Fitbit – Last gasp.

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Healthcare is its one and long shot.

• Fitbit now wants to be known as a health care company but in order to do that, it will have to offer devices that have highly accurate sensors as well a thriving ecosystem of third parties involved in health care.
• Fitbit has followed up the somewhat clunky and unattractive Fitbit Ionic with a much better looking and more svelte device called the Fitbit Versa.
• This takes the functionality of the Ionic together with its proprietary Fitbit OS (which is open to third party developers) and crammed it into a much better-looking product.
• In effect this is an Apple Watch for those that either do not own an iPhone (83% of global users) or do not want to be locked into Apple’s iOS ecosystem.
• The use of a proprietary OS has allowed Fitbit to really increase battery life which is by far the stand-out feature of the Versa.
• The larger Ionic could go for 5 days or more on average usage which I suspect to be about the same in the Versa. (Smaller battery offset by lack of GPS which is one of the biggest drains on the battery).
• The Versa is cheaper than the Apple Watch but the lack of a LTE modem (pointless in my opinion (see here)) and GPS means that it cannot offer such a wide range of functionality.
• The real problem when comparing the Versa against the Apple Watch is the relative degree of support from third parties.
• With 8m Apple Watch units sold in Q4 17, every iOS developer that has an applicable app is likely to extend its functionality to that device but the same cannot be said for Fitbit.
• Fitbit OS has launched with apps from Starbucks and Strava and I suspect that Fitbit had to pay those companies to support its OS.
• This is the classic chicken and egg problem that all new platforms have to contend with and my confidence that Fitbit will able to crack this nut in recreational fitness it not high.
• This is why the healthcare angle is so important.
• If Fitbit can build an ecosystem of healthcare providers and services around the Fitbit OS, then this platform might have a chance to carve out a niche for itself.
• However, this will require Fitbit to improve the quality of its sensors to provide medical grade data, potentially seek FDA approval and appeal to consumers’ wallets.
• This will involve using a Fitbit device as a tracker and allowing a healthcare provider to track one’s activity in exchange for a lower insurance premium.
• This is a use case that I think could really take-off and help reverse the devastating impact that lifestyle related diseases have the cost of providing health care.
• However, Apple has also cottoned onto this and I suspect that its installed base alone is likely to give it an overwhelming advantage.
• However, Apple has yet to come up with sensors that can provide reliable, medical grade data.
• This is why I suspect the accuracy of both sensors and the algorithms that interpret the data they generate will be the deciding factor on whether this pivot works out for Fitbit.
• It has a chance. but the odds are against it given the size and scale of its competition.
• This makes the shares extremely risky and best avoided in my opinion.