go through in December 2020. Google likely walked on eggshells, because the EU Commission is notoriously difficult to deal with, and has already fined the company 9-billion Euros on recent years for anti-trust violations. This approach has been echoed this year by WhatsApp choosing not to implement its new Facebook business blending mechanism in the EU.
On 14 January, Google reported that it had completed its acquisition of Fitbit despite the DOJ and Australian regulators not yet approving the deal. Google claims to have gone forward with the deal regardless, due to having waited more than 14 months, alongside having the agreed-upon waiting period between itself and the DOJ expire with no objections. Google restated its commitment made when the acquisition was first announced, that users’ privacy will be protected through working with regulators on an on-going basis and that Fitbit as a platform would not be locked away from 3rd parties outside of Google.
However, if Google’s acquisition of Nest in 2014 sets the precedent, Fitbit will not remain a separate entity that happens to be held under Alphabet, the parent company of Google. The company will inevitably integrate Fitbit under the Google brand alongside Pixel, Chromecast and Nest offerings, including Fitbit accounts being merged with Google Accounts. Presently, both Fitbit and Google have not stated what is to come in the future, with only Fitbit stating how the acquisition will allow the company to do more.
Google is treading a fine line with the Fitbit acquisition, because many Fitbit users would probably be displeased with a Google services migration. Time will tell the direction Google wants to take with integrating Fitbit into its ecosystem.